Q4 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the community Health systems fourth quarter and year end 29, <unk> conference call.
This time all participants are in listen only mode. After the speakers presentation. There will be a question and answer session to ask a question. During the session. You want me to press Star one on your telephone.
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If you require any further assistance. Please press star Zero I wouldn't Alexander conference over to your Speaker today, Mr. Roscomos Vice President of Investor Relations. Thank you. Please go ahead.
Good morning and welcomed.
[music] in your rents when you actually conference call.
Let me begin the call I'd like to read the always disclosure statement.
This call may contain certain forward looking statements.
Putting all statements that do not relate solely due to historical or current Fox.
These forward looking statements are subject to a number of known and unknown.
What you're describing heading such as risk factors and our annual report on form 10-K, and other reports filed or furnished to the securities and Exchange Commission.
Actual results may differ significantly from those expressed in any forward looking statements in today's discussion we do not intend to update any of these forward looking statements yesterday afternoon, we issued a press release with our financial statements and definitions and calculations of adjusted EBITDA and adjusted MPPR.
For those of you listening to the law in broadcast of this conference call. They supplemental slide presentation posted to our website, we will refer to those flights earnings call.
All calculations, we will discuss also exclude gain or loss from early extinguishment of debt impairment expense as well as gains or losses on sale of businesses expenses incurred.
<unk> expenses related to employee termination benefits and other restructuring charges expenses from government and other legal settlements related cost expenses from settlement and fair value adjustment and legal expenses related to cases covered by the CBR change in valuation allowances recording for promissory notes change an estimate for professional liability.
He claims are cruel tax effect related to estimate legal settlement and change in tax valuation allowance without that I'd like to turn the call over to Mr., Wainscott, Chairman and Chief Executive Officer.
Thank you Ross good morning, welcome to our fourth quarter and year end 2019 conference call with US on the call Today's championship, President and Chief Executive Officer.
Chief Operating officer I, just gave your promotion [laughter], Hamish Executive Vice President and Chief Financial Officer, Dr. Lynn Simon President of global operations and she's not closer.
We're pleased to welcome Kevin to the first CHS earnings call today, Kevin has a 22 year veteran of the company and we're all excited to have in the CSL CFO role now a after most recently serving as assistant CFO and treasurer.
2019 was a good year for community Health systems, we advanced a number of strategic initiatives are designed to drive long term growth and we began to see the kinds of results we've been expecting from our stronger portfolio.
We're especially pleased with our strong finished 2000 my team and as we enter 2020 with positive momentum and optimism.
Our future.
Looking at the fourth quarter performance there are a number of items worth highlighting we saw a continuation of good volume performance on the topline same store net revenue growth was 3.7% adjusted EBITDA was for 47.
And a 47 million, which increased 7% compared to the prior year slightly a number of divestitures adjusted EBITDA margin of 13.6 improved 150 basis points year over year and is 13.6 adjusted EBITDA margin marks the highest margin we've achieved since the fourth quarter of 2016.
During the quarter, we made progress.
Across its WB supplies and other operating expense categories with most expense savings expected.
Throughout the 2020.
As we look back at the full year of 2019, the company drove significant progress across multiple areas in 2019, our executive management team and hospital leadership teams focused on key areas. The included one advancing the company's strategic imperatives safety and quality operational excellence connected care and competitive position.
Measure initiatives under each of these imperatives are producing growth increasing efficiencies improving financial performance.
Secondly, I'm, making progress toward the completion of our divestiture program, which has improved the companys remaining portfolio and a group.
Healthcare systems with higher growth potential today over 80% of our hospitals or end markets with population of 50000 or more people.
Selling inpatient outpatient services to affected to deliver patient care across the health care continuum, and continuing extending significant debt maturities, which has provided a runway to execute our strategic growth plans with accomplishments made in 2019 debt should not be a burden or distraction this year.
The results are reflected in our 2019 performance on a full year same store basis. It was a strong here for the company in 2019 same store admissions were up 1.3%.
Adjusted admissions were up 2.2%.
Which was our strongest performance since 2008.
