Q2 2020 Community Health Systems Inc Earnings Call
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Ladies and gentlemen, thank you for standing by welcome to community Health Systems Second quarter 2020 earnings Conference call. At this time, all participants are in listen only mode.
After the speakers presentations there won't be a question answer session.
You ask a question dream, it's actually going to press star one on your telephone.
Be advised to today's conference is being recorded.
Few requiring further assistance. Please press star zero I've been talking the conference over to your Speaker today, Mr. Ross Campbell, Vice President Investor Relations. Thank you. Please go ahead.
Thank you Mike Good morning, and welcome to community Health systems second quarter Conference call before we begin the call I'd like to read the following disclosure statement. This conference call may contain certain forward looking statements, including all statements that do not relate solely to historical or current facts. These forward looking statements are subject to a number of known add on.
Known risk, which are described in heading such as risk factors and our annual report on form 10-K, and other reports filed with or.
We're furnished to the Securities Exchange Commission as a consequence 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.
Yes for those of you listening to the live broadcast of this conference call a supplemental slide presentation has been posted to our website, we will refer to those slides during this 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 the sale of businesses expenses from government and other legal settlements and related costs expenses from settlement legal expenses related to cases covered by the CVR expenses related to employee.
Fifth and other restructuring charges change in valuation allowances recorded for for mystery notes changes estimate for professional liability claims accrual change in tax valuation allowance with that said I'd like to turn call over to Wayne Smith, Chairman and Chief Executive Officer Mr. Smith. Thank you Ross good morning, and welcome everyone.
Through our second quarter conference call I'm joined today by Tim mentioned, our President and Chief operating Officer.
Inside the present clinical operations, and Chief Medical Officer, and Kevin Hammers, Executive Vice President and Chief Financial Officer.
It goes without saying that to covert fight is still alone.
I think we're finding a very good fight as indicated by our second quarter results, we reported our first quarter results.
At the end of April not concluded my remarks by saying that CHS is strong and resilient organization that has always manage to solve problems.
We remain ready for whatever might come mix and that we would be best.
It would do our best for everyone and counsel on those three months later, we find ourselves into position appearing for meaning more koby night convictions now than we were back at that point in April were also balancing the healthcare needs at Noncovered patients having successfully reopened substantially all of our services that were suspended.
Early stages of this band.
Ensuring that all need healthcare in our communities will continue to have access quality and say healthcare. The credit of course goes to every physician every nurse every clinician caregiver support worker, who shows up everyday to serve our patients our medical staff employees have been extraordinary during the.
Extraordinary times.
And while you not.
Being seen the.
You may not be seeing as many healthcare hero signs.
Displayed as we saw back in March and April.
The heroic work continues and we're extremely grateful.
We operate in a number of sites has been hit harder by code 19 in recent weeks, Florida, Texas, Arizona and others in each market Workover 19 cases has increased significantly.
Single purpose is to deliver need healthcare services safely.
We're doing everything possible to protect our patients employs their families and others in our community.
Safety always comes first for US in every hospital has implemented protocols to prevent the spread of cobot 19 inside our facilities.
We will people know that third site and our tier and safe working in our hospitals.
At the began the quarter volumes were very low at our markets just like they were across the country. This was due in large part to the federal recommendations stay at home orders and state restrictions on elective procedures and also the cost consumer for fearful and hearing to social distancing recommendations.
As states lifted those restrictions, we engage directly with patients.
Deferred healthcare reassuring them, and bringing them back where needed apartments and procedures and emphasizing as they should not the delay important healthcare services.
We promoted the importance of pop care, and emergency and emergencies and continuation of care for chronic conditions, and even routine screening and health services.
I can't say enough about the work that was done coordinate and collaborate with medical staff leaders and with positions in our markets. These relationships.
Enabled a relatively seamless restart of our elective procedures walk in appointments other services.
We saw coated volumes rebound in our markets in May and June in some cases getting loader close to.
Prequel good levels, although like many others, we saw a slower volume return and R&D ours in July Cokemaking cases have increased across the sunbelt, which can impact healthcare demand and likely effects consumers' willingness to exit services.
But in most of our markets. We are effectively managing co benign team also leveraging our real time data to monitor.
Effective elective procedures and other volumes to ensure safe and efficient levels of operation.
Our solid recovery in the second quarter was made possible by the company's commitment to operational readiness at all times. This daily focus by them and the team has enabled us to ramp up and down and backup as needed and this flexibility will likely be important as we continue to face uncertainties due to cope with 19 pending.
Our operations and leaders ship teams locally and in the corporate office have artfully manage each markets unique needs. While also leveraging our organization resources and a coordinated enterprise wide response.
Our response and recovery work has benefited greatly from prior investments that we may to enhance our supply chain operations extend our transfer centers accelerating workforce management processes and optimize our physician practice operations.
It's not just our company size, although that's part of it but also our mindset and our ability to adapt to the conditions to make rapid decisions to quickly coordinate resources and deploy expertise where it's needed.
The strength along with the advantage of scale position us well to cope with the future evolution of payment.
They also ensure we can't predict our business and improve our competitive position in the feature as we move forward with strategic market opportunities and the necessary adjustments healthcare providers called upon to make down to deliver even better care.
And more innovatively in the future.
Let me turn to the funds we received from the cares Act for just a moment and Kevin will.
The detail and much we'll get into this in much greater detail in few minutes.
Run from the care Act have been very helpful to our organization in so many other healthcare providers.
For through the pandemic and expand and didn't make.
Really funds and accelerate Medicare payments provided liquidity, ensuring the industry could maintain more jobs survive business disruptions and volume declines and.
They supported the continuation of essential services for our communities.
But the potential negative impact of coating 19 will not likely in until we were able to control the pending in healthcare providers will continue to need to support.
Of our country, while we care for Americans to count on community hospitals to.
To always be available when they're in eight when they need us.
Looking forward, while cobot 19 as a primary focus we're also continued to plan for the feature.
Our divestitures as we wrap up the portfolio rationalization program. This year, we strengthened portfolio improve liquidity.
Our stronger portfolio is benefiting from investments in strategic growth drivers, including capital investments in revenue and net revenue initiatives that will deliver market share gains in both inpatient and outpatient lines of business.
Our strategic markets margin improvement program also remains on track with a solid reduction across numerous expense categories, reducing greater efficiency across the organization.
And our confidence continues to run high and while nothing is assured in a public crisis, we will make a managed through this pandemic to the best of our abilities controlling what we can control and adapting whenever we need to let me say once more grateful I am to everyone across the community health systems organization I'm proud of our achievements.
In this difficult circumstances, I hope that everyone will continue to do their part we have control the spread of Vars and protect one another we want our caregivers to be safe who are patients to recover.
And we must do all we must all do our park and now I'd like turn call over debacle in Simon to continuously meaning of our critical aspects in our responses and in fact Simon.
