SEM - Earnings call transcript Q3 2017 | Select Medical Holdings Corporation

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Operator

Good morning, and thank you for joining us today for Select Medical Holdings Corporation's Earnings Conference Call to discuss the third quarter 2017 results and the company's business outlook.

Speaking today are the company's Executive Chairman and Co-Founder, Robert Ortenzio; and the company's Executive Vice President and Chief Financial Officer, Martin Jackson. Management will give you an overview of the quarter and then open the call for questions.

Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company, including without limitation, statements regarding operating results, growth opportunities and other statements that refer to Select Medical's plans, expectations, strategies, intentions and beliefs. These forward-looking statements are based on the information available to management of Select Medical today, and the company assumes no obligation to update these statements as the circumstances change. would turn I over conference time, Mr. to this like the to call At Ortenzio. Robert begin. may you Sir,

Robert Ortenzio

Thank you, Call morning, Medical's operator. Good Third for joining Quarter Select us Earnings Conference for everyone. XXXX. Thanks for

provide our operational the the want highlights Before I you metrics some outline with quarter, for I to quarter. for

the Welsh, U.S. Co, announced partnership partners enables majority and pleased agreement, partners, operates health occupational combined Under week the HealthWorks our new of success signing the and of XX owner and continue This an in expand Health to First, we as our our platform with the approximately Concentra clinics XXX Carson minority HealthWorks. states. are agreement will Cressey U.S. the and in remain & XX us Select of to have Dignity along build and last to centers company. health. the on-site combine company occupational new terms Care, upon will in minority existing

third of states. With centers, community-based in XX our end in As national significantly the and clinics partnership than outpatient scope. quarter, of XX% this on-site Concentra clinics our XXX overlap less occupational expands XX health XXX operated centers, the

LTAC We patient with progress continue operations transition our to the are criteria. that be since our showing pleased to

For than the patient X.X% compliant quarter, more we increased days on basis. by our total a year-over-year

same time. of over period patient total the Our increased by X.X% days

from first the for the XX% year quarter, criteria. in in weakest rate since patient quarter in XX% the quarter occupancy our hospitals down Our only time from slightly in seasonally third quarter. began year-over-year LTACs up our up was sequentially and transition last the XX% our was occupancy second LTAC to same their for

patients only to Case on focus and was Index population, continues our quarter. X.XX we the in As criteria run higher Mix compliant

and continues day also $X,XXX increase rate quarter. to in LTACs our per this patient was Our

in our focus year-over-year on in LTACs. cost margin and managing basis point has occupancy improvement a adjusted in Our XXX EBITDA our improved continued resulted

LTACs XX% was same $XX.X million, Our over year. quarter adjusted up the to last compared this EBITDA quarter

rapidly. business continues rehab to Our inpatient grow

the days basis. we patient our by For a year-over-year to days XX,XXX increased total quarter, XX.X% on

from Our QX XX.X% as occupancy to increased rate XXXX. XX.X% of

rate Our a by joint was additional up in rehab opened Cleveland $X,XXX. adjusted Cleveland one was with same-quarter and XX.X%, over scheduled open on to this Revenue year-over-year hospital growth basis in growth Hospital EBITDA XXX%. day October month. patient to venture increased We XX.X% Clinic Akron now additional later in our

year rehab have should we under As that I new in construction. in Las late X Vegas should that last open early mentioned and quarter, next hospitals Orleans also one in New One XXXX. open

EBITDA business a Our with by revenue same grow X.X% on and outpatient legacy quarter nicely continues up up year-over-year to X.X% basis.