Full year same store net revenue growth was 4.2%, which was a company strongest performance since 2012.
As we think about all the initiatives we've executed.
Or are still in a process of implementing throughout the organization. We're excited about the future. We expect to continue positive tranche and 2020 and to deliver incremental EBITDA growth this year and beyond what should or leveraged improve our cash flow performance.
As I mentioned the company has made considerable progress all of our strategic imperatives today I want to highlight our safety and quality impaired one quality metrics. We track is organizational serious safety event rate, which has been monitoring which we've been monitoring since 2012 as part of our work to deliver high.
Reliability say patient care.
We have seen a significant improvement in this measurement through to the third quarter 2019, a we have reduced our serious safety event rate by 84% and we have sustain a reduction of over 80% since 2017.
We're making progress in other areas, including improvements in CMS focus areas in a minute Tim will provide additional details about our accomplishments and work to advance the other strategic imperatives.
Turning to divestitures as I mentioned earlier.
Earlier, we have effectively reshaped our portfolio and as we shift more about focusing resources the stronger health care systems and markets. We're seeing the results through the end of the fourth quarter 2019 as part of this plan we completed divestitures.
Accounting for approximately 2.3 billion net revenue generating approximately a billion dollars in gross proceeds at good transaction multiples of 10 to 12 times EBITDA, we expect to complete this divesture planned by the middle of the you're generating approximately 300 million additional gross proceeds we now have more than 90.
Divestitures behind Us a formidable challenge and complex task to say at least as much as we work to minimize disruption of separating assets out of our company. The process of divesting hospitals required the attention of our teams our approach to managing divestiture activity, while prioritizing ongoing operations has helped to make this program horses.
Vessel as Divesture activity comes to close full attention now can be placed all markets remain with our organization long term.
As we disclose in January our full year 2020 guidance includes a net operating revenues adjusted for expected Divesture timing are anticipated to be 12.4 billion to 12.8 billion. Adjusted EBITDA is anticipated to be 1.65 billion to 1.8 billion.
Kevin will provide more details on this later in the call.
Summary, we're pleased with our improvements and a momentum established in 2019 and confident in our ability to continue these positive trends, we expect to make steady progress in 2020, as we advance each of our strategic imperatives continue to channel our energy into growth initiatives and execute our strategic margin improvement program.
To control costs and improve same store EBITDA.
Now, let's turn to program over to Tim Thank you Wayne.
Overall, we finished the are strong and we're focused on delivering incremental growth going forward.
Looking at 2020, the company is focused on delivering volume and market share gains through continued execution across our growth initiatives and we expect to continue to execute on our strategic margin expansion programs also as we enter 2020, it's worth noting that the reimbursement environment remains generally stable, which positions the company well to deliver future growth.
On today's call I will walk through some highlights from the fourth quarter and share the latest on a few of our strategic priority.
First in terms of the flu, we experienced a ramp up a flu related because it's late in the quarter. Overall. However, this was lower acuity flu volume they use it increased physician clinics urgent care on ERP as it.
Due to low acuity nature of this year's Blue, we don't leave that it impacted year over year inpatient admissions or EBITDA.
The overall volume side fourth quarter same store admissions improve 0.1%, while adjusted admissions increased 1.8% surgeries grew 3% due to both positioning capital investments and targeted service lines.
ER visits were up 3.4%. This growth continues to be driven by our transfer center model enhanced clinical and M.S. outreach programs and freestanding easy grow.
Same store net revenue increased 3.7% in a quarter.
During the fourth quarter, we were pleased with our volume in that revenue performance and in terms of full year 2019 has waned just mentioned we experienced our best same store volume in same store net revenue performance in roughly a decade.
Well I have brought is evident in areas, where we have focused our energy and investment during 2019, we delivered strong volumes in cardiology, orthopedics, neuro and trauma as well as other service line.
We have a stronger portfolio today than we did two years ago on page seven of our supplemental slide presentation. We show the performance of our core hospitals in markets are those that were same store at the end of the fourth quarter recast over the past two years and 2019, we delivered stronger same store net revenue growth and improved volume performance for admissions adjusted.
