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IPC The Hospitalist Co. (IPCM)

Q3 2008 Earnings Call

November 11, 2008


Adam Singer – Chairman, Chief Executive Officer

Devra Shapiro – Chief Financial Officer

Jeffrey Taylor – Chief Operating Officer


Arthur Henderson – Jefferies & Co.

Kristina Blaschek – William Blair

Sudeep Singh – Deutsche Bank

Brooks O'Neil – Dougherty & Co.

[Eugene – Civic]



Welcome to the IPC The Hospitalist third quarter 2008 earnings conference call. (Operator Instructions) I would now like to the call over to your host for today's call, Stephanie Carrington.

Stephanie Carrington

With us today from management are Adam Singer, M.D., Chairman and Chief Executive Officer, Jeff Taylor, President and Chief Operating Officer and Devra Shapiro, Chief Financial Officer.

I hope you have seen the press release announcing the earnings of the IPC The Hospitalist Company for the third quarter. If you have not received a copy, please call Ben Carmichael at 646-536-7023 and he will fax or email you a copy or a copy may be obtained from IPC's web site at

Certain statements and information in this conference call may be deemed forward-statements within the meaning of the Federal Private Securities and Litigation Reform Act of 1995. Forward looking statements in this press release may include but are not limited to those statement regarding projected operating results, revenues, earnings and IPC's growth opportunities and strategies.

Forward-looking statements are often characterized by terminology such as may, anticipate, will, expect, estimate, project, position, strategy and similar expressions. Although IPC believes that the expectations reflected in any of its forward-looking statements are reasonable based upon existing trends and information and IPC judgments as of today, actual results could differ materially from those projected or assumed based on a number of factors including those factors set forth in its annual report on Form 10-K under the heading risk factors and IPC's other filings with the SEC.

IPC's future financial conditions and results of operations as well as any forward-looking statements are subject to inherent known and unknown risks and uncertainties. IPC does not intend and undertakes no obligation to update any forward-looking statement to reflect future events or circumstances.

With that I will now turn the call over to Adam Singer, M.D., Chairman and Chief Executive Officer of IPC.

Adam Singer

Thank you everyone for joining us. We reported our third quarter 2008 results today after the close of market. I will start by reviewing our recent highlights. Devra will review the financials and then we will open up the call for questions.

We are very pleased to again report record top and bottom line results this quarter. For the third quarter of 2008 our Hospitalists reported over 690,000 patient encounters generating net revenue of approximately $63.2 million, up 32% from the same period of the prior year. This is driven largely by a 19% same market revenue growth.

We are very pleased with our ability to continue to grow top line revenue through both same market revenue growth and acquisitions while demonstrating significant operating leverage. We continue to reduce our G&A as a percentage of revenue with 150 basis point reduction year to date. We generated $3.2 million in net income, or $0.20 per fully diluted share.

So far this year we've entered two new markets through acquisitions in New England and Southeast Florida and closed five in market acquisitions in our existing markets in Texas, Florida and Arizona. Our strong balance sheet with $55 million in cash and untapped $30 million line of credit and positive cash flow will enable us to continue to execute on our acquisition strategy.

We continue to see a robust pipeline of deals which are in all stages of development from early discussions to due diligence and deal documentation.

We have executed on our 2008 hiring plan. We have increased every one of our recruiting staffs over the prior year including the number of physicians sourced, the number interviewed and the number hired. We currently have over 1,000 physicians working for IPC with a cadre of over 650 fully employed physicians and another 400 who work on an as needed or subcontracted basis.

We believe that we are well positioned to continue to grow the company both on a same market basis and by developing new markets. We, like everyone else, have seen the reports of reductions in hospital admissions. Since the close of the third quarter, our regional executives have begun to report that census is soft in many of the facilities.

In spite of the reported decreases in admissions, we continue to show some growth in patient encounters and have not seen a degradation in pay or mix. However, we have as yet not seen the normal seasonal uptick in activity that we have experienced in the past during this time of year.

But we continue to believe that activity will increase before year end. Based on the information we have on hand, and as we indicated in our press release, we believe that it is prudent to forecast that we will be near the low end of our previously announced full year 2008 range for both revenue and EPS.

We want to reiterate that we believe that we are well positioned to weather the economic downturn and the current softening in hospital census. We have motivated physicians in place to provide medical care to the patients who will inevitably require hospitalization. We have the cash on hand to continue acquisitions and increased interest from privately owned practices which will need the resources, financial stability and infrastructure we provide.

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