we quarter, we with Physio implemented. continue last changes mentioned the headwinds several corporate to with of markets acquired experience we As some have

past clinics the and the to XX% For by Overall by the we several for note confident these been quarters. are and years are assets to improve XX we have down down flat was was was X.X% very will that operators million was XX.X% performance with for revenue that have for important to $XX.X million. seasoned It's next the quarter, quarter, their revenue that over to EBITDA us the by million. $XX.X managing Physio down EBITDA and they $X

in Harvey of Irma, and the hurricanes, the Additionally, clinics to of impacted temporary many quarter. closure due operations adversely our our

and have our in the slight EBITDA shown we revenue segment. adjusted outpatient growth would impacts, Excluding weather negative in

the our quarter quarter day XXX,XXX Net for $XXX quarter to the the X.X% million hospitals some Let me the last revenue year. of visits the slightly the segment specialty Net Harvey primarily impact to increased revenue net visits to quarter million increased last visits The Net X.X% million quarter compared next year. take to million revenue same days to for million $X.X compared revenue quarter to million revenue $XX Irma. of same in revenues our visits areas you quarter. hurricanes. approximately in net just patient XXX,XXX Patient Outpatient in Average to million $X,XXX same related $XXX.X and the of under of affected patient estimate the days year. to decline quarter quarter to year. to third quarter the same in Overall loss Rehabilitation the decreased increased per to highlights of increased to quarter We the third Hurricanes decreased quarter third decrease last billion X.XX last operational compared be $X.X last year. through year. $XXX $XXX.X net in last for by patient X.XX the same due third compared X.X% third days in was the in same within million compared to to compared to $X,XXX

experienced our revenue in clinics in of at visits decline some the in Physiotherapy offset The increase partially to addition decrease an of we hurricanes, revenue by per decline visit. markets. In visits within the impact was to net in related the

decline in quarter Our decrease quarter in $XXX affected start-up The revenue million centers revenue. the acquired Concentra the $X.X and of year. million Net per the in million offset X.X% in was year. net segment is to quarter net same hurricanes, per in caused to increased our $XXX visit in revenue increase compared approximately visits third $XXX visit third the last estimate by we quarter by compared last was $XXX from which partially the same newly our in the which primarily areas to

was revenue approximately on-site clinics, quarter, from generated other the centers million of was the and community-based third outpatient services. clinics And our the $XX For $XXX balance from million.

quarter and million quarter in quarter patient start-up at quarter in The EBITDA quarter segment to margin the relative rate. performance is start-up year. increase million $XX.X new EBITDA The net rehabilitation Harvey last in revenue per in for in adjusted in the last same labor compared the in third for adjusted X.XX year. last XXX which same adjusted margins the hospitals. quarter million $XX.X XX.X% were Adjusted Specialty adjusted last net per $XX.X revenue year. X.XX third the EBITDA year. was at EBITDA increased to due compared our quarter same margin in specialty the third resulted $XX the effect same to our was $XXX EBITDA per quarter this compared as rehab XX.X% last lower X.X% year. in in year. XX.X% third decline year which to visit compared million revenue third and million year. lowering improved For Outpatient compared Hurricanes million an same visit compared proportion third quarter the the markets the to in compared quarter services year. decrease to by the XX.X% primarily to margin visits points X.X% $XXX.X specialty and last Adjusted visits EBITDA the was the for our margin quarter XX.X% million losses segment EBITDA third consolidated the last for to in basis visits LTACs adjusted related quarter quarter Adjusted hospital centers, same million the in the employer decrease to in to primarily last last $X.X $XX.X the $X for adjusted the million a EBITDA improved in same visit the to quarter in hospitals in EBITDA both the million per with losses reduction to in to operating visit compared $XXX the were same of for and hospital was the Total the impacted same expense to compared increased related The to higher and quarter the quarter And had Irma. to hurricanes, is to XX.X% outpatient in a related of yield in grew quarter

before visits up quarter last we and Adjusted addition, this now was year quarter business. opening Physio a well was as to in year. million fully in Harvey start-up hurricanes, markets. telemedicine $X.XX per was related the to experience call to to challenges EBITDA additional compared due margin to adjusted as EBITDA turn in Jackson quarter year. in losses the Earnings Decline in in for financial the the our same to Concentra clinic third and $XX.X year. $X.XX adjusted compared over last In third the decline same I'll margin continue to Irma, the of in diluted EBITDA few compared XX.X% details last questions. same a for quarter million Marty in $XX primarily for operational XX.X% share our were quarter it