Thank you Wayne.
Managing the clinical and operational aspects of a large scale pandemic requires a solid infrastructure for crisis initiatives management high levels of coordination and communication across the team and as we noted earlier the ability to make rapid yet informed and prudent decisions.
Our public response team continues to collaborate on a daily basis to share key updates and every functional area affected by this pandemic from testing capability to infection control to supply management from nursing and patient care to employees health.
I'm facility planning to marketing and communications and so many other areas necessary for an effective response.
Our goal as proactive and timely information and support for our regional and local hospital leadership teams, especially in light of evolving clinical guidelines regulatory updates and sometimes an influx of code at 19 volumes.
We use an internally developed at 19 tracking dashboard for real time visibility of Cobot 19 cases across all of our hospital.
This enables us to see trends plan and adjust accordingly, and accurately report information to various agencies.
At the Middle of June and into July we have seen an increase in covet 19 patients primarily across the southern states.
Currently we are experiencing the highest number up 19 admissions in Texas, and Florida, while we continue to manage varying degrees of surge in Mississippi and Alabama.
We believe we have hit our peak volumes in areas in our Arizona markets at this time with newly diagnosed and inpatient caseload showing sustained reductions.
We have tested over 100000 patients for a potential coven 19 diagnosis.
Provide to care for approximately 15000 confirm covet 19 patients in our hospital ease and outpatient care settings.
This compares to approximately 2000 cared for at the end of April 3000 at the end of May and 7000 at the end of June which brings and declare perspective the magnitude at this current surge in July.
Touching on some of the achievements we've seen since the early stages of the pandemic.
As testing resources have increase we are able to more quickly diagnosis and confirm Kobe banking cases, which enables us to appropriately placed positive patients and special Coca care units deploying adjust staffing teams and allocate ERP and other supplies were needed.
On the supply chain side, we have implemented a new centralized distribution system for people and equipment, which adds an additional depth to our sourcing and logistic capabilities.
Organized our facilities and operations to provide safe care for both cobot positive and Noncovered actions.
We can see the benefits of our early stage planning and how those efforts are allowing the company to effectively manage increases in covet 19th admissions.
Our focus on our employees and providing resources to increase resiliency and when necessary to provide relief.
Our clinical teams have adapted well to simultaneously caring for those affected by cobot 19, as well as those who have other non covalent healthcare needs.
Throughout this pandemic our primary objective is to ensure the safety of our patients physicians and staff, while continuing to provide access to care for the communities we serve.
As we continue to monitor new Covent 19 cases on a market by market basis, we remain confident in our ability to manage the current situation and we are prepared to make adjustments for future scenarios when they are needed.
I'd like to join Lane and thanking everyone has worked tirelessly to ensure that our hospitals and their staff can very effectively care for all of their paychecks.
And I'd like to also acknowledge the frontline caregivers, who earn our respect and admiration every single day Tim.
The Atlanta I join you and expressing my appreciation to the caregivers across our organization and the nation for the sacrifices that they and their families have made and for the high quality care being provided for all patients.
I also want to express my gratitude to our hospital and physician practice leaders, who were answering operational excellence and execution of our carpet 19 response and recovery strategies.
I've been incredibly impressed by the organized approach resourcefulness and continuous commitment to serve their communities. During this public health crisis.
And of course, I'm thankful for our CHF clinical and operational experts were providing tremendous levels of support to our markets, while keeping all of our other important the operational and strategic initiatives on track.
As Wayne mentioned, when we were able to restart medical and surgical procedures across our markets in may we were well prepared to ramp up operations.
We had plans in place for patient testing be further elective procedures and had already redesign space is inside of our facility to ensure social distancing and safe workflows.
We work closely with our medical staffs to ensure appropriate capacity for differ cases, and we developed processes that allow physicians and patients to return to the hospital setting safely and efficiently.
And our team has worked to increase communications with patients and their families proactively inviting them to come in for needed care and reassuring them about what to expect.
Early planning an intentional volume rebuilding efforts led to consistent improvements in our admissions adjusted admissions surgery and the our visits during may and throughout June.
Typically in terms of our key metrics and second quarter performance. Our net revenue was negatively impacted in the second quarter as a result at a pandemic.
Admissions trough with a 31% decline in April prior to the recovery in May and June during which higher acuity inpatient admissions and surgeries return to our hospitals.
We finished June with a 5% decline versus the prior year month.
On the surgery side, we were down almost 70% in April, but we were able to drive strong sequential growth. The next two months ending June at a positive 2% serves service lines, including cardiology Orthopedics and our service has contributed to this recovery.
Similar to the reports across the industry ERP Thats have recovered at a slower pace than other volume metrics.
Our hospital IAR visits were down 45% in April that improved to a negative 20% by the end of June.
We continue to see our Eddie volumes improve into July now down approximately 15% versus the same period last year.
Our EBITDA declines are primarily due to lower acuity presentation.
Most traffic representing what is typically higher acuity patient volume return to more historical levels, leading into the third quarter.
Now I'd like to highlight recovery in our physician practices.
Many practices were affected by volume declines in the early part of the quarter, mostly because of stayed home orders and consumer reluctance toward visiting any kind of health care setting.
We have previously invested in tele health capabilities. So we were able to quickly ramp up these services ensured that our patients could connect with their position and other providers virtually.
We managed over 230000 telehealth visits in the second quarter with high levels of patient and provider satisfaction.
Once states began to lift to stay at home orders, we current reconnected with our patients leading to an increase of in person practice visits as well.
In addition practice volume is now higher than pre pandemic levels feeding prior year visits and our clinics by 6% in June.
Our physician practices. Another access points are the top of the funnel for procedural and hospital volumes. So a leading indicator of future utilization based on the visits we're now seeing and our practices. We believe we should see increased demand for medically necessary care across most specialties and hospital services and future months and.
Late June and into July the rate of new Covent 19 positive cases has increased particularly across the sunbelt states from which the company generates approximately three fourths of our net revenue.
The increase in these states a slow down the company's overall volume recovery.
We are currently averaging a daily census across the enterprise of more than 1000 cobot positive patients.
As a result on a year over year basis. During the month of July our same store admissions are down approximately 5%, which is in line with June results surgeries are down close to 10% and the our visits have improved slightly from where we were in June but.
But as Dr. Simon previously noted we believe we have peaked or plateaued in terms of cobot cases, and some hot spot market and as we demonstrated on the back ended the second quarter, we're prepared to recapture more normal volumes as healthcare demand returns.
Each of the work we were doing prior to the onset of cobot 19, including initiatives. We've accelerated during the pandemic will make a stronger for the future. For example, our transfer center has provided increased visibility and to market needs and has aided in recovery efforts as markets reopened we were well on the way to expanding transfer center operations to other mark.
Yes, before the pandemic cat and we are still on track to complete this expansion before the end of the year.
