Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Universal Health Services' first quarter 2020 earnings Conference call.
All lines are currently on the listen only mode. After the speaker's remarks, there will be a question and answer session I feel like asked a question at that time, you may do so by pressing star and the number one on your telephone keypad.
It is now my pleasure to hand, the conference over to Mr. Stephen So please go ahead Sir.
Thank you good morning.
Our CE Mark Miller President also joining us on the line. This morning, we welcome you to this review of Universal Health Services' results for the first quarter ended March 31st 2020.
During this conference call, we will be using words, such as believes expects anticipates estimates.
And similar words that represent forecasts projections and forward looking statements for any were 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 in risk factors in our form 10-K for the year ended December 31 2019.
[music].
We'd like to highlight just a couple of developments in business trends before opening the call I've two questions.
As discussed in our press release last night. The company reported net income attributable to your way chats per diluted share of $1.64 for the quarter.
After adjusting for the impact to be items reflected on the supplemental schedules included with the press release, most notably a 7.4 million or eight cents per diluted share unrealized loss on shares.
Mark certain marketable securities held for investment our adjusted net income attributable both to you a chats per diluted share with $1.73 for the quarter ended March 31st 2020.
During the first two and a half months of the quarter volumes in our acute care segment were tracking modestly ahead of the prior year.
The two last two weeks of March or whatever.
Incidence of cold at 19, and suspected cobot cases increased dramatically in order to cities and correspondingly the volume of non coal that patients decline.
Consequently, we experienced a 29% decline in admissions in that two week period at our acute care hospitals.
The significant declines in patient volumes at our acute care hospitals continued into April.
The decline in admissions during the second half of March as well as even more precipitous declines in emergency room visits and elective slash schedule procedures resulted in a significant decline in income during the first quarter.
The behavioral health segment was similarly tracking ahead of the prior year volumes until mid March when admissions declined 25% during the last two weeks of the quarter, resulting in a significant decline in operating income during that period.
The significant declines in patient volumes experience in our behavioral health facilities have also continued into April.
In addition to the volume decline soap business segment had to deal with other material operational challenges, including constraints on cobot related testing and a lag on results as well as a shortage of personal protective equipment.
Our Paramount concern when the Cobot crisis first developed was taking all the necessary steps to keep our patients and employees as safe as Hans.
We did recognize the severe financial stress is created by the cobot crisis and by the end of March in the beginning of April we undertook a series of steps to mitigate the dramatic revenue declines to protect our capital structure, including one cost reduction initiatives across all of our expense categories to a significant reduction in play.
Land Capex spending evthree, a suspension of our share repurchase in quarterly dividend programs.
Given the uncertainties in projecting when shelter in place directors will be lifted and hospital volumes will return to more normalized levels, we have withdrawn our earnings guidance for 2020.
Congress has recognized the severe financial strains being placed on hospitals and it has passed a number of Corona virus bills, specifically, providing relief to the hospital industry.
You HSS hospitals have received funding grants pursuant to the carriers Act, which are subject to meeting certain qualifications aggregating approximately $195 million today.
In addition, we have received accelerated Medicare payments totaling $375 million thus far.
And we're hoping to receive additional Medicare accelerated payments in the near future.
Before giving effect to receipt of these additional funds as of March 30, Onest 2020, we had approximately 1.2 billion in on borrowing capacity under existing loan facilities.
Provide installation against the decline in operating cash model.
[noise], we'd be pleased to answer your questions at this time.
At this time, if you like to ask an audio question you may do so by pressing star and the number one on your telephone keypad again, not a star one well pause for just a moment.
The first question will come from the line and Steve Valiquette with Barclays.
Hi, Good morning. This is Andrew Mark on for Steve Appreciate all the comments and everything you're doing as an organization.
My question can you compare and contrast, the impact that the pandemic had on your two business segments and highlight any differences and baseline expectations between those segments during the recovery phase.
Sure address to me the biggest dear friends is that on the acute in the acute division you have the increase in coal bid or suspected Colby patients.
