Question-and-Answer Session
(Operator Instructions). We do have a question from the line of Kevin Ellich.
Kevin Ellich - RBC Capital Markets
Rich just wondering if the 3rd op with that bad debt reserve increased to 2.75%, wondering if you could provide a little bit more color? You mentioned the slowdown on the managed care payer side. Are there any specific payers that you guys are bumping into problems with?
Rich Whitney
Yeah, I really can't point to any specific payers. It's, it's almost across the board. And it's a trend we've been watching for a quarter or two and it's obviously been offset by improvements in other areas because our DSO remains stable at 70 days over the last several quarters. But, it's really just a little bit of a slowdown on the non government payer side causing us to boost that provision a little bit.
Kevin Ellich - RBC Capital Markets
And are those in-network or out of network contracts?
Rich Whitney
It wouldn't really make a distinction. I don't think it's a material distinction.
Kevin Ellich - RBC Capital Markets
Okay.
Rich Whitney
In this particular issue.
Kevin Ellich - RBC Capital Markets
Got it. And then going back to your comments on the bundling rule, I guess, what's your expectation for your market basket increases? I think the house bill included a provision for productivity gains.
LeAnne Zumwalt
Yeah, the house bill actually now it is not applicable because in fact the dialysis segment was eliminated. Now that could come back in the senate, but right now where we stand, we expect our market basket to be implemented as permit by market basket minus one.
Kevin Ellich - RBC Capital Markets
Got it. And then, Rich, could you help us, provide an update on uses of free cash flow? I guess how you would like to use that?
Rich Whitney
Sure. Our priorities in terms of use of cash remain the same as they have always been, and that is to sort of three priorities in this order. First, investing in profitable growth opportunities, acquisitions and de novos. Second, share repurchases, and third, paying down debt. Regarding growth, as we have stated, virtually all of the MDOs, the midsize dialysis organizations have offered themselves up for sale over the last 18 months or so.
And we are interested in acquiring, should any of them become available at a reasonable price. So that is sort of part of that dynamic in terms of growth. I should mention also, sort of given the current environment as it relates to healthcare reform, the economic environment, capital markets environment, it may be that our appetite would only be for one such transaction instead of multiple transactions.
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