Key capital investment projects were completed and putting new freestanding emergency departments to support our operations on the radar, Texas and to expand northwest health, Our healthcare network in northwest, Arkansas, and we opened new ASV fees, and North Carolina and in Birmingham, Alabama.
We have other active projects underway, including a de Novo micro hospital to extend the geographic reach and strength of our Tucson, Arizona market that hospital is scheduled to open in the fourth quarter.
We have an active pipeline of new access points and service line expansions across the portfolio and we are still actively recruiting new physicians to our markets.
Our strategic margin improvement program has delivered expense savings across our corporate office and infrastructure shared service centers supply procurement vendor fees and other non patient care areas. These savings, while significant where more than offset by our net revenue loss due to covert 19 in the second quarter, but.
Correct. These savings to provide long term benefit through ongoing expense reductions and greater efficiencies as our business returns to more normal levels.
Before I turn the call over to Kevin I think it is important to acknowledge that none of us are aware of what the future holds especially at the cobot 19 pandemic content continues to affect our country.
What I remain confident and however is that our company has the breadth of resources, a highly committed team and will remain agile and overcome challenges along the way because of this I believe we will effectively managed through the second half of 2020 and can emerge from this with even sharper execution as we focus on delivering long term growth and now I will turn the.
Call over to Kevin.
Thanks, Tim and good morning, everyone.
Similar to last quarter I will not cover all of the typical financial metrics today, instead, I would point to to the 8-K and our slide deck for additional details.
As a reminder, we previously with through our 2020 financial guidance and we're not providing guidance due to the ongoing impact of cobot 19 pandemic. The recent surge in new cases, the ongoing uncertainties around the timing of recovery and other factors that we have discussed.
During the second quarter on a consolidated basis net operating revenues came in at two.
Billion $519 million down 23.7% from the prior year, while adjusted EBITDA was $454 million up 12.9% on.
On a same store basis net revenues decreased 18.4%.
This was comprised of a 24.2% decrease in adjusted admissions and a 7.6% increase in net revenues per adjusted admission.
As Wayne mentioned Coven 19 has had a negative impact on our financial performance during the first half of 2020.
Year to date through June Thirtyth, we estimate that cobot 19 has negatively impacted our net revenue by over $1 billion.
During the quarter, our hospital leadership teams did an outstanding job managing variable costs and expenses and as Tim mentioned, our strategic margin improvement program helped to deliver further on expense reductions on a same store basis, our salaries wages and benefits expense decreased 9%.
Supplies expense was reduced by 18% and other operating expenses decreased 1%.
Switching to cash flows cash flow for provided by operations were $1.65 billion for the second quarter of 2020. This compares to cash flows from operations $132 million during the second quarter of 2019 for the first six months of 2020.
Our cash flows provided by operations were 1.71 billion.
This compares to cash flows from operations of 265 million during the first six months of 2019.
In terms of the year over year comparison.
There are few items worth noting versus prior year, which impacted both the quarter and the six month periods in April the company received approximately $1.2 billion of Medicare accelerated payments.
The company also received 564 million in provider relief grants under the cares act that will not be subject to repayment as long as the company meets its eligibility criteria.
Lower EBITDA due to the pandemic was largely offset by increased cash from accounts receivable collections and in the first quarter, we paid $53 million Inartful litigation so.
Turning to Capex, our Capex for the first six months of 2020 was $192 million or 3.5% of net revenue compared to 212 million or 3.2% net revenue in the prior year.
We have continued to invest in cap invest capital into high growth opportunities across our markets Germain physician for incremental growth in the future. However, as we manage through these unusual circumstances, we do have the ability to scale down.
As it relates to liquidity at the end of the second quarter. The company had $1.55 billion of cash on the balance sheet as.
As of June Thirtyth, the company had no outstanding borrowings and approximately 434 million of capacity borrowing capacity under the ABL with the ability to increase it up to $1 billion.
Switching to the cares Act as we previously discussed we received approximately $1.2 billion in Medicare accelerated payments to support near term liquidity.
The recruitment.
Medicare accelerate payments is scheduled to begin in August.
In the second quarter, we received approximately $564 million of grants through the public health and social services Emergency fund in both general and targeted distributions of which we recognized approximately 448 million in the quarter and income as a reduction in operating costs and expenses.
Following the second quarter in July the company received an additional $109 million grant through the public health and social services Emergency fund through additional targeted distributions through.
Through July the government has now allocated 125 billion of the $175 billion in the carriers Act, we do not have visibility into how the remaining allocations will be determined.
In terms of our divestiture program on our last earnings call. We indicated the divestitures announce through late April would complete the company's formal divesture plan under closing upon closing.
Subsequent to our call in June we closed two hospital transact transactions generating approximately 150 million of proceeds we also announced a definitive agreement to sell Bayfront health Saint Petersburg in Saint Petersburg, Florida.
Combined we expect these announced divestitures that if not yet close to generate approximately 430 million of incremental proceeds and close at various times during the third and fourth quarters.
We look forward to driving growth from the strengthen portfolio as we move forward.
At the end of second quarter, we had approximately 13.1 billion of long term debt.
Down approximately 270 million from year end and the company has no near term maturities with its next maturity of $231 million not due until February of 2022.
In summary, we are confident that following our recent capital structure work along with our current cash on hand proceeds from the divestitures and signed definitive agreements availability under our ABL as well as the possibility of additional federal government stimulus and relief efforts, we have ample liquidity.
To manage through this current crisis returned to normal operations and be well positioned for growth moving forward.
Wayne I will turn the call back over to you. Thank you Kevin at this point operator, we're ready to open up for questions.
We will limit everyone to one question. So several you will have on the call.
For this call and as always were available.
You can Regis at area code 6.465 7000.
As a reminder to ask a question you want me to press Star one on your telephone.
Your question.
Lower hash key.
George will allow everyone time for questions. Yes. Thank you please limit yourself to one question each.
Please stand by what we can model gets renewed roster.
Your first question comes from Josh Raskin from from research.
Hi, Thanks, good morning.
Question about the Tele health comments and I'm curious in terms of just that work flow and the impact on the referral process and procedures downstream I'm curious how you make sure you are included in that process and what sort of investments you're making in is there an opportunity actually for community to take share.
Can you sort of invest a little bit more than maybe some of the not for profits in your markets and things like that.
Hey, this is land I can answer some practice side like Josh I think your question is in terms of market share how's that affecting.
Total health effects that in.
I think it's a very positive that we have very positive position in terms as well as Lynn you, specifically, but I think we've done really well I can start and intend may have additional comments on the from the practice side as Tim said, the Tele health. We are positioned I think to get it started at really accelerated and we continue to see obviously higher use.
Telemedicine than before the pandemic, what we're doing strategically is really looking to the hardwire that and our clinic operations.
