Community Health Systems, Inc.

Ladies and gentlemen, thank you for standing by and welcome to community health system second quarter 2020 earnings conference call at this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session to ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now turn the conference over to your speaker today, Mr. Ross Cuomo, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, Mike. Good morning and welcome to Community Health System's 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 and unknown risk, which are described in headings such as risk factors in our annual report on Form 10-K and other reports filed with or furnished to the Securities and 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 EPS. 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 and legal expenses related to cases covered by the CVR, expenses related to employee termination benefits and other restructuring charges, change in valuation allowances recorded for commissary notes, change in 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, the Chairman and Chief Executive Officer. Mr. Smith.

Thank you, Ross. Good morning and welcome everyone to our second quarter conference call. I'm joined today by Tim Hingston, our President and Chief Operating Officer. Dr. Lynn Simon, President of Clinical Operations and Chief Medical Officer, and Kevin Hammonds, Executive Vice President and Chief Financial Officer. It goes without saying that the COVID fight is still on, but I think we're fighting a very good fight as indicated by our second quarter results. We reported our first quarter results at the end of April, and I concluded my remarks by saying that CHS is a strong and resilient organization that has always managed to solve problems that we remain ready for whatever might come next and that we would do our best for everyone who counts on us. Three months later, we find ourselves in the position of caring for many more COVID-19 patients now than we were back at that point in April. We're also balancing the healthcare needs of non-COVID patients, having successfully reopened substantially all of our services that were suspended in the early stages of this pandemic and ensuring that All who need health care in our communities will continue to have access, quality, and safe health care. The credit, of course, goes to every physician, every nurse, every clinician, caregiver, support worker, who shows up every day to serve our patients. Our medical staff and employees have been extraordinary during these extraordinary times. And while you may not be seeing as many health care 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 states that have been hit harder by COVID-19 in recent weeks, Florida, Texas, Arizona, and others. In each market where COVID-19 cases have increased significantly, our single purpose is to deliver new health care services safely. We're doing everything possible to protect our patients, employees, their families, and others in our communities. Safety always comes first for us, and every hospital has implemented protocols to prevent the spread of COVID-19 inside our facilities. We want people to know that they're safe in our care and safe working in our hospitals. At the beginning of 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 because consumers were fearful of and adhering to social distancing recommendations. As states lifted those restrictions, we engaged directly with the patients who had deferred healthcare, reassuring them and bringing them back for needed appointments and procedures, and emphasizing that they should not delay important healthcare services. We promoted the importance of prompt care in emergencies and continuation of care for chronic conditions and even routine screening in health services. I can't say enough about the work that was done to coordinate and collaborate with medical staff leaders and with physicians in our markets. These relationships enabled a relatively seamless restart of our elective procedures, walk-in appointments, and other services. We saw COVID volume rebound in our markets in May and June, in some cases getting closer to pre-COVID levels. Although, like many others, we saw a slower volume return and our ERs. In July, COVID-19 cases have increased across the Sun Belt, which can impact healthcare demand and likely affects consumers' willingness to access services. But in most of our markets, we are effectively managing COVID-19 while 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 Tim and the team has enabled us to ramp up and down and back up as needed. And this flexibility will likely be important as we continue to face uncertainties due to the COVID-19 pandemic. Our operations and leadership teams locally and in the corporate office have artfully managed each market's unique needs while also leveraging our organization resources in a coordinated enterprise-wide response. Our response and recovery work has benefited greatly from prior investments that we made to enhance our supply chain operations, extend our transfer centers, accelerate 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 new conditions, to make 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 future evolution of the pandemic. They also ensure we can protect our business and improve our competitive position in the future as we move forward with strategic market opportunities and the necessary adjustments health care providers are called upon to make now 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 We'll get into this in much greater detail in a few minutes. Runs from the CARE Act have been very helpful to our organization and so many other healthcare providers. Support through the pandemic relief funds and accelerated 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 COVID-19 will not likely end until we are able to control the pandemic and healthcare providers will continue to need the support of our country while we care for Americans who count on community hospitals to always be available when they need us. Looking forward, while COVID-19 is a primary focus, we're also continuing to plan for the future. Our divestitures, as we wrap up the portfolio rationalization program this year, we strengthen the portfolio and improve liquidity. Our stronger portfolio is benefiting from the investments in strategic growth drivers, including capital investments and net revenue initiatives that will deliver market share gains in both inpatient and outpatient lines of business. Our strategic margin improvement program also remains on track, with a solid reduction across numerous expense categories, producing greater efficiency across the organization. And our confidence continues to run high. And while nothing is assured in a public crisis, we will manage 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 how grateful I am to everyone across the Community Health Systems organization. I'm proud of our achievements in these difficult circumstances. I hope that everyone will continue to do their part to help control the spread of the virus and protect one another. We want our caregivers to be safe, we want our patients to recover, and we must all do our part. And now I'd like to turn the call over to Dr. Lynn Simon, who continues to lead many of our critical aspects in our response to the pandemic. Dr. Simon.

