Question-and-Answer Session
Operator
(Operator Instructions) We'll take our first question from Eric Gommel with Stifel Nicolaus.
Eric Gommel - Stifel Nicolaus
Good afternoon.
Rick Matros
Hey, Eric.
Eric Gommel - Stifel Nicolaus
How you're doing? Just on guidance, you're still comfortable with your current guidance?
Rick Matros
Yes.
Eric Gommel - Stifel Nicolaus
Okay. And then, just a couple questions on operations. How has sort of the rising I guess food costs and utilities impacted bottom lines. You actually reported better margins than we expected. I'm just curious your thoughts there.
Rick Matros
At this point it really hasn't affected us at all. We've got pretty strong contracts in place through a group purchasing organization for all of our food and don't expect that to have any material change. It's obviously a little bit more difficult to predict on the fuel side but we don't have a whole lot of folks out in the field in the context of all of our employees that are driving all that much in terms of impacting our fuel costs.
And whether vendors try to pass on higher costs to us because of their increased fuel costs, which would be the greater concern, I think from our perspective there are enough vendors for us to choose from within our GPO that we can apply some good leverage there because we obviously give these guys a big book of business, so at this point we don't have that much of a concern about it, Eric.
Eric Gommel - Stifel Nicolaus
Yes, and I was thinking more on the energy side, just utility bills and that sort of thing for your --.
Rick Matros
They've gone up but not to the point where it's hurt us. The rest of our operating initiatives have been more than adequate to compensate for any inflation there.
Eric Gommel - Stifel Nicolaus
Okay. And then, in your guidance I just want to be clear about what you've embedded in there for Medicare changes or potential changes because you did spend some time discussing that. What kind of Medicare rate growth expectation do you have embedded in your guidance?
Rick Matros
We assumed a 3% market basket increase on October 1st, and we assumed overall Medicaid rate growth of 3% for calendar year 2008. Now, let's assume for a second that we don't get the full market basket increase. At this point it's way too early for us to even think about amending our guidance because it really becomes a 2009 issue. It's only a one quarter issue for 2008 and I don't want to presuppose that anything less than 3% would cause us at this early date to restate guidance.
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