Along with integrating our tele health platform with into our electronic medical record that could help us with that referral process that you mentioned and making sure that we link up our primary care physicians with our specialists and then eventually downstream to provide their procedures. So Tim yes more comment yes. Thanks for the question John.
So again, we're very pleased with the fact that we've had such strong growth in June for those practices, partly due to the launch of Tele health as we said, but also the return of our walk in business. It's been very reassuring front that we have the right doctors in the right place I'm going to patients are indeed, requiring and desiring to have their health.
Care services met by our practice of again from a tele health perspective, the integration that Lynn mentioned is pivotal but in terms of the competitive edge at it provides to us I am it depends on the market and some of our market that we have competitors that have also launched or embellished of their their tele health platforms as well through the impact of a pandemic I'll bet and men.
We have our markets. It is a new AD debt for us in terms of opportunities for patients to up to participate in their care with their provider. So at this point is kind of too early to tell we did see some tapering off of the telehealth visit that some patients did prefer to come back to in person visits.
In terms of the integration with our referral system, we do like the fact, we monitored internally we do like the fact that we do see those connections being made from our primary care as to our specialists and to our belief that it does give us some good insights into what we can expect a procedural volumes in the month to calm net net.
It's helpful in terms of long absolutely.
Your next question comes from Frank Morgan from RBC capital markets.
Good morning, I appreciate the comments about Leach recent volume surgical trends in the month of July down about 10% and I'm just curious how much variation is there in that number.
If you could maybe give us a range between some of those hotspot markets that you talked about in Texas, and Florida, how much more they impacted and then say markets that you wouldn't consider the hot spot markets.
Yes, Frank this is Tim it's a clear correlation that our biggest impacts are in those markets that are experiencing search conditions. We have very few of state mandates as you know that are limiting our ability to.
Provide elective are scheduled care to our patients, but in those hot spot market.
In Texas in Mississippi for instance, we do have certain capacity thresholds that we have to maintain which does require us to throttle back, but even without those requirements. I think it's important to emphasize across our portfolio. We're doing I think a really good job doing what doing what's right for each of our community.
Dialing back them at the luck diverse scheduled procedures deferring them. So that we ensure we have ample capacity for an influx of cobot 19 care. So for that for this particular adjusts for a time through July definitely seeing a decrease in surgeries in our most impacted market keeping close tabs on those patients so that when we do see some of those cobot volumes.
Relieved in those market, we can reconnect with those physicians and patients and bring those those services back into our hospitals.
Your next question comes from Ralph Jacoby from Citi.
Thanks, good good morning.
The pricing mix sat up 7.6%, obviously, a strong result can you just give us a little bit more on sort of the acuity what Sam I was up and then payer mix not only hung in but looked like it actually improved within commercial which I guess, there's a little surprising maybe any thoughts there and whether you expect that essentially sort of fall off.
Hi, Thanks.
Sure. Ralph this is Kevin I can give you a little color on that so.
You know front from a demographic standpoint, I think the the.
Group of patients at probably stayed away from our hospitals the most during the quarter, where Medicare patients those being at the highest risk and probably.
Stayed away from from the healthcare environment.
So that certainly contributed to a payer mix improvement I would say our pricing was split pretty evenly between acuity and payer mix.
Is the best way to look at that.
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Your next question comes from Bryan can kill it from Jefferies.
Hi, Good morning. This is Jack slipping on for Brian. Thanks for taking my questions I, just wanted to touch on margins and how you're thinking about margin profile moving forward and then kind of how sustainable. The current cost structure is at what point, you might need to ramp up staffing and and comp.
We're actually feeling pretty good about margins related.
And we think Theres a lot of visibility into the future in terms of our.
2.0 program in terms of expense management, all those things were positive for US given you want to sure. So we had started.
Back in the third quarter, some margin improvement initiatives.
We continue to work on those throughout this pandemic period, they continue to get traction and we think Theres continued opportunity. So in addition to flexing some of our variable costs as a result of declining volumes during the pandemic. We also continue to.
Progress on other margin improvement initiatives, so as we come out of the quarter, certainly with the decline and volume and revenue.
We did not generate the EBITDA for the for the quarter, but as we returned to normal we believe that will continue to improve our margin profile from the pre cobot levels.
Your next question comes from Andrew Baum from Barclays.
Hi, Good morning, Thanks for the question the Capex in the quarter came in around 93 million, which held up relatively well to the prior quarter and initial guidance can you give us a sense where would you have budgeted in the back half a year and where you might be pulling back on investments Ben thanks.
Sure. So so weve.
As you know we pulled guidance for the rest of the year. So we don't.
Not given kind of a target on our capital spend but as I've indicated we're continuing to invest and what we believed to be our growth opportunities.
So that as we recover and things return to normal we're going to be well positioned to continue to grow take market share and improve our margins, where we have some opportunity in where some of the spend.
Did get pulled back a little bit was with some of our IP spending where we did not have.
People.
Our employees going into the hospitals to do.
Deployment of IP networks, and so forth certainly wanted to protect both our employees and patients from that standpoint, and also some medical equipment, where the providers of the medical equipment, you know and US included did not want those people in our hospitals.
Cities, so that spending as things return to normal I will come back a little bit, but we did continue to invest in some construction projects and mentioned we opened a pre sandy NFC and we have.
New facility in Tucson.
That will be opening later this year that are all growth projects.
Yes.
And our last question comes from Kevin Fischbeck from Bank of America.
Hi, there, yes, so why would you in their peers. It seems like industries has gotten pretty.
Solid add done pretty well dealing with covidien, maintaining some pretty normal operations, so I'm trying to understand where.
If you're managing this well during Q2, what scenarios might exist, where there'd be some downside in the back half of the year. Thanks.
I'm not sure that it gets any more complicated than it is right.
I think this event was the gold Obsoleted molest.
Number of years and I think the great thing utterances organization has the ability to adapt.
We've seen the.
Remarkable change in terms of the way we provide care that we have people that have been doing this now.
Last two months and I think they've gotten increasingly better.
You can see it in the results where patients are.
Goodwill I got you know I think the downside is here.
The upside is the last letter part of the year.
But again I can't be I'm extremely impressed with their building this organization that people within in terms of.
We are.
For for all this and you know the the government restrictions have created some of those issues and they might create more kind of going forward, but on related.
The government has been very helpful in terms of the.
The appears act so anyway.
We're very hopeful that were on the right track in the countries on right track in that.
The latter part of the year will be very solid.
We'll now turn the call back over to Mr. Smith for closing comments.
Thanks again this for being with US. This morning, I want to once again express how deeply grateful we are to all of our employees physicians medical staff regional presence hospital leadership teams hospitals support teams.
And corporate office support teams.
We continue to move ahead with our strategies one to provide outstanding care for patients to to maintain trust in partnership with our physicians and employees three to demonstrate our value duties, we serve and forward to reward the currently shareholders and debt holders for their confidence in investment our organization.