And effectively that increase in patients display saying.
A significant number of non called the patients coming through the emergency room and displacing a very large number of elected unscheduled procedures. So effectively you have these very unfavorable shift negative on the shift and service mix or you've got many.
More a medical patients.
Who are a little bit more expensive to treat because it will all be isolation and other protective steps that we're taking to protect our patient and our employee population.
Then youre, losing a lot of this higher profitability higher margin business.
Again for those last couple of weeks out the mine.
We want to March on the behavioral side, while we lost or.
Not an insignificant amount of volume in those last two weeks of March you don't have that same negative what I would describe the service line mix shift in other words the patients that we lost were known let's not necessarily any more profitable than the patients that we retain.
And and that's why I think that the operating income results on the operating income results declined in the acute division was more severe than it was in April division.
Great. Thanks, and then I'm just a quick numbers question are you able to quantify the impact from the delayed fish cuts and Medicare sequestration.
Yeah, So I would we estimate Andrew that combined.
And I would also include in that beating the F. Master lease, that's probably about $35 million to $40 million.
Additional income over the balance of 2020.
From what we would have originally anticipated.
Okay, great. Thank you.
Yes.
Next question will come from the line of Justin Lake with Wolfe Research.
Thank you I, just a few team dial down for Justin.
I wanted to ask about how we should think about the margin from lost revenues going forward in Q1 acute revenues and EBITDA I missed our pre kogan numbers by roughly the same dollar amount.
And obviously with cost cutting got sort of improve going forward and wanted to get some color on how to think about that both acuity behavioral or from that point. Thank you.
So as I indicated Eugene in my comments are.
We really the the decline in volumes and the shift in business and the last two weeks in March occurred. So suddenly that we really didnt have time to implement any significant cost cutting measures until the very end of March in the beginning of April but since then we've aggressively look.
And our cost structure.
Across the portfolio across all of our expense categories.
And are making as as many reductions as we think our prudent.
Given the significant decline in.
<unk> revenue stream.
But I think it's fair to acknowledge that the nature of the hospital business and the hospital business model is that.
Given the dramatic decline in revenues it is impossible for us to reduce costs.
And at a level commensurate to the reduction in a in revenues so difficult to project.
But I would say that if we can reduce our costs.
At sort of half the rate that revenues are declining that we've probably done.
A pretty thorough job now we'll continue to evaluate that as time goes on obviously, our hope is that.
Some of this loss business.
We'll be restored and we are in the process of measuring.
What the appropriate cost structure is for volumes literally on a daily basis.
But but you know in our business it hasn't would be in any business.
Revenue decline that has occurred it has dramatically in as suddenly as this one has is difficult to deal with.
Surely on a cost cutting basis.
Got it thank you.
The next question will come from the line and Matthew bullish BMO capital markets.
Hi, This is there going on for Matt Borsch, just a quick question on the but we're trying to size the improvement I can impact on the behavioral science and you mentioned a modest increase in admissions year over year.
January February obviously before the fall off in mid March.
Are you will be give an indication of the magnitude of that year over year increase in January February March.
Is there some back.
Yes, I think it was in the lower single digits like a three or 4% we were tracking three or 4% ahead of the prior year.
Okay. That's helpful. Thank you and I mean, you sorry.
Or is that kind of answer I I think that was true on both sides of the business.
Okay all right. Thank you.
Your next question comes from the line. If you don't you agree with Deutsche Bank.
Yeah. Good morning, guys. Thanks for taking my questions a couple ones here on the behavioral side can you talk about the different trends that you saw it into March and April between residential and acute and we didn't acute are there any segments like substance abuse that some more impact and others have you seen any rebounds.
The segments at this point.
Yeah, so it's difficult to make really broad or generalisations here, Pete, though I think what we saw in the behavioral business was all sort of call. It the downstream effects from our referral sources. So when schools closed around the country.
We definitely saw a decline in our adolescent business in a number of markets.