Admissions surgery anti R. visits.
Well, we intend to divesting generally underperforming assets, we have been extremely focused on strengthening our core health care system do targeted capital investment strategic service line development and physician recruitment as well as driving solid operational execution.
We're seeing continued progress across our operating initiatives, which include our accountable care organizations or Agios. The transfer program provider based expansion inpatient investment allocation access point development moving into 2020, we remain focused in a variety of opportunities to drive continued growth today.
I'd like to provide you with the progress update on our Hcl initiative, which just completed their second full year of operation. Our ace deals have been a very effective strategy, enabling our hospitals to better align with independent and employed physicians around quality and innovation and care delivery.
After driving increased estill participation from 2018 to 2019, we continue that trend into 2020.
We have added approximately 20000 Medicare fee for safe service life more than 150, new independent positions as well and for the second straight year, we achieved a strong 97% renewal rate independent primary care physicians engage in our agios.
Through this initiative, we're demonstrating that we can be a strong partner to position with the sharp focus on outcomes and value for our patients.
Our in House transfer program remains a key volume initiative. This service continues to provide valuable operational visibility into our operations and better insights into new service line development and position hiring opportunities don't line up with demonstrated market demand.
During 2019, we expanded our transfer center service into 17 additional hospitals, but the program now supporting 63, CHS hospitals in 25 markets.
By the end of 2020, we expect to complete our planned rollout, but the transfer center, serving approximately 75% of CHS hospitals.
Turning now to primary care development. This strategy has been a targeted key growth driver for the company.
Through our multiyear strategic planning process, we're ensuring we have a strong foundation or primary care providers in the right location and with the right resources to support their practices.
Today, we had 80 urgent care and walk in clinics with a good pipeline plan for 2020.
It's been a primary care over the past two years and now have approximately 1200 employed primary care providers and for 100 primary care locations.
That's it became clear and 2019, we saw more than 4 million primary care business, which was a 20% increase over the prior year. We believe this investment bodes well for the future volume growth moving forward.
In terms of capital expenditures, our investments are deployed across strong markets with good growth potential and 29 team we have new bed additions come online in Birmingham, Alabama, Palmer, Alaska, and Victoria taxes, as well as surgical Gi and cardiac capacity expansions in Knoxville, Tennessee, Cedar part, Texas and walk spare Pennsylvania.
Well, we have additional growth Capex plan for these markets as we move into 2020, we also have a solid pipeline of outpatient and inpatient investments underway our plan across a number of other key markets within our portfolio.
Before I turn the call over to Kevin to walk through our financials I would like to make a few comments regarding our margin improvement programs.
We were pleased to see our adjusted Justin EBITDA margin Penneast 2019 strong as we have mentioned in the past our management team completed a strategic market improvement program. During the third quarter 2019. The program included a detailed analysis of corporate shared services in hospital administrative costs, our management team regional and how.
Hospital leaders are further refining and executing this plan, which also includes revenues revenue cycle enhancements outpatient operating efficiencies and other new initiatives that are being introduced we experienced savings from this plan during the fourth quarter, and we expect incremental savings to build each quarter as we move through 2020.
Kevin.
Thank you, Tim and good morning, everyone.
I will provide additional commentary on the results from the fourth quarter and walk through our 2020 guidance.
As a reminder, calculations discussed on this call exclude items Ross mentioned earlier.
On a same store in quarter over quarter basis during the fourth quarter net revenues increased 3.7%.
This was comprised of a 1.8% increase in adjusted admissions and a 1.9% increase in net revenue per adjusted admission.
During the fourth quarter, our consolidated net outpatient revenues increased to 54% of our net operating revenues.
Consolidated revenue payer mix for the fourth quarter of 2019 compared to the fourth quarter 2018.
Managed care and other which includes Medicare advantage increased 200 basis points Medicare fee for service decreased 70 basis points Medicaid decreased 80 basis points and self pay decreased 50 basis.
Looking at our adjusted admissions by pair our managed care Medicare advantage in Medicaid volumes were all up while our Medicare fee for service and self pay volumes each declined.