This concludes our call today look forward to update you on our progress later in the year. Once again you have any questions is always reaches Eric on the six one.
Or 657000, thanks again for joining the call.
Ladies and gentlemen. This concludes today's conference call. Thank you for participation you may now disconnect.
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Ladies and gentlemen, thank you for standing by welcome to community Health systems second quarter 2020 earnings Conference call.
It's time, all participants are whats multi mode.
After the speakers presentation, there won't be a question answer session.
Good question during the traction you, perhaps one on your telecom.
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The conference over to your Speaker today, Mr. Roscommon, Vice President Investor Relations. Thank you. Please go ahead.
Thank you Mike Good morning, and welcome to community Health systems second quarter Conference call before you begin the call I'd like to read the following disclosure statement. This conference call may contain certain forward looking statements, including all statements that do not relate solely to historical or current sac.
These forward looking statements are subject to a number of known and unknown risk, which are described in heading such as risk factors in our annual report on form 10-K, and other reports filed with or.
[laughter] furnished to the Securities Exchange Commission as a consequence 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.
For those of you listening to why broadcast of this conference call a supplemental slide presentation has been posted to our website, we will refer to those slides during this 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 the sale of businesses expenses from government and other legal settlements and related costs expenses from settlement legal expenses related to cases covered by the CVR expenses related to employee.
Fits and other restructuring charges change in valuation allowances recorded for from Missouri notes changes estimate for professional liability claims accrual change in tax valuation allowance with that said I'd like to turn the call over to Wayne Smith, Chairman and Chief Executive Officer Mr. Smith. Thank you Ross good morning, and welcome everyone.
Our second quarter conference call I'm joined today by Tim hedged in our President and Chief Operating Officer, Dr. Lynn Simon present, clinical operations and Chief Medical Officer.
Kevin Hammons Executive Vice President and Chief Financial Officer.
It goes without saying that the covert five is still alone.
I think we're finding a very defined as indicated by our second quarter results, we reported our first quarter results.
At the end of April not concluded my remarks about saying that CHS is strong and resilient organization that has always managed to solve problems.
We remain ready for whatever might come mix that we would be best.
Through our best for everyone else on those three months later, we find ourselves into position appearing for many more koby liking basis now than we were back at that point in April were also balancing the healthcare needs of non cobiz patients having successfully reopened substantially all of our services that were suspended.
In early stages of this Brandon and ensuring that all of these health care in our communities will continue to have access quality and safety health care.
And of course goes to every physician every nurse every clinician caregiver support worker, who shows up everyday to serve our patients.
Staffing employees have been extraordinary during these extraordinary times.
And while you.
Being seen.
While we may not be seeing as many healthcare hero size.
Display as we saw back in March and April.
Heroic work continues and we're extremely grateful.
We operate in the numbers sites has been hit harder by Koby 19 in recent weeks, Florida, Texas, Arizona and others in each market Workover 19 cases have increased significantly our single purposes deliver new healthcare services safely.
We're doing everything possible to protect our patience employs their families and others in our community.
The always comes works for US and every hospital is implemented protocols to prevent the spread of koby 19 inside our facilities.
So people know that third site in our tier and safe working in our hospitals.
At the beginning in the quarter volumes were very low in our markets just like they were across the country. This was due in large part to the federal recommendations stay at home orders and state restrictions on elective procedures and also the cost consumer for fearful and the hearing to social distancing recommendations.
As states lifted those restrictions, we engage directly with patients.
Deferred healthcare reassuring them, and bringing them back where needed apartments and procedures and emphasizing as I mentioned I would like important healthcare services.
We promoted the importance of prop here in emergency and emergencies and continuation of care for chronic conditions, and even routine screening and health services.
I can't say no.
The work that was done coordinate and collaborate with medical staff leaders and with positions in our markets. These relationships.
Enabled a relatively seamless restart of our elective procedures walking performance and other services.
We saw coated volumes rebounded or markets in May and June.
Okay, just getting a lot or close to.
Prefilled good levels.
Although like many others, we saw a slower volume return and our yours.
As you lock overnight in cases of increased across the sunbelt, which can impact healthcare demand and likely effects consumers' willingness to exit services.
But in most of our markets. We are effectively managing Coca 19 also leveraging our real time data to monitor.
Effective elective procedures and other volumes to ensure safe and efficient levels of operation.
Our solid recovery in the second quarter was made possible by the company's commitment operational readiness at all times.
We closed the spectrum and the team has enabled us to ramp up and down and backup as needed and this flexibility will likely be important as we continue to face uncertainties.
Thanks.
Our operations and leaders sheer teams locally and in the corporate office artfully manage each markets unique needs. While also leveraging our organization resources and a coordinated enterprise wide response.
Response and recovery, we're it's benefited greatly from prior investments that we made to enhance our supply chain operations extend our transfer centers sell ready workforce management processes and optimize our physician practice operations.
It's not just our current size, although thats part of it but also our mindset and our ability to adapt to these conditions like rapid decisions to quickly coordinate resources and deploy expertise where it's needed.
These strengths along with the advantage of scale position us well to cope with the feature evolution of pending that.
They also ensure we can't predict our business and improve our competitive position in the feature as we move forward with strategic market opportunities and the necessary adjustments health care providers Calc, London make now to deliver even better care.
More innovative late in the future.
Let me turn to the funds we received from the cares Act for just a moment and Kevin.
In detail and much we'll get into this in much greater detail in two minutes.
From the care Act have been very helpful to our organization in so many other healthcare providers.
Through the pandemic.
And then make.
Really funds and accelerate Medicare payments provided liquidity, ensuring the industry could maintain more jobs.
Business disruptions and volume declines and.
They support the continuation of essential services for our communities.
Digital were negative impact of Copel 19 will not likely in until we were able to control dependent and healthcare providers will continue to me the support.
Of our country, while we care for Americans.
Community hospitals.
To always be available when they're in eight when they need us.
Forward well covered liking as a primary focus we're also continued to plan for the feature.
Our divestitures as we wrap up the portfolio rationalization program. This year, we strengthened portfolio improved liquidity.
Stronger portfolios benefiting from investments in strategic growth drivers, including capital investments in revenue and net revenue initiatives liver market share gains in both inpatient and outpatient lines of business.
Our strategic market margin improvement program also remains on track with a solid reduction across.
Yes expense categories, producing greater efficiency across the organization.
And our confidence continues to run high and while nothing is ushered in a public crisis, we will they managed through this brand into the best of our abilities controlling what we can't control are adapting whenever we need to.
Let me say once more grateful I am to everyone across the community health systems organization.
Out of our achievements in this difficult circumstances, I hope that everyone will continue to their part of control the spread of bars and protect one another we want our caregivers to decide who are patients to recover.
And we must do all we must all do our.