We certainly saw a decline in outpatient revenues.
Which tend not to be quite as emerge and outpatient treatment tends not to be quite as emerging I know, we've tried to replace a lot of that outpatient capacity with tele medicine.
Capabilities and other things like that you mentioned substance abuse, and again I think substance abuse treatment can be or tends to be a little bit more discretionary than some other.
Psychiatric diagnosis. So we saw a decline in that income of our markets, but it didnt vary by market we saw.
As acute hospitals I think around the country were overwhelmed with coal that in called with respect to patients. We were definitely seeing fewer behavioral referrals form acute emergency rooms, as well and I think fewer behavioral patients were going to acute emergency room.
So again.
Across the board I think we've seen that but hope is that as.
The covidien the incident to covert patients stabilizes around the country.
I will return to kind of a more normalized pattern of referrals from our various referral sources.
Okay, great. They don't make sense side, there's a lot of moving parts to walk us through the Pinedale Stephen for each segment and just help us think about what does the mix of variable versus fixed costs.
For SCB other opex et cetera.
Yeah, sorry, you can start with supply expense, because I think that tends to be the most variable of our expenses, it's almost a 100% variable not quite.
And.
You know now I will say that obviously you know the there's been a lot of focus on the supply chain items for the Corona diaries patients, including in a personal protective equipment et cetera. So we've really tried.
Stock up on those sorts of items where possible.
I think salary expense tends to be sort of semi variable or semi fixed. However, you want to look at and maybe on a 50% level and I would say the same thing about operating expenses I think those expenses tend to be flat on a step level so as volumes decline.
In larger chunks, we start to.
Make more reductions in costs that are not sort of directly variable. So in other words as patient volume goes down we're obviously going to reduce the number of nurses at the bed side, because there are fewer occupied beds, but as volumes go down we're also going to.
Due to headcount and other expenses and more overhead departments like ancillary department.
And meet our general overhead departments, like dietary and housekeeping and billing and collection et cetera. So.
That's the exercise our hospitals are going through literally at this point on a daily basis and I think our.
Our being pretty effective in pretty conscientious about doing this in a responsible way for that we're still providing the highest level of quality care for the patients that remain.
And that we're also prepared.
To provide that level of care as those volumes sort of return to more normalized levels.
Great. Thanks, so much.
Our next question will come from the line of Frank Morgan with RBC capital market.
Good morning.
I guess I wanted to focus in on what you're seeing today right now and then maybe some more color around your plan to kind of restart the business. What's your thinking about the timing there and what kind of feedback are you getting from either state regulators will work from physicians that did operate in your hospitals.
And then finally, how much more accelerated payments do you expect receipt. Thanks.
Yeah. So so let me tackle the last question first the payments that we have received so far the sort of the outright grant payments are from the first two tranches of the cares at $100 billion dedicated to.
Hospitals. So the first two tranches were $50 billion and that's the 195 million is our share of those first two tranches. So the government has identified three more tranches that $10 billion each for rural hospitals for hot spots and for uncompensated care covert patients, we don't know exam.
Exactly how the government.
It's going to allocate or what methodology, though used to allocate those dollars. So it's a little difficult for us or it's difficult for us to project, what our what our share of that will be the remaining 20 billion on the original hundred billion is not really been identified in any way by the government as to how they're going to distribute that and then there was good forthcoming.
On a virus bill that was passed that includes $75 billion of relief for health care providers and.
Theres been no indication how those funds will be distributed so we really can't estimate that.
As far as your first question, Frank about sort of how that volumes and the business has trended since the end of March I think it's fair to say a I think as at least one of our peers indicated things got a little bit worse in the first half of April.
Before they seem to plateau and in some cases start to get a little better we've seen a number of states already lift.
Their data on elective and scheduled procedures at Texas for Us being public most notable stay to have done so.
And in some of our hospitals in Texas, and some ambulatory facilities, we've actually started to see the resumption of elective and scheduled procedures I think in most of our other states of consequence, Florida, California, Nevada. The general expectation is that the states will lift there back.