Thank you, Wayne. Managing the clinical and operational aspects of a large-scale pandemic requires a solid infrastructure for crisis and issues management, high levels of coordination and communication across the team, and as Wayne noted earlier, the ability to make rapid yet informed and prudent decisions. Our COVID response team continues to collaborate on a daily basis to share key updates in every functional area affected by this pandemic, from 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 COVID-19 volumes. We use an internally developed COVID-19 tracking dashboard for real-time visibility of COVID-19 cases across all of our hospitals. 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 have seen an increase in COVID-19 patients, primarily across the southern states. Currently, we are experiencing the highest number of COVID-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 our Arizona markets at this time with newly diagnosed and inpatient caseload showing sustained reductions. We have tested over 100,000 patients for a potential COVID-19 diagnosis. We have provided care for approximately 15,000 confirmed COVID-19 patients at our hospitals, EDs, and outpatient care settings. This compares to approximately 2,000 cared for at the end of April, 3,000 at the end of May, and 7,000 at the end of June, which brings into clear perspective the magnitude of 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 increased, we are able to more quickly diagnose and confirm COVID-19 cases, which enables us to appropriately place positive patients in special COVID care units, deploy and adjust staffing teams, and allocate PPE and other supplies where needed. On the supply chain side, we have implemented a new centralized distribution system for PPE and equipment, which adds an additional depth to our sourcing and logistics capabilities. We have organized our facilities and operations to provide safe care for both COVID positive and non-COVID patients. We can see the benefits of our early stage planning and how those efforts are allowing the company to effectively manage increases in COVID-19 admissions. We're focused 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 COVID-19, as well as those who have other non-COVID 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 COVID-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 Wayne in thanking everyone who has worked tirelessly to ensure that our hospitals and their staff can very effectively care for all of their patients. And I'd like to also acknowledge the frontline caregivers who earn our respect and admiration every single day. Tim?