Now I'd like turn call over to Dr. Lynn Simon to continuously meaning.
Our critical aspects in our responses Brandon Thanks Simon.
Thank you Wayne.
Managing the clinical and operational aspects of a large scale pandemic requires a common infrastructure for crisis initiatives management.
Levels of coordination and communication across the team and as we noted earlier the ability to make rapid yet informed and prudent decisions.
Our covered response team continues to collaborate on a daily basis to share key updates in every functional area affected by this pandemic.
Testing capability to infection control to supply management from nursing and patient care to employees health.
From facility planning to marketing and communications and so many other areas necessary for an effective response.
Our goal is proactive and timely information and support for our regional and local hospital leadership teams, especially in light of evolving clinical guidelines regulatory updates and sometimes an influx of co that 19 volumes.
We use an internally developed at 19 tracking dashboard for real time visibility of covet 19 cases across all of our hospital.
This enables us to see trends plan and adjust accordingly, and accurately report information to various agencies.
Toward the middle of June and into July we've seen an increase in covet 19 patients primarily across the southern states.
Currently we are experiencing the highest number of covet 19 admissions in Texas, and Florida, while we continue to manage varying degrees of surge in Mississippi and Alabama.
We believe we have hit our peak volumes and arrows in our Arizona markets at this time with newly diagnosed and inpatient caseload shelling sustained reductions.
We have tested over 100000 patients for a potential coven 19 diagnosis.
We have provided care for approximately 15000 confirm covet 19 patients in our hospital.
Ladies and outpatient care settings.
This compares to approximately 2000 cared for at the end of April 3000 at the end of May and 7000 at the end of June which brings and declare perspective the magnitude of this current surge in July.
Touching on some of the achievements we've seen since the early stages of a pandemic.
As testing resources have increase we are able to more quickly diagnosed and confirm covet 19 cases, which enables us to appropriately placed positive patients and special kind of the care units deploying adjust staffing teams and allocate ERP and other supplies were needed.
On the supply chain side, we have implemented a new centralized distribution system for PPV and equipment, which adds an additional depth to our sourcing and logistic capabilities.
We have organized our facilities and operations to provide safe care for both covert positive and non compensation.
We can see the benefits of our early stage planning and how those efforts are allowing the company to effectively manage increases uncovered 19 admissions.
Our focus on our employees and providing resources to increase resiliency and when necessary to provide relief.
Clinical teams have adapted well to simultaneously caring for those affected by covet 19, as well as those who have other non covalent healthcare needs.
Throughout this pandemic our primary objective is to ensure the safety of our patients physicians and staff, while continuing to provide access to care for the communities we serve.
As we continue to monitor new Covent 19 cases on a market by market basis, we remain confident in our ability to manage the current situation and we are prepared to make adjustments for future scenarios when they are needed.
I'd like to join Lane and thanking everyone has worked tirelessly to ensure that our hospitals and their staff can very effectively care for all of their paychecks.
And I'd like to also acknowledge the frontline caregivers to earn our respect and admiration every single day Tim.
Thank you land I joined you and expressing my appreciation to the caregivers across our organization and the nation or the sacrifices that they and their families have made and for the high quality care being provided for all patients.
Also want to express my gratitude to our hospital and physician practice leaders, who are answering operational excellence and execution of our corporate 19 response that recovery strategies.
An incredibly impressed by the organized approach resourcefulness and continue with commitment to serve their communities. During this public health crisis.
And of course, I'm thankful for our CHF clinical and operational experts were providing tremendous levels of support to our market, while keeping all of our other important the operational and strategic initiatives on track.
As Wayne mentioned, when we were able to restart medical and surgical procedures across our markets. In may we were well prepared to ramp up operations. We have plans in place for patient testing be further elective procedures and had already redesign space has inside of our facilities to ensure social distancing and safe workflows.
Our closely with our medical staffs to ensure appropriate capacity for deferred cases, and we develop processes that allow physicians and patients to return to the hospital setting safely and efficiently.
And our team has worked to increase communications with patients and their families proactively inviting them to come in for needed care and reassuring them about what to expect.
Early planning an intentional volume rebuilding efforts led to consistent improvements in our admissions adjusted admissions surgery and the our visits during may and throughout June.
Typically in terms of our key metrics in second quarter performance. Our net revenue was negatively impacted in the second quarter as a result of the pandemic.
Admissions trough with a 31% decline in April prior to the recovery in May and June during which higher acuity inpatient admissions and surgeries return to our hospitals.
We finished June with a 5% decline versus the prior year month.
On the surgery side, we were down almost 70% in April, but we were able to drive strong sequential growth. The next two months ending June at a positive 2% serves service lines, including cardiology Orthopedics and neuro service has contributed to this recovery.
Similar to the reports across the industry ERP Thats have recovered at a slower pace than other volume metrics.
Our hospital visits were down 45% in April that improved to a negative 20% by the end of June.
We continue to see our EDI volumes improve into July now down approximately 15% versus the same period last year.
Our EBITDA declines are primarily due to lower acuity presentation.
Mess traffic, representing what is typically higher acuity patient volume return to more historical levels, leading into the third quarter.
Now I'd like to highlight recovery in our physician practices.
Many practices were affected by volume declines in the early part of the quarter, mostly because of stayed home orders and consumer reluctance toward visiting any kind of health care setting.
We had previously invested in tele health capabilities. So we were able to quickly ramp up these services and ensure that our patients could connect with their position and other providers virtually.
We managed over 230000 telehealth visits in the second quarter with high levels of patient and provider satisfaction.
One states began to lift to stay at home orders, we current that reconnected with our patient leading to an increase of in person practice visits as well.
In addition practice volume is now higher than pre pandemic levels bidding prior year visits and our clinics by 6% in June.
Our physician practices and other access points are the top of the funnel for procedural and hospital volumes. So a leading indicator of future utilization based on the visits we're now seeing in our practices. We believe we should see increased demand for medically necessary care across most specialties and hospital services and future months and.
Late June and into July the rate of new Covent 19 positive cases has increased particularly across the sunbelt states from which the company generates approximately three fourths of our net revenue.
The increase in these states a slow down the company's overall volume recovery.
We are currently averaging a daily census across the enterprise of more than 1000 cobot positive patients.
As a result on a year over year basis. During the month of July our same store admissions are down approximately 5%, which is in line with June results surgeries are down close to 10% and the our visits have improved slightly from where we were in June but.
But as Dr. Simon previously noted we believe we have peaked or plateaued in terms of cobot cases, and some hot spot market and as we demonstrated on the back ended the second quarter, we're prepared to recapture more normal volumes as healthcare demand returns.
Each of the work we were doing prior to the onset of covered 19, including initiatives. We have accelerated during the pandemic will make a stronger for the future. For example, our transfer center has provided increased visibility and to market needs and has aided in recovery efforts as markets reopened we're well underway to expanding transfer center operations to other mark.