And some time in the first half of May and we would expect and we're certainly working very closely.
With our own employees and with our physicians.
To be do everything we can to be ready for that resumption.
So that we can.
We can begin to treat those patients as quickly as as the bands are lifted.
And and again hope is that that will occur in most of our geographies by.
Early may how quickly thats going to occur.
I think it sort of beyond our control and a lot of cases, I think it'll it'll be dependent on how patient themselves feel we're certainly doing everything we can from procedural perspective to make sure that patients feel like the hospital had and there is a safe place to calm and they can be protected though we tested before.
They are treated and and therefore, we can make sure that.
People are not being unnecessarily expose to the virus et cetera. So I hope is that things.
To begin to improve in late April in early may, but again, the trajectory of that and how quickly. It occurs is very difficult to say at this point.
And just on the Medicare accelerated payment request did you say there was also some additional dollars there you're expecting overseas. Thanks.
Yeah, I mean, our applications for those funds.
I would indicate that we've only received about half of them.
Theres been some reporting that the government.
Has.
Slowed down those payments I think mostly to part D providers, which in theory should not be I have an impact on us.
We're waiting to see we've been told at least in formally that those applications and those requests that are in the Q will be paid.
And our request were filed timely et cetera. So our hope is that we will receive Anna now similar to what we have already received.
But we're waiting to see how that plays out.
Yeah, I think we'll take the next question.
Our next question comes the line of Kevin Fischbeck with Bank of America.
Great. Thanks, just wanted to trying to understand I guess, when you think about the.
He does that have been delayed or that's occurred I guess what percent do you think will end up coming back into the system and then if you could in both segments and again or have you say that can you just sounded more time on the psych cycle, it's not really clear to me I understand I would like to procedure deferred reschedule it.
That makes sense of the acute side, how does pent up demand if at all.
Back into the system if most of your volume is coming from.
Yes, the ours and things like that I guess I don't others in the same elective deferred I process there. Thanks.
Yes, So look Kevin the World has changed and you know you had asked me.
Two months ago, how much of our elected and scheduled procedures were sort of discretionary or deferrable.
I would have told you that I think it's a relatively small percentage.
And obviously in the context of this pandemic I would have been wrong.
I think a lot of what's being deferred or things like cardiac procedures.
Invasive cardiac procedures stands and pacemakers cardiac cataract surgeries like oncology surgery neurosurgery.
Heavy duty orthopedics, where patients are in a significant amount of pain.
And I think you know generally I would have described those procedures is not very deferrable and I think our point of view is that over a period of time and I think it's difficult to define exactly what that period is but I think our perspective is that most of those procedures will wind up getting done.
We don't do a lot of what I would again describe as purely.
Discretionary sorts of procedures cosmetic procedures, and ophthalmology procedures and things that certainly really are absolutely discretionary.
We just don't do those kinds of procedures in the hospital and haven't done them for years. So.
I think our point of view is that most of these procedures that have been postponed in deferred.
We will ultimately take place I mean, that's the feedback we get from our physicians.
And and that's the sense, we get is as we ourselves you know analyze that on the acute side.
On the behavioral side.
You know, we struggle a little bit with with the same question that you pose we don't exactly no.
Where these patients are at the moment, we don't believe they're being treated in other forums. Its you know et cetera.
And again as a consequence, we believe that ultimately.
Behavioral volumes will return to normal as a matter of fact I think it's.
Got it.
Unreasonable to speculate that we're in an extremely stressful environment for the vast majority people and that folks who are.
Have a chronic mental illness.
Are more likely to struggle with some of those illnesses in this environment it would be stresses than they might be in a normal period. So.
Ultimately I think we feel like again behavioral volumes will we'll get back to normal I'm not sure those that same.
Sort of sense of recapture that there is when the acute side, but I think theres, if theres a sense of.
Being able to get back to normal volumes once I think the the majority of our referral sources.