Martin Jackson

Good Bob. morning, Thanks, everyone.

and general our cost For same million expenses compares operating million. in bad $XXX administrative and expense $XXX our quarter, services, were debt which This last quarter of expense include year. to the the third

our expenses last Cost services in operating to net for last As were third same $XXX the a were revenue, year. percentage the XX.X% as year. million quarter to compared million quarter $XXX XX% the compared of same in third for the of quarter quarter

of same was to in of last. X.X% hospital same XXX year. percent in Bad third compared the quarter specialty operating a a in compared of hospitals. to revenue quarter percent X.X% year acquired of primarily quarter X.X% for was by percent G&A quarter $XX.X was improved the quarter G&A the debt percent was specialty percent net our increase is an X.X% a our revenue of quarter increase third net As expense XX.X% a the third in compared same the as services third points services net this The in both revenue, revenue of of start-up net in last The bad in as year. quarter last to as to debt revenue net and cost in in a decreased due decrease segment. cost of as year. performance driven basis XX.X% million for last to in revenue the

in income completed were quarter of first of completed the third the expense EBITDA debt in and tax effective last last was of XXXX million $X.X was of $X.X quarter the and refinancings year. earnings of unconsolidated same third for of the recorded Concentra was Holdings Medical Select adjusted tax reduced Depreciation end quarter. and was third same to $XX.X million billion compared subsidiaries As third the is million quarter, related year. last $X.XX. sheet. well and third term of quarter. quarter loans of This Bob the and during and Interest the in in per quarter the year. quarter, $XXX.X equity of $XX.X $XX.X compares primarily able XX.X%. million The the in total we to X.X% the expense income $XX.X EBITDA $XX margin third we in generated EBITDA to same expense fully and achieve we the the adjusted expense third decrease last cash million had in which million as was quarter on mentioned, rate $X.X Net The EBITDA diluted attributable share of million the the $XX.X million We year. during margins amortization the for the to quarter. earnings in the adjusted the to refinancing At quarter adjusted $XX.X in with interest compares rates is to as XX.X% we quarter was This Company the compares the the XXXX. million $XXX.X million in that quarter quarter in third outstanding same million balance

term activities balance unamortized in had loans, in $XXX.X the borrowings X/X% Select of premiums $XXX senior that sheet payable. million Our the revolving And notes, in issuance of the million million $XX.X loans, discounts, notes $XX.X debt provided $X.XX debt quarter. term third Select billion million Select loans, the million in included the Concentra million X of and quarter flow $XXX liability. in at and other in cash Operating overall $XX.X we balance consisting reduced cost debt miscellaneous end

December of increase This underpayments DSO, June days XXXX. compares LTACs. Interim received and primarily XX XXXX. September days in XXXX through Payment days was at outstanding, XX to days XX, Periodic related Our or at XX, XX to was XX, our the Program in DSO Medicare we The as sales our

we quarter, in million but we're third million. currently $XX underpaid by During $XX the underpayments, still approximately over recouped

the amounts first quarter. Investing of in owed of underpayments used million and a of then cash quarter purchases $X.X to million of in of to investments $XX.X and of cash over third of the related the The to provided $XX.X the recouped million PP&E in million activities primarily quarter. million will acquisitions and cash come $XX.X The activities of relates $XX provision the in the quarter. in during in net cash $XX.X and borrowings million year. overdrafts our use repayments total was which term million of balance facility borrowings net fourth million. we third expect million October, of of partially balance revolving on debt of quarter. in loan was other $XX.X we $X.X in $XX and million next During Financing recoup approximately for the payments And offset the by $XX