Before the pandemic cat and we are still on track to complete this expansion before the end of the year.
Capital investment projects were completed and putting new freestanding emergency departments to support our operations on the radar, Texas and to expand northwest health, Our healthcare network in northwest, Arkansas, and we opened new asked fees and North Carolina and in Birmingham, Alabama.
We have other active projects underway, including a de novo micro hospitals to extend the geographic reach and strength of our Tucson, Arizona market that hospital is scheduled to open in the fourth quarter.
We have an active pipeline of new access points and service line expansions across the portfolio and we are still actively recruiting new physicians to our markets.
Our strategic margin improvement program has delivered expense savings across our corporate office and infrastructure shared service centers supply procurement vendor fees and other non patient care areas. These savings, while significant where more than offset by our net revenue loss due to cobot 19 in the second quarter, but I.
These savings to provide long term benefits through ongoing expense reductions and greater efficiencies as our business returns to more normal levels.
Before I turn the call over to Kevin I think it is important to acknowledge that none of us are aware of what the future holds especially at the corporate 19 pandemic content continues to affect our country.
What I remain confident in however is that our company has the breadth of resources highly committed team and will remain agile and overcome challenges along the way because of that I believe we will effectively manage through the second half of 2020 and can emerge from this with even sharper execution as we focus on delivering long term growth and now I will turn the.
Call over to Kevin.
Thanks, Tim and good morning, everyone.
Similar to last quarter I will not cover all of the typical financial metrics today, instead, I would point to to the 8-K and our slide deck for additional details.
As a reminder, we previously with through our 2020 financial guidance and we're not providing guidance due to the ongoing impact of cobot 19 pandemic. The recent surge in new cases, the ongoing uncertainties around the timing of recovery and other factors that we have discussed.
During the second quarter on a consolidated basis net operating revenues came in at two.
Billion $519 million down 23.7% from the prior year, while adjusted EBITDA was $454 million up 12.9%.
Same store basis net revenues decreased 18.4%.
This was comprised of a 24.2% decrease in adjusted admissions and a 7.6% increase in net revenues per adjusted admission.
As Wayne mentioned Cobot 19 has had a negative impact on our financial performance during the first half of 2020.
Year to date through June Thirtyth, we estimate that cobot 19 has negatively impacted our net revenue by over $1 billion.
During the quarter, our hospital leadership teams did an outstanding job managing variable costs and expenses and as Tim mentioned, our strategic margin improvement program helped to deliver further on expense reductions on a same store basis, our salaries wages and benefits expense decreased 9%.
Supplies expense was reduced by 18% and other operating expenses decreased 1%.
Switching to cash flows cash flow for provided by operations were $1.65 billion for the second quarter of 2020. This compares to cash flows from operations $132 million during the second quarter of 2019 for the first six months of 2020.
Our cash flows provided by operations were 1.71 billion.
This compares to cash flows from operations of 265 million during the first six months of 2019.
In terms of the year over year comparison.
There are few items worth noting versus prior year, which impacted both the quarter and the six month periods.
In April the company received approximately $1.2 billion of Medicare accelerated payments. The company also received $564 million and provider relief grants under the cares act that will not be subject to repayment as onto company meets intelligibility criteria.
Lower EBITDA due to the pandemic was largely offset by increased cash from accounts receivables collections and in the first quarter, we paid $53 million Inartful litigation settlement.
Turning to Capex, our Capex for the first six months of 2020 was $192 million or 3.5% of net revenue compared to $212 million or 3.2% net revenue in the prior year.
We have continued to invest in cap invest capital into high growth opportunities across our markets Germain physician for incremental growth in the future. However, as we manage through these unusual circumstances, we do have the ability to scale Dan.
As it relates to liquidity at the end of the second quarter of the company had $1.55 billion of cash on the balance sheet.
As of June Thirtyth, the company had no outstanding borrowings and approximately 434 million of capacity borrowing capacity under the ABL with the ability to increase it up to $1 billion.
Switching to the cares Act as we previously discussed we received approximately $1.2 billion in Medicare accelerated payments to support near term liquidity.
Recruitment of Medicare accelerate payments is scheduled to begin in August.
In the second quarter, we received approximately 564 million of grants to the public health and social services Emergency fund in both general and targeted distributions of which we recognized approximately 448 million in the quarter and income as a reduction in operating costs and expenses.
Following the second quarter in July the company received an additional $109 million grant through the public health and social services Emergency fund through additional targeted distributions.
Through July the government has now allocated 125 billion of the $175 billion in the carriers Act.
We do not have visibility into how the remaining allocations will be determined.
In terms of our divestiture program on our last earnings call. We indicated the Divestures announced through late April would complete the company's formal divestiture plan under closing upon closing.
Subsequent to our call in June we closed two hospital transact transactions generating approximately 150 million of proceeds we also announced a definitive agreement to sell Bayfront health Saint Petersburg in Saint Petersburg, Florida.
Combined we expect these announced divestitures that if not yet close to generate approximately 430 million of incremental proceeds and close at various times during the third and fourth quarters.
We look forward to driving growth from the strengthen portfolio as we move forward.
At the end of second quarter, we had approximately 13.1 billion of long term debt.
Down approximately $270 million from year end and the company has no near term maturities with its next maturity of $231 million not due until February of 2022.
In summary, we are confident that following our recent capital structure, where along with our current cash on hand proceeds from the divestitures and signed definitive agreements availability under our ABL as well as the possibility of additional federal government stimulus and relief efforts, we have ample liquidity.
To manage through this current crisis returned to normal operations and be well positioned for growth moving forward.
Wayne I'll turn the call back over to you. Thank you Kevin at this point operator, we're ready to open up for questions.
We will eliminate everyone to one question so several you'll.
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First question comes from Josh Raskin from research.
Hi, Thanks, good morning.
Question about the Tele health comments and I am curious in terms of just the work flow and the impact on the referral process and procedures downstream I'm curious how you make sure you are included in that process and what sort of investments, you're making and is there an opportunity actually per community dictate share.
Can you sort of invest a little bit more than maybe some of the not for profits in your markets and things like that.
Hey, this is land I can answer from.
Active side.
Josh I think your question is in terms of market share houses setting.
Tele health effects that in.
I think it's a very positive very positive position in terms as well as Lynn you, specifically, but I think we've been really well I can start until may have additional comments on the from the practice side as Tim said, the Tele health. We are positioned I think to get it started and it really accelerated and we continue to see obviously higher use.
Telemedicine than before the pandemic, what we're doing strategically is really looking to the hardwire that and our clinic operations.
Along with integrating our tele health platform with into our electronic medical record that.
Help us with that referral process that you mentioned and making sure that Lee link up our primary care physicians with our specialists and then eventually downstream to provide their procedures. So Tim have more comment yes. Thanks for the question Josh.