Start to reason some level of normal activity now we're spending a lot of time on our but in our behavioral business trying to understand where these patients are at the moment, where they are the system. If there are efficient ways for us to capture them without them going through the the sort of traditional referral sources. Then again I think we've made some progress and as.
My earlier comments indicated in the latter half of April I think we're seeing some glimmers of hope that that payroll volume for our adding at least incremental away.
And just me last question. If you think about this pent up demand concept positions in both businesses.
How do you think about the margin on that I guess, we can get model that is coming back to normal pretty easily but if there is pent up demand does that come in that normal margin higher margin lower margin because you have to hire more nurses are 10 staff I mean, how do you think about.
The profitability that business looks like if theres, an above average amount the pent up demand coming back in second half the year.
I mean I my sense is it would come back at sort of their traditional margin.
The reality is the staff that historically treat those patients is there an available on base largely been the ones that about hours reduced et cetera, just because there is a lack of patients. So.
You know maybe there is some element of overtime.
Or some temporary labor required if we're going to run the yellow artisan over the weekend or later hours during the day, but I think for the most part.
Those patients get treated under a cost structure that.
Very much resembles the true the traditional cost structure that they would have been treated under.
Okay. Thanks.
Again Quals can audio question you may do so by pressing Star line. The next question will come from the line as Matthew Gilmore with Baird.
Hi, Thanks to the question.
Steve I was hoping you could talk about the behavioral length of stay metric it did seem to improve a little bit in the quarter amongst curious.
You are seeing payers sort of reduce some of the utilization restrictions and how thats been trending.
Yeah, I think thats, a tough one to answer Matthew it's hard to know whether that's kind of a meaningful change the way payers have approached the business or it's just as the rest of the world was focused on.
Hello, good patients. So there was just lesser less attention and I think we also have always had.
The sort of perspective that when volumes drop some in the.
In the behavioral business, there is a little bit less pressure to turn patients over is quickly. So I think you saw some of that but I.
So the last couple of weeks of the quarter and even into April are so different and unusual from anything we've ever experienced on I'm reluctant to draw any conclusions from.
You know trends in statistics like length of stay.
Fair enough and then.
Could you quantify that the reduction the Capex and thank you had been talking about 800 million. Previously can you just give us a sense for you know how how much do you think you can reduce it going forward.
So I think that.
It's at least a twofold sort of approach on our part am one is obviously as we're seeing our revenue stream and ultimately obviously the cash flows that will decline commensurate with that revenue reduction, we're trying to conserve our capital and.
Make the capital investments that are sort of most necessary.
Most impactful from a return perspective in the short run and I think ultimately we ever point of view that over the course of 2020 will probably going to wind up spending a quarter to a third less than what our original projections were.
The same time and I think this is relevant to the bigger construction projects that we've been contemplating and had included in our Capex for the year and for several years, we've been experiencing several years worth of escalating construction costs and pricing pressures et cetera, and certainly have a sense that.
One of the benefits of this.
Downturn is that.
Those construction provider is will be under some pressure as their demand as the demand for their services lessons and so I think we feel there's an opportunity for us to reprice recast rebid.
Many of our projects et cetera, and a more reasonable prices. So we're going to certainly make the effort to do that and if we have to delay or elongate the timeline for some of those projects I think we're willing to do that in this period. So.
I think where we're focused on on accomplishing both of those objectives over the course of the next several months.
Great. Thanks, a lot.
Our next question will come from line of Davis with JP Morgan.
Great. Thanks, Good morning, Thanks for taking my question.
My question relates to the inpatient sides of both of your segments I Wonder if you could frame for us what percentage of normal.
Census, you're running that see currently or for the month of April whatever comes to mind as a percentage of sort of normal for this time of the year. Thank you.
Yes, I mean, some by my prepared comments indicated I think that you know acute care admissions were down about 29% than last two weeks margin behavioral were down 25%.
I think acute.