Adjusted on million. earnings to of per year expected which to is updated an be XXXX. $X.XX. guidance over $XXX our we the in This the to diluted and back adjusted $XXX on remarks. for billion questions. revenue range debt excludes And in open provided range be calendar of the to be loss retirement per concludes prepared expected is range effect this like tax press the release, in expect $X.XX at to time, to the $X.XX EBITDA $X.XX call up to to we'd of to Additionally, earnings We our financial it now the in to of be turn share for to related million $X.X the share billion. earnings net the in range $X.X Fully of operator

Operator

from Capital the Morgan RBC [Operator Instructions] And comes our first of question line Frank Markets. from

may begin. You

Frank Morgan

give transition growth of LTAC you should us this my I'm be that if can transition think the we've now would from view first got here that kind is on Now That how question. go wondering underway. complete, you admission a

Martin Jackson

than XX in then really, we it we is focus real have the we we mean, think rate, XX%, our back it grow can probably see X first growth, the over think really to to to occupancy get there higher the that XX%. months. opportunities LTAC to that that I achieve We even historical is And Frank, next that. some

to get it then higher that's got back to a - that really levels. we've historical than the anticipate So short-term And we focus that. take can we

Robert Ortenzio

work would I we are Bob. pretty mean, really tough LTACs. is this been the bullish done. has point I Frank, Yes, this at say really that on the

a and think I challenge They've And more the there great couldn't responded the think good operators we criteria. upside. way that I done have great new of to pleased is be our job. have we some they momentum. the with And

Frank Morgan

just when weak prepared it on of I could And utilization you timing to your a outpatient and like more businesses, that on on macro outpatient the any the of in providers maybe it of there. areas Would just curious, didn't lot point our environment. any be there? some sound Physiotherapy, across a maybe that, just you side? And know look the have sort your was in wanted color but spoken But I'm of perhaps could you little I say the that. recovery secondly, and remarks, confirm just to then of the of And softness

Martin Jackson

really have outpatient point to as fine there's side I Sure, lost don't the side. is mean, some of going make those as is the they're think And therapists And PTs we'll Frank. we outpatient additional specific the come function to what back. see a when in that anything put clinics. on We to Physiotherapy do far of in we're sure visits some those the in to marketplaces. clinics,

to where So come to a historically. the it a perspective, months the frame is, see X next time from back X timing to think, reasonable over I Physio - X was probably

Frank Morgan

more Just off. I'll one and hop

not thinking JV about should development thinking about you we - coming obviously, where know online. the how at how a will from guidance. a those off. On When loss going the perspective, quarters come? going impacts hits biggest next rehab online, hop But give And I'll to the side, start-up be level, that year? the of the high start several I start-up these have you're just into coming thinking we of geography

Martin Jackson

probably as to far anticipate As per $X $X.X we'll start-up losses, hospital. million about we see million

time think provided open the I we we that those. frame to expect

their are opening doors. So just next hospitals that of a year, we've up number gotten

On So there the quarters see into losses. the fourth basis, for we'll anticipate that be - see third many in we overall so start-up quarters, we'll some the on. you'll that X an start-up year losses. and and shouldn't go really But black first

Operator

question comes of Mayo from from our the And line Whit next Baird. Robert

begin. You may

Whit Mayo

get we're LTAC quarter how maybe of the weak third into now that at pulmonology is But you're feel quarter? business business to you curious cases. to providers the a guys of the get And think for of going about quarter kind presumably the pretty and through transitioning think new the and all seasonality I And for forward? upper conversion. just trying the weak seasonality seasonally put a fully most for perspective site-neutral how this you look respiratory just

Martin Jackson

- Whit. Frank sorry, I'm Sure,

Whit Mayo

okay. That's

Martin Jackson

When different businesses. really seasonality, is we it a take different look at for our

you second look the If at the the a strong first take and typically very in quarter. is LTAC, LTAC

all Third starts back quarter in When concerned. inpatient census rehab, at as from quarter take it lowest quarters, is, is rehab the a of the as all the really out standpoint. isn't the and then impacted look third inpatient to you seasonality that far quarter a come

rehab outpatient quarters very were second business, Our and first strong.