We're very pleased with the fact that we've had such strong growth in June for those practices, partly due to the launch of Tele health as we said, but also the return of our walk in business. It's been very reassuring front that we have the right doctors in the right place I'm going to patients are indeed, requiring and desiring to have their healthcare services.
By our practice of again from a tele health perspective, the integration than mentioned as pivotal but in terms of the competitive edge at it provides to us on that depends on the market and some of our markets that we have competitors that have also launched or embellished of their tele health platforms as well through the impact of a pandemic I'll bet and many of our markets. It.
As a new AD that for us in terms of opportunities for patients to.
To participate in their care with their provider. So at this point is kind of too early to tell we did see some tapering off of the telehealth visit that some patients Ted prefer to come back to end person visits.
In terms of the integration with our referral system, we do like the fact, we monitored internally we do like the fact that we do see those connections being made from our primary care as to our specialist hence our belief that it does give us some good insights into what we can expect a procedural volumes in the month to come.
It.
Thats helpful in terms of long absolutely.
Your next question comes from Frank Morgan from RBC capital markets.
Good morning.
The comments about Leach recent volume surgical trends in the month of July down about 10% and I'm. Just curious how much variation is there and that number you could maybe give us a range between some of those hotspot markets that you talked about in Texas, and Florida, how much more they impacted then then say markets.
That you wouldn't consider the hot spot markets.
Frank This is Tim it's a clear correlation that our biggest impacts are in those markets that are experiencing search conditions. We have very few state mandates as you know that are limiting our ability to.
Provide elective are scheduled care to our patients, but in those hot spot market.
In Texas and Mississippi for instance, we do have certain capacity thresholds that we have to maintain which does require us to throttle back, but even without those requirements I think it's important to emphasize.
Our Kaleo, we're doing I think a really good job at doing what doing what's right for each of our community.
Dialing back them at the luck diverse scheduled procedures deferring them. So that we ensure we have ample capacity for an influx of cobot 19 care. So forth for this particular adjust our time through July definitely saying a decrease in surgeries in our most impacted market keeping close tabs on those patients so that when we do see some of those cobot volumes.
Relieved in those markets, we can reconnect with those physicians and patients and bring those those services back into our hospitals.
Your next question comes from Ralph Giacobbe from Citi.
Thanks, good good morning.
Pricing mix that up 7.6%, obviously, a strong result can you just give us a little bit more on sort of the acuity what Sam I was up and then payer mix not only hung in but looked like it actually improved within commercial which I guess, there's a little surprising maybe any thoughts there and whether you expect thats essentially sort of fall off.
Hi, Thanks.
Sure. Ralph this is Kevin I can give you a little color on that so.
From a demographic standpoint, I think the the.
Group of patients at probably stayed away from our hospitals doesnt, most during the quarter, where Medicare patients.
Those being at the highest risk and probably.
Stayed away from from the healthcare environment.
So that certainly contributed to a payer mix improvement I would say our pricing was split pretty evenly between acuity and payer mix.
As the best way to look at that.
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Your next question comes from Bryan Keane cubic from Jefferies.
Hi, Good morning. This is Jack slipping on for Brian. Thanks for taking my questions I, just wanted to touch on margin and how you're thinking about margin profile moving forward.
And then kind of how sustainable the current cost structure is at what point, you might need to ramp up staffing and and comp.
We're actually feeling pretty good about margins right.
And we think theres.
A lot of visibility into the future in terms of.
Our 2.0 program in terms of expense management, all those things repositories, given you want to sure. So we had started.
Back in the third quarter, some margin improvement initiatives.
We continue to work on those throughout this pandemic period, they continue to get traction and we think Theres continued opportunity. So in addition to flexing some of our variable cost as a result of declining volumes during the pandemic. We also continue to.
Progress on other margin improvement initiatives, so as we come out of the quarter certainly with the decline in volume and revenue.
We did not generate the EBITDA for the for the quarter, but as we returned to normal we believe that will continue to improve our margin profile from the pre covert levels.
Your next question comes from into remarks from Barclays.
Good morning, Thanks for the question the Capex in the quarter came in around that.
Which held up relatively well to the prior quarter and initial guidance can you give us sense, where would you up budgeted.
The back half a year and where you might be pulling back on investment spend thanks.
Sure. So so weve as you know we pulled guidance for the rest of the year. So we don't.
Not given kind of a target on our capital spend but as I've indicated we're continuing to invest and what we believed to be our growth opportunities.
So that as we recover and things return to normal we're going to be well position to continue to grow take market share and improve our margins, where we have some opportunity in where some of the spend.
Did get pulled back a little bit was with some of our spending where we did not have.
People.
Our employees going into the hospitals to do.
Deployment of IP networks, and so forth certainly wanted to protect both our employees and patients from that standpoint, and also some medical equipment, where the providers as a medical equipment.
And US included did not want those people in our hospital facilities, so that spending us things return to normal I will come back a little bit, but we did continue to invest in some construction projects as Tim mentioned, we opened a pre sandy and AMC and we have.
New facility in Tucson.
That will be opening later this year that are all growth projects.
Our last question comes from Kevin Fischbeck from Bank of America.
Hi, there, yes, so with you and your peers it seems like industry has gotten pretty.
Solid add done pretty well dealing with covidien, maintaining some pretty semi normal operations, so I'm trying to understand where.
If you're managing this while during Q2, what scenarios might exist, where there'd be some downside in the back half of the year. Thanks.
I'm not sure that it gets any more complicated than it is right.
This is about as most difficult upside in the last.
Number of years and I think the great thing in terms. This organization has the ability to adapt.
We've seen.
Remarkable change in terms of the way we provide care that we have people that have been doing this now.
Yes, two months and I think they've gotten increasingly better.
You can see it in the results of our patients or.
Goodwill odd.
I think the downside is here.
Yes.
Is the last letter part of the year.
Again I can't be.
I am extremely impressed with their build this organization that people with in terms of.
We are.
For for all this and you know.
The government restrictions have created some of those issues and they might create more kind of going forward, but on related.
The government has been very helpful in terms of.
It appears act so anyway.
We're very hopeful that we're on track in the countries on right traction.
The latter part of the year will be very solid.
We'll now turn the call back over to Mr. Smith for closing comments.
Thanks again this for being with US. This morning, I want to once again express how deeply grateful we are to all of our employees physicians medical staff regional presence hospital leadership teams hospitals support teams.
And corporate office support teams.
We continue to move ahead with our strategies one to provide outstanding care for our patients to to maintain thrust in partnership with our positions and employers three to demonstrate our value duties, we serve and forward to reward that currently shareholders and debt holders for their confidence in investment in our organization.
This concludes our call today look forward to update you on our progress later in the year. Once again you have any questions.
Please reach as Eric on the six one.
For 657000, thanks again for joining the call.
Okay.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.