Census, and patient days and admission activity has sort of settled in around that number in April I think the behavioral numbers have gotten a little bit better.
But but those numbers are kind of reflective of again.
The declines we saw in March into early April.
Both cases, I think they're getting a little better in the back half of April button, but there.
They are reflective of the level of decline we've seen.
Thank you.
We haven't heard from Hey, Jay.
Steve Rubin and talked with them.
Yes, I have spoken with AJ.
Our next question will come from the line what nail you vs.
Hey, thanks.
Steve I was just wondering if you could talk a little bit about payer mix and then how you're working on.
Identifying Medicaid coverage in three or it's just from a a process standpoint, it might be helpful. The here, what you're doing operationally I would think that some of the presumptive eligibility rules may may help you, but just from a registration process standpoint, you know just could you talk a little bit about your revenue cycle.
Yes, we had I think in.
The short run again over the last I'll call. It six weeks, we haven't really seen our payer mix change a great deal or see in particular, a significant uptick in patients without insurance.
Obviously.
Maybe not obviously, but I think a lot of employees.
Who are not working had been furloughed on them and I think a lot of furloughed employees or are retaining their health benefits in many industries et cetera.
Obviously, the expectation is that going forward.
To the degree that unemployment rises.
Significantly as I think it's expected to do.
We'll see.
Ticket uninsured patients.
Unlike the recession from a decade ago there is some.
Greater cushion here, obviously, there is Medicaid expansion in a number of our space that should sort of help.
You know insulate some of that increase and uninsured volumes.
Theres some talk that Congress will provide extended Cobra benefits there obviously are.
The state and federal exchanges, which should provide some additional or an additional outlet for some patients.
And.
So our admitting folks and our folks who.
Who deal with coverage issues are paired too.
Make sure that our patience and prospective patients.
Use every tool available to them to get the coverage. They need. We this is not the first time, we've gone through this drill I would say that a recessionary sort of environment is something that where at least a custom to working with and that there are models for us and procedures that we employ a little bit different than the cobot crisis.
Where you know we're sort of writing the playbook.
Or rewriting the playbook almost from scratch and in certain cases.
No. That's that's helpful and maybe just to clarification questions. The Medicare accelerated payments did you give a number for what you.
Expect to receive and the the $20 million malpractice increase in the quarter, just any more color on sort of the the trends driving that would be helpful. Thanks.
Yes, so what I said previously where it was received the 375 million and have filed for and expect to receive a similar amount.
In the future as long as.
CMS doesnt change their approach or change the rules and midstream.
As far as of now practice adjustment it was really based on.
Some you know a relatively small number of large case is that sort of casino had negative outcomes over the course of the last quarter or too.
In our minds required an adjustment to our reserve I think it's a little too early for us to make a judgment about how that will affect our going forward.
Expense provisions et cetera. So you know obviously right now we feel like to $20 million adjustment gets us to where we need today, but it's a it's a an area that we will continue to monitor as we go forward.
Okay. Thanks, a lot.
Your next question will come from the line is there James I personally.
Hey, Thanks. This is Chris NIM on this on for Ciena assortment second the and then you mentioned expanding capacity in the all our for when procedural volumes do come back, but can you clarify or maybe quantify just how much.
Capacity you'd be able to add to meet some of the pent up demand.
Yeah, I look I think it's fair to say that most most of our hospital as far as many most hospital of ours in general there not operating anywhere close to entrepreneurs and capacity and they operate from early in the morning, usually till sometime mid afternoon or so so we certainly have the option to.
Operate later into the day and on the weekends et cetera.
I think a lot of that is dependent quite frankly on surging capability and their capacity.
To operate safely et cetera, I think we have the employees.
And I think we have the physical capacity to.
You know expand our capacity if there is a.
So did I catch up or pipeline of demand that's greater than our normal.
Volumes, but you know a lot of that again, I think it's going to be dependent not so much on heavy gating mechanisms. We have in the hospital, but on patient perception inpatient willingness to come back to the hospital pattern, it's incumbent upon us.