is second have. basis, quarter then being Concentra you the that third And your strongest lowest. we And quarters lowest quarters. the then on quarter Third fourth third the and see typically, is

then third quarter performance first as is And is quarter as quarter be would concerned. the the The far the fourth weakest. typically

Whit Mayo

losses I'm when know the I back operating And may of looks influencing mean, be like they per expenses year-over-year. X.X% I start-up it patient - looking Yes, into that. some hospital declined day, the

the just or And any just to can initiatives the progress or you maybe way costs you're trending? at controllable look share making? anecdotes any strategies on quarter, Just in just clean how they're

Robert Ortenzio

the weren't benefit that with I'm that. board, number staffing the had in sure keep - XXXX you'll sure a on kept we to something flexing the we in are day like patient far saw nurses obviously, we As costs doing one you probably volume, of about was of as you made talked as and things concerned, that time. at the employed nice them basis, a growth on from And a per recall,

operators very per on a in our done patient a overall particular, good reducing think have basis. job I in expenses, also day

So on all PPT said per basis, I if on down. a of look you a those are patient pharmaceutical as a take costs, at basis, supplies, day

costs. they've again, very job done a So managing good really

Whit Mayo

HealthWorks. Concentra the And high level, looking and at contrast maybe just one one, doing U.S. a maybe last compare just and with

similarities more staffing looking maybe Just the the at versus is, on any line? look opportunity going the you on top you the transactions? model the But presumably look at how opportunity guys guys Where the dissimilarities color or high-level for of just forward? how

Robert Ortenzio

Well, U.S. HealthWorks U.S. States HealthWorks that's the the Southeast, Northeast. and in South, part do Concentra company United some a businesses. They of has Concentra have differences. been very the has historically are geographic in grown more been similar Western whereas

businesses these different. are So not

But So we're expanding companies the differences them looking always kind there's dramatic. forward to and of overall subtle but national footprint. I would say putting geographic in like these, nothing together

Operator

And of our next question Rigg comes from from Deutsche Chris the line Bank.

may begin. You

Chris Rigg

make the sure on the right EBITDA got I Just Physio numbers pressure. wanted to

you about million. $X I XX% think year-over-year to down said

absolute about year-over-year imply in $X Physio that does a decline So million EBITDA?

Martin Jackson

Yes. think That's right, year Chris. million. $X.X I The the quarter, - prior was

Chris Rigg

- you about all to million-ish were it year? you're way has for that where the $XX the year? year full be been for XXXX, trending below million And last $XX roughly So going

Martin Jackson

it over it quarter, that in it that we come it trended trending the was first event in going then way quarter, - saw was trending And the And the nicely. - second It back third we - on. quarter. then saw

Chris Rigg

areas the going million that little could so just down midpoint, You specific there $X to to into when little I trending million break How other the a about $X I'm you And the coming bit down are think help expectations then is, where really I guide at million the about from that is any of hurricane. And your bit? Physio? below is $XX year? got a guess with much

Martin Jackson

you impact on Number Chris. it's weather, a components there is to million look the good There's the at guide Yes, question, X a take when a very really the one was $X about weather. down.

focused a - If on again, outpatient the Physio $XX we really, was was little And a look $X.X hospitals our then see it's the bit solely million a take and on million. the Physio, ramp-up rehab, you if at and new about there it's about million, at that impact side. we're you our that $XX take look inpatient north business it's of of slower

that that to million. will provide bridge So that you will get to a get with you $XX -

Chris Rigg

of guess then just finalize And to here. train thought this I

back So recoup least I earlier? to weather as And get would at think come more you the next little the year? back take then noted in the we - will bit - had Physio that a all time that at inpatient least should

