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The Providence Service Corporation (PRSC)
Q1 2010 Earnings Call
May 06, 2010 11:00 am ET
Allison Vigler - Cameron Associates
Fletcher McCusker - Chairman & CEO
Michael Deitch - CFO
Craig Norris - COO
Herman Schwarz - CEO, LogistiCare
Leamon Crooms - CSO
Odnik Reising - CJS Securities
Wes Hufffman - Avondale Partner
Kevin Ellich - RBC Capital Markets
Brandon Osten - Venator Capital
Peter Park - Park West Asset Management
Rick D’Auteuil - Columbia Management
Tyson Bauer - Wealth Monitors, Inc.
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I’ll now turn the presentation over to Alison Ziegler of Cameron Associates.
Thanks (inaudible). Good morning everyone and thank you for joining us this morning for Providence’s conference call and webcast to discuss its financial results for the first quarter ended March 31, 2010. You should have all received a copy of the press release last night. If you would like to be added to our email list please call Devin Rhoades at 212-554-5461.
Before we begin please note that we have arranged for a replay of this call, the replay will be available approximately one hour after the call’s conclusion and will remain available until May 13. The replay number is 888-286-8010 with the pass code 24914056. This call is also being webcast live with a replay available. To access the webcast go to www.provcorp.com and look under the event calendar on the IR page.
Before we get started I’d like to remind everyone of the Safe Harbor statement included in the press release and that the cautionary statements apply to today’s conference call as well. During the course of this call the company will make projections or other forward-looking statements regarding future events or the company’s beliefs about its financials results for 2010 and beyond.
We wish to caution you that such statements are just predictions and involve risks and uncertainties. Actual results may differ materially. Factors which may affect actual results are detailed in the company’s filings with the SEC including the company’s 10-K. The company’s forecast are dynamic and subject to change. Therefore these forecasts speak only as of the date of this webcast, May 6, 2010. The company may choose from time-to-time to update them and if they do will disseminate the updates to the investing public.
I’d now like to turn the call over to Fletcher McCusker, Chairman and CEO. Go ahead Fletcher.
Thank you very much Allison and good morning everyone. In Tucson today with me is Craig Norris, our Chief Operating Officer; Michael Deitch, our CFO; and introducing Leamon Crooms, our new Chief Strategy Officer on the line from Atlanta is Herman Schwarz, CEO of LogistiCare and is always we’ll all be available for your questions following our scripted remarks. We are coming of the most amazing quarter we have ever experienced and clearly in a remarkable position as a company when you consider we’ve remained embedded in a recession with many if not all of our state payers still struggling with budget deficits.
Now since the creation of Medicaid has there been the kind of congressional support for America’s indigent that we are collectively witnessing today. The Health Care Reform Legislation will increase Medicaid by 33% bringing the number of enrollees to around 70 million people literally one in every six Americans. Equally as important in the bill are the mandates for states to develop home-based delivery systems something this company pioneered in 1997.
The bill also includes what is called the maintenance of efforts section that requires states to maintain the Medicaid plan at stimulus levels established by the February 2009, Medicaid stimulus legislation. This is called states like Arizona to reverse anticipated reductions to Medicaid eligibility. States remain stymied as well in their attempts to reduce Medicaid rates due to the advocacy group led actions in federal court resulting in a number of co-beneficiary rulings. We are seeing in a new round of litigation is a number of Republican led states have actually sued the federal government over the mandates in the Healthcare Reform bill. This pro-Medicaid spending environment is certainly partisan, but so was the initial legislation adopted in the 60s.
The combined effect of this environment has flattened down our rates, but continues to pump volume as state shift away from the more expensive out-of-home providers even before the class act in the pro-home-based language of the reform bill. There is an earlier doctor provision in the bill and we do expect some states will move to attract federal dollars long before the 2014 start date.
Our news on a couple of other fronts, we did win the arbitration in Canada and British Columbia. The 3 million and change dollars that are recoup there will be returned to us that will not affect our earnings but as good news in terms of our situation in Canada and on LogistiCare front we had a very interesting situation developed in Idaho, where basically our proposal was disqualified when the state of Idaho gave LogistiCare a zero score due to their historical financial section being presented under the name Charter LCI which was the holding company when Charterhouse own LogistiCare before we acquired in, otherwise they would have won that bid, but we are essentially viewed as non-responsive. All this basically to provide a backdrop for you and reviewing are now fifth record quarter in a row benefiting from these trends benefiting from our ability to manage costs and blessed with virtually no turnover of our key personnel. Then Michael will walk you through the particulars in the quarter. Mike?