During the fourth quarter 2019, the sum of consolidated charity care self pay discounts and uncollectible revenue, 31.1% of adjusted net revenue, which was flat year over year.
Turning to same store expense items, our salaries and benefits as a percent of net operating revenue decreased 10 basis points, driven by productivity management, which allowed us to step over wage inflation supplies expense as a percent of net operating revenue for our same stores decreased 60 basis points as we.
I've realized some other benefits from the supply chain initiatives, we've undertaken which have resulted in decreases in implant and pharmaceutical expenses.
Other operating expenses as a percent of net operating revenue for our same stores increased 10 basis points due to higher I T and insurance costs offset by decreases in purchase services.
Moving on to cash flows.
For the fourth quarter of 2019, our cash flows provided by operations were 194 million. This compares to cash flow from operations of negative 165 million during the prior year quarter.
Looking at the quarter over quarter increase first as a reminder, that 2018 period included the payment for the H. I may legal settlement of 266 million.
Secondly, cash interest payments during the fourth quarter of 2019 were approximately 998 million lower in part due to the timing of interest payments affected by our refinancing activities.
And lastly, other increases and decreases including EBITDA year over year growth, we're offsets the cash flows during the quarter.
There were a couple of headwinds worth noting during the fourth quarter of 2019.
In the fourth quarter, the refinancing activity accelerated approximately 50 million of cash interest payments into the quarter.
The company had approximately 30 million of legal and legal settlement payments during the fourth quarter and higher malpractice payments that were approximately 20 million.
For the full year 2019, our cash flows provided by operations were 385 million compared to 274 million for the full year 2018.
Looking at the year over year increased again in 2018 period included the 266 million payment for the H. I may legal settlement.
Higher interest payments of approximately 75 million in part due to timing of refinancing activity.
And higher cash outflow from malpractice claim payments of approximately 90 million.
As we think about recent cash flow performance, we expect improved free cash flow performance in 2020.
Turning to Capex, our capex for the full year 2019 was 438 million or 3.3% of net revenue.
In 2018, our Capex is 527 million or 3.7% of net revenue, we continue to allocate capital towards high growth opportunities in a number of key market with growth potential.
Moving onto the balance sheet at the end of the fourth quarter. We had approximately 13.4 billion up long term debt with current maturities of 20 million.
At the end of the fourth quarter, we had approximately 216 million of cash on hand on the balance sheet.
In terms of the capital structure in 2019, we completed several transactions, which strengthened our liquidity and improved the company's maturity profile. Most recently in early 2020, we completed the transaction, which extended 1 billion of our 2021 notes and 425 million of our 2020.
Three nodes into 2025.
After this transaction the company has no near term maturities.
With its next maturity of 231 million due in February of 2022.
We expect to fund this with cash at a future date.
Moving forward, we are focused on the execution of our strategic initiatives, which we expect will drive improved same store EBITDA growth along the company to deleverage and drive better cash flow.
Now I will walk through our full year guidance.
Net operating revenues are anticipated to be 12.4 to 12.8 billion.
Same store adjusted admissions growth is anticipated to be 1.5% to 2.5%.
Adjusted EBITDA is anticipated to be 1.65 to 1.8 billion.
Net income per share is anticipated to be a loss of $1.32 a loss of 60 cents per share based on weighted average diluted shares outstanding of 115 million to 115.5 million.
Cash flow from operations are forecasted to be 600 to 700 million and Capex is expected to be $400 million to $500 million in terms of 2020 as we've mentioned mentioned in the past we expect expense savings from our strategic margin initiative program to build sequentially throughout the year.
Such in terms of EBITDA performance for the year, we expect the cadence to be somewhat similar to 2019 with our fourth quarter being our strongest EBITDA quarter the year.
I'll now turn the call back to you. Thanks, Kevin at this point.
Operator, we're ready to open for questions.
So we will limit every one to one question. So several you'll have time.
But as always we're able to talk in return period code six one flat.
7000.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or hash key please standby, what we compile the Q and a roster.
Your first question comes from Brian Tanquilut from Jefferies.
Hey, good morning, guys congratulations.