Martin Jackson

weather a The is onetime event.

opened outpatient clinics, a business. I all the of rehab fact, for As matter of all of of center and the with at clinics exception all those of our mean, one Concentra, are

So onetime. million perspective, of a see think I yes, weather. $X than be mean, associated less an in of that quarter it it type but will from event. we onetime with little I will the impact, bit probably There But really as it is a be the fourth

Chris Rigg

final one one changing gears. And then just here,

On some. strength JV a Has you talked has it change LTAC note I any any But seeing obviously, inpatient you've there I'll interest? more know to there. And side, been guys. are side? the on leave about the JV you broad-based been for rehab

Robert Ortenzio

will do It we you to not rehab the has operations. we is kind have and one-off. know, interest those new some de side, is novo criteria. as on that preoccupation, mean, the those our a on the there transition I Yes, the focus of been

not couple last of forward. going in our JVs a to future. part, plan moment some the although is that's forward definite do growth this side. to be broad you've to really primary at announcing rehab primarily a on become LTACs the we business seen more as going of new some. will years, look part focus, we the And continue It's more And the So will a

the to frequent see the expect side the side to be to JVs that's or on see the as as and what large So on you're I rehab focus. wouldn't going LTAC as

Operator

of line comes Sutherland Benchmark the our Company. from Bill And question next from

may You begin.

Bill Sutherland

get went little have Marty, mine you variance, trying ramp. EBITDA asked. a slower the on the been IRF through the to just handle But and I'm adjustment since tighter of Most

kind far year? to degree as significant X of where - referring to you're what track those you on with as So ones are I last we assume stand today, the

Martin Jackson

that's great Bill, a question. Yes,

a we are take you are target. If where today, on look we at

We've the So in nice the improvements X quarter. we be in some quarters. the first the pretty slower fourth third ramp seen was really to And expect strong. quarter

Bill Sutherland

mostly large it the in of as related was you a Southern And just to Cal? challenges such did doing facility

Martin Jackson

hit I very the but Yes, you we're I hospital, Daily additional the right all large some head. the nail the on time And California to opportunity think up, mean, Census about and is get CRI Rehab. the very, excited ADC, very was a now. us took up Average it at nicely it

Bill Sutherland

one respect? things which some in therapists, the now, did in on corrected In second churn Or issue in quarter is more this somewhat was apparently Physio that to what the the Just is change the challenge, you in first issue quarter? thought topic. the similar was that

Martin Jackson

No, it's thing. same the

Bill Sutherland

what What you you it, churn do is think you that guys do - analyze as about?

Martin Jackson

I what don't have change, with that do change. like consequently, - you certain you've I operational clinics, of Bill, Well, all you when people standardize procedures, procedures. all And whenever when our there's got we think always as do - X,XXX that, we you that think,

Bill Sutherland

developing. the And telemed losses then regarding business last, start-up you're mentioned you

in kind interested color on business type terms of in of what your of be that would Just any platform? be

Martin Jackson

Sure.

remotely would services services. to physicians. in Concentra, going I after-hour to is really over have we at addition place in anticipate it's providing the for And it on be As some far telemedicine located on-site as focused initiative

in think was third dollars about $XXX,XXX. spent there the I the quarter,

was there third So the negative variance quarter. of $XXX,XXX a about for

Operator

from of And of comes the from Kevin Bank America. Fischbeck question line our next

may You begin.

