Question-and-Answer Session
Operator
Thank you. We will now begin the question and answer session. (Operator Instructions). Our first question comes from Kemp Dolliver from Cowen and Company, please go ahead.
Kemp Dolliver - Cowen and Company
John, after that closing, I’ve decided that CNN needs you (laughter).
John H. Short
Thank you, Kemp.
Kemp Dolliver - Cowen and Company
Congratulations on the contract therapy margins. On the margins this quarter, there was the reference to reductions and insurance met that cost and management incentives being bonuses, just quickly, what is the genesis of those reductions? Are they structural in nature or are these just timing-related given that most of these are accruals? I just want to get a sense for the sustainability beyond fourth quarter with some of these.
John H. Short
Well, don’t discount superior management in that list, but I think—and Jay’ll get into more detail—in terms of bad debt, that obviously is an accrual issue, but Jay and his team have done a very good job in making sure that our collection policies, especially in CT are keeping our bad debt to a minimum and that’s baring fruit. In terms of our self insurance, most of it was in health insurance.
We’ve made some structural changes in our plan design for 2008 and we think we are seeing the benefit of that. We’ll have to see what happens in the fourth quarter to see if it’s sustainable. Jay do you want to add additional color in terms of other insurance provisions?
Jay Shreiner
No, I think that pretty well covers it. We did have, in addition to lower health insurance in the third quarter, also a little bit lower professional liability insurance, but, nothing of the size or significance that we reported last year. So, it’s just normal adjustments to accruals.
John H. Short
Yeah, the big thing we want to get across is the accrual adjustments serendipitously offset the negative impacts of the hurricanes and the Part B therapy cap start up mess. So, if we take all of that one-time stuff out, we’re still at $0.24 on continuing operations.
Kemp Dolliver - Cowen and Company
Right, okay and on the management incentives, are they at the corporate level or division level?
John H. Short
They’re both, mostly I think aren’t they heavily weighted toward the corporate level? We were a little more bullish about our performance expectations than we turned out to deliver. Our hospital group did not help us there.
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