And Kevin and welcome to the new role. So I guess since we were allowed one question I'll just ask it to Kevin.
As I look at Capex your guidance for the year versus what you did in 2019 is that the right level of Capex, you think going forward that we should be thinking about for you to be able to drive growth and then I guess a follow up to that is as I think about your debt maturities you've had some success refinancing recently had pretty.
Compelling rates should I be thinking about.
Some refinancings coming up as well in 2023 to take advantage of the current rate environment. Thank you.
Thanks, Brian glad to be here in terms of Capex.
We do think thats, the right amount of Capex going forward or keep in mind that we've had the we're coming off kind of the best revenue growth that we've had a number of years and our capex as a percent of net revenue is pretty similar to what it's been in the path we're investing in a high.
Growth opportunities as well as making a other investments maintenance capital investment and we think that.
You know, we're making the right level of investment. We also have a number growth areas like our transfer center, our primary care development, which are less capital intensive and so we'll continue to be able to drive drive growth from those are related to our debt.
We'll continue to be opportunistic and look forward to opportunities to refinance the.
2023 dead at some point in the future, but right now we have a clear runway and our focus is on continuing to improve our EBITDA margins and lower our debt leverage.
Brian This is Tim I'll add onto that a I do believe we have more than sufficient capex that committed to our highest growth market I'm always looking for opportunities to expand service lines as Kevin said with the right physician recruitment. That's obviously on something we managed our operating expenses.
We also have moved a lot of our capital spend that was traditionally on the I.T. side to a purchase surface spend so again getting margin improvement, but some of our our decisions in terms of how we capitalize or how we purchased that certain services I think bodes well for us in terms of how we deploy more of our general capex into outgrowth related projects.
Your next question comes from Josh Raskin from Nephron research.
Hi, Thanks, Good morning, and welcome as well Kevin. So question just around the guidance. If you look at the implied EBITDA margins of say 13, after 14 or so roughly I'm curious whats the broad spread margins across your existing hundred one hospital portfolio may be exclude some of that.
You know outliers there I'm just trying to thinking what is the broad range of those and then how should we think about the long term.
EBITDA margins for this existing portfolio.
So just in terms of I'll say it Kevin from this universe, we don't really care about individual hospital margins, but as you can expect you can figure this out pretty quickly.
Origins are.
We have substantial margins in some markets and and not so substantial in some markets and thats part of our objective, but if you look at our guidance for 2020, or if you get to out to the by the fourth quarter. So we should be in the mid teens in terms of kind of.
The fourth quarter, so that it kind of going forward.
Very pleased that we're we're moving up and 13.6 for the fourth quarter. My team was a good performance.
Your next question comes from Frank Morgan from RBC.
Good morning, It ends on high on for Frank I, just want to ask about the the Medicare inpatient update that you got a for the full fourth quarter.
We've also had some changes the wage index methodology I'm, just how did that affect your your pricing enter yield in the fourth quarter and kind of whats the benefit of that over the full year of 2020 baked into the guidance. Thanks.
We certainly saw some benefit from that in the fourth quarter, although some of that was muted by the the losses some supplemental payment in the fourth quarters, we look forward to 2020.
We have approximately $80 million a benefit from the Medicare inpatient update that we'll get a throughout the first three quarters until it anniversaries and then effective one one is the where the outpatient.
Medicare update and net increases about 30 million in our guidance.
Your next question comes from AJ Rice from credit Suisse.
Hi, everybody.
Maybe just to drill down a little bit more on the EBITDA margin and your expectations or I guess your full year number for night change was 12.3% EBITDA margin and you've got it growing 140 basis points now recognize a you ended the year in the fourth quarter 30, 46%.
But there is seasonality so I'm just trying to figure. It you know probably 140 basis points step up looks like a lot and that's probably not really pay or do you sort of have a sense of how much incremental margin gain you really need from what you exited the year and then as you think about where that margin gains.
Come from.
20 is I guess, you're forecasting a mid single digit revenue growth back probably gives you some leverage but is there expense items, where there is a particular opportunity where some of that's going to come from.
Sure AJ, let me start on that so.