Kevin Fischbeck

you're in so certain Go difficulties we Physiotherapy. staffing and lot the guess, I of kind not workers. I labor about That's pressures transaction specifically to issues hear it's to saying talk change of finding the not back related specialties are cost of really - issue, disruption The guess, just some leadership? the and the - to related a providers

Robert Ortenzio

Kevin. true, is that Yes,

subsegments commentary that certainly hasn't find acquisition. say specifically. I nursing. to would Physio. Although on - not getting But areas different the particularly the some transaction asked the the and Physio recruiting of business, issue the we that's question we The challenges been that's on our and in related But in do is a we're

Kevin Fischbeck

exactly again get why then better that started do in And in then QX worse and think you it QX? to got

Martin Jackson

additional was volume, been was think additional it. third sudden for that - kind - we've we volume of there lot rehab. ended in quarter just of We - what that some and experience then the But outpatient less and all up the the masked Kevin, always a happening of a

that's it's think shown I again. why So itself

Kevin Fischbeck

- you a guess that your with I I staffing better, be hired levels therapists if So temporary it or... the you right, expecting but have didn't volume then volume would rebound Was would think QX? happen that or didn't

Robert Ortenzio

the staffing outpatient the seen don't staffing the of to with outpatient we issues Yes, can historically. that had referred criteria Kind commentary the the to business really business. haven't we was to think do out unique really we relative earlier problems to to not call through transition. the LTACs that I that LTACs

Kevin Fischbeck

driving mentioned up that? bad And What then specialty quarter. debt was the that you was in hospital

Martin Jackson

is LTAC the of as seen side. we've seen and some increased specialty on aging accounts our Yes, the is in some we've what in

Kevin Fischbeck

it's Okay, the LTAC on side?

Martin Jackson

Yes.

Kevin Fischbeck

I once from ramp you you get occupancy that there? occupancy? in into about do then is And back continue rate, a what Or are of to - then period in guess, you you to getting able there? And if you what think normal growth you you the be to QX, that normal talked how get target about just rate driving short that LTAC time. it pretty pace on should the view? Is What's right did a now, on occupancy side

Martin Jackson

and going comfortable, QX between a to take mature, 'XX occupancy lot of takes making in of feel it's geographical of occurred criteria, if a And the continue. with our QX us that in of we will hospitals, process really the ground. the liaisons locations time 'XX that's place, makes X at point - increase the each as look clinical mean, on into mean, that's are what as helpful. What impact continues that think the Yes. Kevin, you think I we is versus spending rate, educational I that that very specific that us

Kevin Fischbeck

concern was these patients treated were are before. that that that there historical out our in Obviously, have LTAC could been

better to So percent going people that be be is to come come now to in you any guess, get be, the haven't will have who seen to - great few next a progress. to exactly always than could that I done referral percent to concern few the we I in? said guys harder how in obviously easiest might have be the going wondering to was you and to fill apparently, slowdown You You've that. couple expected, going job, occupancy? able get it's percent first of were get then

Martin Jackson

have we Kevin. No, not,

As matter exact opposite. the fact, of a

have we've a I some that there you program once a really with And care think of out the And needs. at perspective, in clinical peers, number referral success hospitals. the care a both specific their of I I data, finding that want talked a a them just done saying, you done patient it's that. hospital it we're stabilized, we education into said, really the appropriate to you with clinical compliant sitting has our real acute investors sources. mean, is move educating and really quickly from is to that short-term address acute as them what a when that and gives that med setting lot take look us number we've patients LTAC part to your comfort is a potential substantial

Kevin Fischbeck

as now? relying were dynamic. this worse, seeing them obviously, on Are Then some were as a as patients. closures more making come it LTAC a that see competitors struggle to you better last them of question potential on of marketplace is too less noncompliant there potential understanding than opportunity? capacity much therefore helping in and And see course, you the you likely the going Because you're do Or out? far

Robert Ortenzio

by having there the looking large the clinical attract think smaller many, of and commentary need of question know I patient think last having good on who have those come trouble adjusting consistent segment Mix couple are that kind don't the at that. you're programs the we create compliant the for see because years I was that the patients environment to acuity And lower seeing given we to capacity are Case including out. it's And over treating Marty that going I there's the they and is this any are industry patients. that a with ones Index, and

confident think I we we out So will continue great to and right that. XX it the we don't extent, the we are on are I industry months. blended I rate here from transition accelerate the will with next the in But think can see that that struggle, accuracy. The call directionally, think

think, venue in the was LTACs I that meet - what patients. - adapt I over anticipated, seeing for you're think differently industry the broader is a high providers to as and to acuity and markets on see, changing So and ICU able a this that viewed as is And being that's going are going post time higher need. acuity, not all you're to commentary is be

And transition. the CMS gradually industry this. this legislature, very see glide path we'll gave and you're criteria, so seeing it And long for the a because

confident you going But you see that are see it. to we will it So are gradually.

