LPNT

LifePoint Hospitals, Inc. (LPNT)

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LifePoint Hospitals, Inc. (LPNT)

Q4 2013 Earnings Conference Call

February 14, 2014 10:00 ET

Executives

Bill Carpenter - Chairman and Chief Executive Officer

Leif Murphy - Chief Financial Officer

David Dill - President and Chief Operating Officer

Analysts

Mike Newshel - JPMorgan

Josh Raskin - Barclays

Tom Gallucci - FBR

Darren Lehrich - Deutsche Bank

Frank Morgan - RBC Capital Markets

A.J. Rice - UBS

Gary Taylor - Citi

Ralph Giacobbe – Credit Suisse

Whit Mayo - Robert Baird

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the LifePoint Hospitals’ Fourth Quarter and Year End 2013 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded, Friday, February 14, 2014.

On today’s call, LifePoint will be making forward-looking statements based upon management’s current expectations. Numerous factors could cause LifePoint’s results to differ from these expectations and LifePoint has outlined these factors in its filings with the SEC. The company encourages you to review these filings. LifePoint also asks that you please review the cautionary language under the caption, Important Legal Information, in the company’s press release issued this morning. The company undertakes no obligation to update or make any other forward-looking statements whether as a result of new information, future events or otherwise. Also please visit LifePoint’s website for links to various information and filings.

I would now like to turn the conference over to Bill Carpenter, Chairman and Chief Executive Officer. Please go ahead, sir.

Bill Carpenter

Thank you. Welcome everyone to LifePoint Hospitals’ fourth quarter and year end 2013 earnings call. We hope you have had a chance to review the press release we issued earlier this morning.

I will start off by taking you through some of the highlights from the fourth quarter and full year. I will then turn the call over to Leif Murphy, our Chief Financial Officer for a more in-depth look at our results. Following our prepared remarks, Leif and I as well as David Dill, our President and Chief Operating Officer, will be available to answer your questions.

I will begin with some highlights from our solid fourth quarter. Revenues from continuing operations grew to $952.6 million, an increase of 6.6% compared to the same period last year. Adjusted EBITDA was $148.5 million, up 10.1% from a year go and diluted EPS for the fourth quarter was $0.75. Turning to the full year 2013, our revenues were approximately $3.7 billion, up 8.4% from 2012. EBITDA from continuing operations was $537 million, a 1.6% decrease from $545.6 million last year. When adjusted for the $27 million impact of the Rural Floor settlement on EBITDA in 2012, EBITDA increased by $18.4 million, or 3.5% and diluted EPS for the full year was $2.68. Leif will provide more details on our quarterly and full year results in a few minutes.

While in-patient volumes remained soft in 2013, we implemented a number of improvements that have positioned us well for 2014. We are positioning ourselves to drive organic growth and optimize the operating performance and profitability of our hospitals. We are implementing initiatives around pricing, outpatient imaging and exchange enrollment. Additionally, we are standardizing various business processes notably in our emergency department, where we are creating additional capacity without deploying additional capital.

We also continue to strengthen our supply chain and revenue cycle operations through our shared services agreement with Parallon. Approximately, 75% of our planned conversion hospitals have now migrated to Parallon and we expect to transition the remaining planned conversion hospitals in the first half of this year. As always, we remain focused on maintaining high standards of patient care and safety. In 2013, we made great progress in achieving our goals under the Hospital Engagement Network. And we have been recognized by CMS as a high-performing contractor.

In 2011, we accelerated our key strategic priority of implementing the culture of quality and patient safety when we were awarded a contract as a Hospital Engagement Network partner with CMS. The main goals of the program were to reduce preventable harms and readmissions. I am proud of the outstanding progress we have made and we look forward to comparing our results with the other 26 national participants. We plan to capitalize on the momentum that has carried us as we further our quality and patient safety initiatives. Our National Physician Advisory Board, which we have discussed with you in prior quarters, continues to….

Operator

Ladies and gentlemen, please standby. Your conference call will resume momentarily. Please standby. Your conference call will resume momentarily. Please do not disconnect your lines. Ladies and gentlemen, your conference call will now resume.

Bill Carpenter

Continuing our call, as always we remain focused on maintaining high standards of patient care and safety. In 2013, we made great progress in achieving our goals under the hospital engagement network and we have been recognized by CMS as a high performing contractor. In 2011 we accelerated our key strategic priority of improving the culture of quality and patient safety when we were awarded a contract as a hospital engagement network partner with CMS. The main goals of the program were to reduce preventable harms and readmissions. I am proud of the outstanding progress we have made and we look forward to comparing our results with the other 26 national participants. We plan to capitalize on the momentum that has been created as we further our quality and patient safety initiatives.

Our National Physician Advisory Board, which we have discussed with you in prior quarters continues to provide us with excellent insights and serves as an accelerator in advancing our quality efforts across the country. Another differentiator on the quality side is our Duke LifePoint partnership. Duke LifePoint is intimately involved in improving the performance of hospitals through clinical programs that advance care and enhance outcomes. Each of these initiatives is occurring against the backdrop of the Affordable Care Act. While it’s still too early to gauge the full impact of healthcare reform, we now project that coverage expansion in our states will have a positive impact on EBITDA of 4% to 5% in 2014. Leif will discuss this in more detail when he covers guidance.

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