Thank you, Lynn. I join you in 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 are ensuring operational excellence and execution of our COVID-19 response and recovery strategies. I've been incredibly impressed by their organized approach, resourcefulness, and continuous commitment to serve their communities during this public health crisis. And of course, I'm thankful for our CHS clinical and operational experts who are providing tremendous levels of support to our markets while keeping all of our other important 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 before their elective procedures and had already redesigned spaces inside of our facilities to ensure social distancing and safe workflows. We worked closely with our medical staff to ensure appropriate capacity for deferred cases, and we developed processes that allowed physicians and patients to return to the hospital setting safely and efficiently. And our teams work 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 and intentional volume rebuilding efforts led to consistent improvements in our admissions, adjusted admissions, surgeries, and ER visits during May and throughout June. Specifically in terms of our key metrics and second quarter performance, our net revenue was negatively impacted in the second quarter as a result of the pandemic. Admissions dropped with a 31% decline in April prior to the recovery in May and June, during which higher acuity inpatient admissions and surgeries returned 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%. Service lines including cardiology, orthopedics, and neuroservices contributed to this recovery. Similar to the reports across the industry, ER visits have recovered at a slower pace than other volume metrics. Our hospital ER visits were down 45% in April, but improved to a negative 20% by the end of June. We continue to see our ED volumes improve into July, now down approximately 15% versus the same period last year. Our ED visit declines are primarily due to lower acuity presentations. EMS traffic, representing what is typically higher acuity patient volume, returned 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 stay-at-home orders and consumer reluctance toward visiting any kind of healthcare setting. We had previously invested in telehealth capabilities, so we were able to quickly ramp up these services and ensure that our patients could connect with their physicians and other providers virtually. We managed over 230,000 telehealth visits in the second quarter, with high levels of patient and provider satisfaction. Once states began to lift stay-at-home orders, we reconnected with our patients, leading to an increase of in-person practice visits as well. Physician practice volume is now higher than pre-pandemic levels, beating prior year visits in 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 are now seeing in our practices, we believe we should see increased demand for medically necessary care across most specialties and hospital services in future months. In late June and into July, the rate of new COVID-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 has slowed down the company's overall volume recovery. We are currently averaging a daily census across the enterprise of more than 1,000 COVID-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 ER visits have improved slightly from where we were in June. But as Dr. Simon previously noted, we believe we have peaked or plateaued in terms of COVID cases in some hotspot markets. And as we demonstrated on the back end of the second quarter, we are prepared to recapture more normal volumes as healthcare demand returns. Much of the work we were doing prior to the onset of COVID-19 including initiatives we have accelerated during the pandemic, will make us stronger for the future. For example, our Transfer Center has provided increased visibility into market needs and has aided in recovery efforts as markets reopened. We were well on the way to expanding Transfer Center operations to other markets before the pandemic hit, and we are still on track to complete this expansion before the end of the year. Key capital investment projects were completed, including new pre-standing emergency departments to support our operations on Laredo, Texas, and to expand Northwest Health, our healthcare network in Northwest Arkansas. And we opened new ASCs in 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 positions to our markets. Our strategic margin improvement program has delivered expense savings across our corporate office infrastructure, shared service centers, supply procurement, vendor fees, and other nonpatient care areas. These savings, while significant, were more than offset by our net revenue loss due to COVID-19 in the second quarter. But we do expect these savings to provide long-term benefit through ongoing expense reduction 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 as the COVID-19 pandemic continues to affect our country. What I remain confident in, 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 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 you to the 8K and our slide deck for additional details. As a reminder, we previously withdrew our 2020 financial guidance, and we are not providing guidance due to the ongoing impact of COVID-19 pandemic, the recent surge in new cases, the ongoing uncertainties around the timing of a recovery, and other factors that we have discussed. During the second quarter, on a consolidated basis, net operating revenues came in at $2,519,000,000, down 23.7% from the prior year. while adjusted EBITDA was $454 million, up 12.9%. 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, COVID-19 has had a negative impact on our financial performance during the first half of 2020. Year-to-date through June 30th, we estimate that COVID-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 percent and other operating expenses decreased 1 percent. Switching to cash flows, cash flow provided by operations were $1.65 billion for the second quarter of 2020. This compares to cash flows from operations of $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 a 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 the $53 million Norfolk 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% of net revenue in the prior year. We have continued to invest capital into high growth opportunities across our markets to remain positioned 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 of June 30th, the company had no outstanding borrowings and approximately $434 million of 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 recoupment of Medicare accelerated 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 in income as a reduction in operating costs and expenses. Following the second quarter, in July, the company received an additional $9 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 CARES 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 announced through late April would complete the company's formal divestiture plan upon closing. Subsequent to our call in June, we closed two hospital transactions generating approximately $150 million of proceeds. We also announced a definitive agreement to sell Bayfront Health St. Petersburg in St. Petersburg, Florida. Combined, we expect these announced divestitures that have not yet closed 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 this strengthened portfolio as we move forward. At the end of the 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, return 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 limit everyone to one question, so several of you will have time on the call for this call. And as always, we're available to talk to you, and you can reach us at area code 615-465-7000.

And as a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. In order to allow everyone time for questions, we ask that you please limit yourselves to one question each. Please stand by while we compile the Q&A roster. Your first question comes from Josh Raskin from Nefron Research.

Hi, thanks. Good morning. Question about the telehealth comments. And I'm curious in terms of just the workflow and, you know, the impact on the referral process and procedures downstream. I'm curious how you make sure you're included in that process and what sort of investments you're making. And is there an opportunity actually for community to take share? You know, could 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 Lynn. I can answer from the practice side.

Josh, I think your question is in terms of market share, how is it affecting, how does telehealth affect that? And I think it's a very positive, I think we have a very positive position in terms of this, but I'll let Lynn give you specifically, but I think we've done really well.

I can start and then Tim may have additional comments. From the practice side, as Tim said, the telehealth, we're positioned, I think, to get it started and it really accelerated and We continue to see, you know, obviously higher use of telemedicine than before the pandemic. What we're doing strategically is really looking to hardwire that in our clinic operations along with integrating our telehealth platform into our electronic medical record. That should help us with that referral process that you mentioned and, you know, making sure that we link up our primary care physicians with our specialists and then eventually downstream to provide their procedures. So, Tim, do you have more comments?

Yeah, thanks for the question, Josh. 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 telehealth, as we said, but also the return of our walk-in visits. It's been very reassuring for us that we have the right doctors in the right place and that patients are indeed requiring and desiring to have their healthcare services met by our practices again. From a telehealth perspective, the integration that Lynn mentioned is pivotal. But in terms of the competitive edge that it provides to us, it depends on the market. In some of our markets, we have competitors that have also launched or embellished their telehealth platforms as well through the impact of the pandemic. But in many of our markets, it is a new advent for us in terms of opportunities for patients to participate in their care with their provider. So at this point, it's kind of too early to tell. We did see some tapering off. of the telehealth visits, as 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 monitor it internally, we do like the fact that we do see those connections being made from our primary cares to our specialists, hence our belief that it does give us some good insights into what we can expect in procedural volumes in the months to come.