As hospital providers to make our patients feel like it's a safe place to calm.
And they can comment be treated NFV environment, I think we have a whole host to procedures.
In place to do that.
And.
Doing everything we can to make our patients feel like.
That should not have any significant concerns about coming in to be treated.
Great. Thanks, and then just a quick ones. You also mentioned the declined adolescent side, but anything you can maybe kind of clarify it here can you just how much of the behavioral business is dependent on the referrals coming from schools.
Yes, so that was a comment, particularly I think about the residential businesses. Our residential behavioral business is probably about 15% of all our overall behavioral revenues, we certainly had adolescent patients in our general psychiatric pay to general psychiatric hospitals, but I was specifically referring to the resin.
Central business before and that's about 15% of our overall revenues.
Got it thank you.
Again Poskon audio question. Please press star one.
Next question will come from the line of AJ Rice with credit Suisse.
Hi, everybody.
The good to hear you guys are doing okay held and Steve.
Maybe a couple things one on the protective equipment. I know you you said that that was something little bit more costly, but I wonder could seems like Thats also a gating factor on when some of these locations. Our we'll have to ours. Some of these public health officials on a lot willing to allow people to reopen.
How are you standing in terms of your supply of that and you.
You think that there's a public health officials in your markets you started to feel comfortable that there's a enough of a supply of that too to allow for some of these procedures to come back.
Yeah, Hey, Jay So I mean, my again prepared remarks, I had talked about two of the challenges that our hospitals have faced thus far operational challenges. It then testing capacity.
And the supply as a PPV.
And I think you're right I think that in order to resume.
Active and scheduled procedures in a meaningful way you have to be able to test all those patients in advance and obviously get their results in a timely fashion and obviously you also have to.
The in shouldn't be assured that you have adequate protective personal protective equipment for those cases and also in reserve. If there is a second wave or a surge and covert patients et cetera.
I think that we have worked very hard over the last several weeks to ensure that supply chain is adequate.
For the various items of personal protective equipment and that the testing capacity and testing timeliness has improved and I think in both cases, we feel like we've made progress, but I think that both of those items will continue to be issue as we move forward and I agree with you I think that to some degree.
Our ability not just for you Hs, what our ability as an industry to resume kind of a normal scheduled elective procedures will require us to continue to make progress on both of those issues.
Okay.
Obviously labor was a challenge late last year and the acute side and obviously, you're implementing a cost reduction efforts now, but I wonder if more broadly maybe just too early for this but obviously the uncertain economic backdrop, what's happening with procedures is that in any way sort of.
Adjusted.
Expectations around labor that might be something that will.
Help me on that.
Going forward, even beyond just some short term cost reductions that you're pursuing.
I mean, certainly what we've seen again EMEA over the last six or seven weeks as a dramatic reduction in our use of overtime and temporary nurses.
Registry.
Personnel.
I think as long as were both in a period of somewhat muted demand as well as a period of higher unemployment hi that we will struggle less with those issues because I think they tend to be issues that are reflective of a much tighter labor markets. So yes that.
It is certainly a side benefit.
Of the revenue decline and the decline in demand that we've seen.
Okay, Okay and.
I know there was always discussion before about what was happening in the Vegas market with HC eight getting back into the network with with you and age and you had some expectations around what that would do obviously, maybe it's hard to understand whether that's playing out as you thought or not but.
Not at least maybe up to the last two weeks of March can you comment on what you're seeing there whether that was progressing as you would expect.
Yes.
Yes, so the comments that we made our year end call where that our expectation was.
That the dynamic of HCV getting back in Sierra United Network would largely be.
Push for US that is we would see a decline in volume as some amount of market share shift to take CHS hospitals, but that would largely be offset by an increase in rates that we were getting from Sierra United on those patients I think again for the bulk of the first quarter.
We were able to satisfy ourselves that that was the case.