You're right. It's we're exiting 2019, our fourth quarters at 13.6%, we thought we see nice growth in our EBITDA margin going back from 2017.
Through 2019, certainly our operating initiatives with our primary care development transfer centers many of the growth opportunities that we've been chasing as they take hold will continue to add to that margin improvement the Medicare rate update we'll certainly be a benefit.
So it's in terms of margin and then we've been working on a number of margin improvement initiatives across various expense categories, primarily in supply chain, which we've talked about for several quarters.
The new supply chain management team in place from New technology, and we're getting traction on those that will also help us reduce expenses and improve our margin.
Your next I will add to that.
As you looked at 2020, and we get out towards the fourth quarter.
Margin gets into a range in terms of the mid teens is substantial changes our debt to cap and our liquidity in the helps us tremendously in terms of the equity.
Your next question comes from Ralph Giacobbe from Citi.
Thanks. Good morning can you out can you just give a sense of same facility revenue or revenue per adjusted admission that's embedded in the guidance and then just the inpatient admissions that had sort of accelerated a bit. The last couple of quarters are sort of flattish in the fourth quarter. So just any color there would be helpful. Thanks.
You know I would we had 3.7% I'm not a same store net revenue growth in the fourth quarter, 4.2%.
For the full year 2019, I would expect something going forward is similar range to that into 2020, we'd given the guidance on same store volumes at 1.5% to 2.5%.
Which which are similar same store.
Volumes that we experienced in the current year. So I would expect similar same store net revenue growth.
And Ralph in terms of the admission and I'm just a quick recap of what we looked into on that obviously, we were pleased with our overall revenue growth of 3.7%. So trying to see where was the movement from inpatient outpatient we're tracking pad throughout the fourth quarter on the biggest shift that we saw in terms of our from a revenue side was the shifted more needs that totaled.
Need Arthur plot plastic teekay is going to outpatient if they stay less than two midnight, which I think it's reflective of our focus on that service line.
Element in terms of advancing the quality and with that the lower length of stay on just seem to be a growing with a better care of the patients. So that does flip it out patient that with a a pretty meaningful ship Ross the year over year in the fourth quarter. We also saw some shifts Dom from inpatient observation kind of correlates to our growth in terms of the Medicare advantage population.
And that we reference in our commercial a rating or I'm, sorry, commercial volume increases the other item on there all of which I'd like to call out where some elective service line closures again, a pretty big impact for us in terms of staff, but not so much in terms of actual margin or earnings and we said. This a you know it will always take a look at what makes sense process.
As we build out our markets across the portfolio and where we have service lines that perhaps have lower volumes or may struggle in terms of everybody to drive margin will make the decision to discontinue those services if there's other options in the community.
And help us improve our EBITDA margin profile and I believe that did shine through in the fourth quarter as well on those elective service line closures, primarily in the post acute space very few them were India more I guess alpha general acute space.
Your next question comes from Kevin Fischbeck from Bank of America.
Great. Thanks, I wanted to ask about cash flow I guess.
Couple of things if I could be.
The number you're talking about for next year I guess, there is that other investment line item that doesn't fall into the Capex number just wanted to see what what that number is and if you're going to be generating free cash flow. After that and then you made a comment about how you move purchased services and I, just I want to more fully understand back.
And how that either impacts the income statement going back the capex number. So we can kind of level set that thanks.
Sure in terms of other investments.
We.
I think spent approximately 170 million.
In the current year included in that this year with about 30 million of of equity investments.
We would not expect those to recur next year.
The other spending in that is around technology software.
And we've made some investments and clinical systems. This year and that's been a pretty good run rate for us over the past several years and would expect that.
Be relatively similar the cash flows for next year's stepped up a little bit as we also mentioned earlier in 2019, we had a headwind of approximately $90 million of malpractice payment a increase in malpractice settlement payments, which we would not X.
Back to recur next year as well.
So with that we were able to.
It's kind of step up the cash flow from operations over what we experienced in 2019, along with the improved EBITDA performance and we're expecting.
Your next question comes from Andrew Mark from Barclays.
Hi, good morning.