Kevin Fischbeck

back. I'll Actually, go

you the Just one was, the question. growth for more don't I once earlier business? I part right you guess, answered the the second if occupancy, what normal of is questions which know LTAC get one that rate of

Martin Jackson

a over to potentially grow you'll Yes. position I another that probably XX% mean, ultimately be in to XX%, see months. I XX think

Operator

Mayo comes And question our next the line from from Baird. Robert Whit of

begin. You may

WhitMayo

U.S. back Can bit sense a get the Sorry. a both of wanted about and the the you frame? the forward hear Welsh, about I to can the time the a to going Maybe talk Just go just Dignity put, transaction. wanted little commitments of financing, the call, HealthWorks? for to little Marty, me? hear structure more bit we Carson.

Robert Ortenzio

regards With the have to lien. and with HealthWorks, second Yes. we JPMorgan, committed that a it's it U.S. first financing deal is for a

financing done, now is should so FTC. got thereafter. FTC approval, pretty completed the And that's we've focus be get we soon through And marketing to that. be think right we'll Once after out

the fifth will also the structure instead year. being fourth anniversary the put-call. saw being third, Your really second comfort the fifth the fourth anniversary, the put-call, third be year put-call question The ought as that deal. you of that same only year you and remains the to put second, call is the was the in original it The and and difference take Concentra

put And first the any U.S. XXXX. first that ownership. So XXXX, the call HealthWorks to would XXXX, be XXXX. let's quarter of first then in closes Select XXXX, of made assume could the in outstanding quarter And the then have ability

Select that, or it's stock. really we of how discretion Whit, to pay thing at Select as for it to stress other cash whether the The here, sole is use is

Whit Mayo

and this they that are the Or for put-call They is have structure? - Dignity So Welsh, same different? both Carson?

Martin Jackson

same. No, they're the

Whit Mayo

They're same? the

Martin Jackson

identical. it's So

Whit Mayo

I - And is established the on establishing How multiple the there fair the on - value amount… put-call? is market are trying I'm an there guess, a you to

Martin Jackson

value, market but them. on transactions fair for it'll basically and multiples paid be the be precedent It'll

was deal assumption, the XX.Xx. U.S. So deal or - state probably which if use you to that's want then assumption paid make to the a Concentra an bad to for first not what about HealthWorks that and was

Whit Mayo

debt the And it. joint on much Got venture? how be would

Martin Jackson

level debt billion. about expected be total The at would $X.XXX

Whit Mayo

And last noncontrolling forward? this cash growth be the just forward. is joint venture to just Welsh there they going Will interest thinking a rolling Dignity be about will or one going the into I of have the distribution and

Martin Jackson

that We us not the that structure, Yes, to Select. of your come puts time. the going do that put-call focus really you're any to liquidity the or be dividends liquidity occur to that able events Whit, going will say, distributions really is is the okay, event there put to the of to - ask X-year anticipate during period was from

Operator

turn time. closing back no call would I questions Mr. showing to to now And at Robert the further remarks. Ortenzio like for this I'm

Robert Ortenzio

us, for and again the to Yes. next No joining closing performance we'll updating Thank look company's remarks. quarter. you forward all on you

Operator

today's and a have thank day. conference. all great for This you participating in Everyone, the you may Ladies and gentlemen, does conclude disconnect. program

Select Medical (SEM) 4 Nov 172017 Q3 Earnings call transcript