Lastly in the last couple of weeks of the quarter, we saw a decline in Sierra patients as we did in all of our other patients hoped it became a little more difficult to do that analysis.
In March and certainly for the last half of March, but I think we're up the mine that our original contemplation of the impact of this was correct and this is at least in its initial stage is turning out to be either a wash or a very slight benefit to us.
Okay, alright, thanks, a lot.
And then Paulson audio question. Please press star one.
Next question will come from the line of Roth Capital City.
Thanks, Good morning, I hopped on a little bit late so apologies his last Friday, but I was hoping you could.
We talk a little bit more Steve we're Allen about sort of the current backdrop and.
If it changes sort of going forward views on the business in terms of strategy are positioning whether that sort of investing more downstream taking more risk partnering more.
Just any any sort of thoughts around around that and potential for structural changes in the industry.
Ralph I think you know I would make a couple of broad comments I mean, we again in our prepared comments, we made the point as I think in a number of our peers has made.
That up until the middle of March et cetera.
Both businesses were operating.
In a pretty robust environment. They were tracking ahead of the prior year I think they were meeting our own internal expectations. The business was good the demand was good.
And I think it on our own lines that none of that instead of fundamentally changed I think that the cobot crisis has altered.
Patient practice patterns, if you will in the short term and I'm not exactly sure how to define the short term.
But ultimately I think that demand as I've said before on the call will.
I will return and so I don't know that we're thinking about the business.
Fundamentally differently because.
Because of the coldest crisis.
Some of the question is that you asked.
About a are we thinking about sort of taking more risk and.
Partnering with others to do that et cetera, I mean, I think we've talked on a number of occasions about.
The things that were doing to do that well before the cobot.
Cope with crisis.
We're doing that through Medicare advantage products and a number of our markets. We're doing that through our insurance subsidiaries. We have accountable care organizations established in virtually all of our markets.
And so I think we were employing and implementing many of those strategies and recognizing how to healthcare landscape is changing again long before the covert crisis. So I don't know that.
The Coca crisis has really alter that trajectory at all.
Hi, This is Alan Miller, our business is in good shape.
I'm.
Facilities our modern.
We are well located.
We have a nice division between behavioral in acute.
And we've just been interrupted and what was.
Underway to be a very strong week.
We are financially strong.
Reputation is excellent.
And.
We just got interrupted I assume.
Thankful.
At this point it seems.
Covert 19 is on the way down.
Or is down a business will open up and I fully expect the.
The by some point.
June July and the May.
Our business will return as a matter of fact, all of the elective surgery that I've been.
Not.
Completed we'll come to the hospitals and my eyes, but.
Given time, we'll pick right back up we.
Very positive about the future.
Whenever.
We started again.
Okay. That's a that's certainly helpful and it just my last one sort of along those lines I guess as you consider the competitive backdrop, then in your market specifically and.
Perhaps potential for a lot, even if things sort of come back.
I mean, do you see or buy into the argument of share gains or M&A opportunities stemming from all this or where are you thinking sort of it's bounced back from an industry perspective and within your market you don't see that.
Competitive dynamic really really changing to create opportunities for you. Thanks.
Ralph I think you know and I think Allen articulated this and then and I tried to say it to some degree again in my prepared comments I think we feel like were well positioned where conservatively capitalized.
And so I think we have every expectation that we can deliver and continue to deliver high quality care Pan officially care in even in this difficult environment.
And while we hope that it rebound quickly.
The degree that it doesn't I think where.
We're in a position too.
Operate and survive and in this environment better than most of our.
Here is in our.
The geographies and which we compete.
So, yes, I mean I think that.
You know any time that there's a crisis. It also becomes an opportunity for those companies that are stronger and.
And better positioned and while I don't think year, we relish.
The notion that others will suffer in this.
This environment, where we're prepared to.
To step in if they do and if if others can't.
Provides level of service and the level of capital investment that's required.
Our markets, we certainly feel like we can do that.
Fair enough. Thanks for the thanks for the thoughts.
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