Question on the divestiture portfolio now with that program is winding down in 2020 of the results of already built that have already you'll get some pretty nice result can you give us a sense for sending a growth characteristics and the current portfolio versus 2016 portfolio how much of the volume of treatment would you attribute it to exiting less attractive markets versus the key employees.
I think programs to drive market share gains in continuing markets.
If you go this is Tim if you go to slide seven in the DAC. It does do a pretty good job of calling that out for you as we recast the portfolio with the within a quarter look back on so obviously you know we demonstrate that there was a stronger core with some of it a sequential or historical volume improvements being muted by perhaps some of the market that we divested.
But in terms of our forward look on those markets as we pointed out investments in infrastructure around the AC Oh. It was the transfer centers the medical staff development physician practices. Our service line focus all those things. We believe we have a stronger core portfolio to invest and which will help us deliver incremental adjusted admission growth as we.
You know provided throughout our guidance or you know, we're really pleased with the high growth rates in some very competitive markets that were saying and other market, where we still have opportunities to invest more develop more that's where we see growth opportunity for several years to calm.
Your next question comes from Gary Taylor from JP Morgan.
Hi, Good morning, I guess, if I'm limited to one question I, just want to ask a little bit sort about margin expectations in the range of of EBITDA growth next year I mean, the stock is.
Has tripled in a month since you put out your 2020 guidance, but the range in that guidance is for 1% to 11% EBITDA growth and I think given your objectives and where you are in the turn around 1% EBITDA growth would be pretty disappointing and 11% would obviously be.
Really exciting so maybe just sort of help us think about why that range of guidances. So wide and you know is there anything just outside of pure you know volume trajectory against these tougher comps that would be sort of the key variable on on that range.
Oh, sorry, let me start this went off so we're coming out of a fourth quarter with really good momentum and we're very optimistic about a 2020 as we move into the new year getting traction on many of our growth initiatives as we've talked about.
Certainly volume is going to be key contributor to our EBITDA growth.
As we go into 2020.
And as well as kind of the speed at which we're able to execute on our margin improvement initiatives, we're getting traction on them. We have a lot more initiative in the hopper and the speed at which those kind of.
Come to fruition will largely depend on where we fall within the range as well as I mentioned, the volume improvements between one and a half 2.5% growth that we're expecting.
And our last question is from Sarah James from Piper Sandler.
Thank you maybe I can just follow up on that last point. So you talked about having a lot of initiatives that can drive just broad variability in their margins and that could you help us delineate between these which are the ones that are the biggest swing factors.
And.
You know how is the rollout stage so when billion now how successful they are.
You know we have initiatives kind of across all of our functional areas. Both here at corporate office as well as in our facilities are they cover any number of administrative.
Tasks.
As well as supply chain, we talked about previously.
As we build out a new supply chain organization and changing how we go about purchasing how we go about contracting with many of our vendors, where we've been getting good traction on the particularly in some supply expenses around implants pharmaceuticals.
Those are the ones that that started to take hold in the back half of 2019. We have continued benefit since those took hold starting really in third quarter and fourth quarter. If you think about an annual benefit will continue to get benefit through the first half of 2020 on knows and then as we add new and.
Yes, it is to the program and execute on those will continue to have a pipeline of of EBITDA growth and margin improvement from those initiatives.
And I will now turn the call back over to Mr. Smith for closing comments. Thank you Mike and thank you again for your time. This morning as we outlined today, we're encouraged by all the company's achievements in 2019 as well as our strong finish to the year. We will continue to move ahead on our strategies to one.
Provide outstanding care for our patients Twod earned the trust in partnership of our physician employees three to demonstrate our value to the communities we serve.
And forward to reward the company's shareholders and debt holders for their confidence in investment our organization, we're deeply grateful to our management team and staff Hospital, Chief Executive officers possible, Chief financial officers, and Chief Nursing officers and division operators, where their continued focus on operations and performance.
We're also grateful to our medical staffs and are committed boards for their continued support. This concludes our call today, we look forward to updating you on our progress later in the year. Once again, if you have any questions you can always Regis at area code 615 or 657000. Thank you.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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