Ned, Ned, it's helpful in terms of volume. Absolutely.

Your next question comes from Frank Morgan from RBC Capital Markets.

Good morning. I appreciate the comments about recent volume of 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 are they impacted than, say, markets that you wouldn't consider the hotspot markets?

Frank, this is Tim. It's a clear correlation that our biggest impacts are in those markets that are experiencing surge conditions. We have very few state mandates, as you know, that are limiting our ability to provide elective or scheduled care to our patients. But in those hotspot markets, 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 across our portfolio, we are doing, I think, a really good job of doing what's right for each of our communities, dialing back some of the elective or scheduled procedures, deferring them so that we ensure we have ample capacity for an influx of COVID-19 care. So for this particular juncture of time through July, definitely seeing a decrease in surgeries in our most impacted markets, keeping close tabs on those patients, so that when we do see some of those COVID volumes relieve in those markets, we can reconnect with those physicians and patients and bring those services back into our hospitals.

Your next question comes from Ralph Giacovi from Citi.

Thanks. Good morning. The pricing mix at up 7.6%, obviously a strong result. Can you just give us a little bit more on sort of the acuity, what CMI was up, and then payer mix not only hung in but looked like it actually improved within commercial, which I guess was a little surprising. Maybe any thoughts there and whether you expect that to potentially sort of fall off in the second half. Thanks.

Sure, Ralph. This is Kevin. I can give you a little color on that. So, you know, from a demographic standpoint, I think the – A group of patients that probably stayed away from our hospitals the most during the quarter were Medicare patients, those being at the highest risk and probably stayed away from the healthcare environment. 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.

Your next question comes from Brian from Jefferies.

Hi, good morning. This is Jack Slevin 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 and at what point you might need to ramp up staffing and comp.

We're actually feeling pretty good about margins right now. And we think there's a lot of visibility into the future in terms of our 2.0 program in terms of expense management. All those things are positive for us. Kevin, you want to?

Sure. So we had started back in the third quarter some margin improvement initiatives. We've continued to work on those throughout this pandemic period. They continue to get traction, and we think there's 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 in volume and revenue, you know, we did not generate the EBITDA for the quarter. But as we return to normal, we believe that we'll continue to improve our margin profile from the pre-COVID levels.

Your next question comes from Andrew Monk from Barclays.

Hi, good morning. Thanks for the question. Your 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 for where you have budgeted in the back half of the year and where you might be pulling back on investment spend? Thanks.

Sure. So we've, you know, as you know, we've pulled guidance for the rest of the year. So we don't, you know, not giving kind of a target on our capital spend. But as I've indicated, we are continuing to invest in capital what we believe 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 and where some of the spend, you know, did get pulled back a little bit was with some of our IT spending where we did not have people, our IT employees going into the hospitals to do deployment of IT 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 and us included did not want those people in our hospital facilities. So that spending as things return to normal We'll come back a little bit. But we did continue to invest in some construction projects. As Tim mentioned, we opened a freestanding ED in ASC, and we have a new facility in Tucson that we'll be opening later this year that are all growth projects.

And our last question comes from Kevin Fishbeck from Bank of America.

hi there yeah so uh with you and their peers it seems like uh the industry has gotten pretty solid at uh done pretty well dealing with covet and maintaining some pretty semi-normal operations so i'm trying to understand where uh if you're managing this well during q2 what scenarios might exist where there would 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 now kevin i think this is about as most difficult as i've seen it in the last

a number of years, and I think the great thing in terms of this organization is the ability to adapt. We have seen a remarkable change in terms of the way we provide care. We have people that have been doing this now for the last two months, and I think they've gotten increasingly better. You can see it in the results of our patients are doing well. I think the downside is here. The upside is the latter part of the year. But, again, I'm extremely impressed with the ability of this organization, the people within it, in terms of providing care 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 the other hand, you know, the government has been very helpful in terms of – CARES Act. So anyway, we're very hopeful that we're on the right track and that the country's on the right track and that the latter part of the year will be very solid.

I will now turn the call back over to Mr. Smith for closing comments.

Thanks again 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 presidents, hospital leadership teams, hospital support teams, and corporate office support teams. We'll continue to move ahead with our strategies. One, provide outstanding care for our patients. Two, to maintain the trust and partnership of our physicians and employees. Three, to demonstrate our value to the communities we serve. and four, to reward the company shareholders and debt holders for their confidence in investment in our organization. This concludes our call today. We look forward to updating you on our progress later in the year. Once again, if you have any questions, you can always reach us at area code 615-465-7000. Thanks again for joining the call.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.