SEM - Earnings call transcript Q3 2018 | Select Medical Holdings Corporation

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Operator

Good morning. And thank you for joining us today for Select Medical Holdings Corporation Earnings Conference Call to discuss the third quarter 2018 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 the 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 and intentions, and beliefs. circumstances based today information no and update statements are of to obligation statements these Medical Select the as forward-looking on available the management to These change. company assumes turn At this conference over to the time, Mr. call will I Ortenzio. Robert go Please ahead.

Robert Ortenzio

morning, Operator. for Thanks third Good Select XXXX. joining call earnings conference Thank for for Medical’s everyone. you, us quarter

the an segments. very last XX% revolving I Select’s $XX this all performance million. in generally and of updates comments generating for outline million quarter million some provide summary were with quarter quarter our Before the debt in debt net $XXX adjusted revenue, and over we we basis from repaid operations in operational $XXX including quarter. spoke the to consolidated Cash strong pleased our growth again metrics, on growth double-digit additional with this growth I just want year-over-year was EBITDA, a again Once business since of over XX.X% in four reduce we flow and over

credit first facility the times the this X at leverage end X.XX quarter. over at from of of third our year the of end times this quarter reduced to We’re

had adjusted margins illness improvements recovery over non-Medicare hit continue controlling in target terms core In critical We’re as Physio of see both division, rates, U.S. growth the business our revenue by year core we we improvement and markets. facility our costs. in in stated X% our core with outpatient rehab leverage growth and planned will confident integration alone. continues credit realized to to continues driven of nice business strong exhibit EBITDA and end growth times. operating X.X We the in proceed nice in topline under our while previously and Healthworks to Concentra volume business growth hospital rate in

achieve maturation continues the business continues. hospital to as the both double-digit of adjusted hospital and in EBITDA portfolio rehabilitation growth Our revenue

to quarter the in rehab track venture rehabilitation Virginia open to University on Also The in joint open next year. currently with venture quarter Riverside the next we’re Florida. is quarter, hospital last of first hospital in venture hospital of new open Health mentioned with I As joint year rehab Vegas the sometime quarter a with next joint expected a and in new the in Dignity Health second expected year. third expected Las chance

We to in would rehabilitation also which construction XXXX on two with XXXX. begin in Health in sometime plan new hospitals Arizona, Banner open

quarter year. year by the in third $XXX third $XXX million the of in million last and a now increase top our operational our in $X,XXX Overall, was compared quarter. in Let the to driven through which to to increased our was by third third in same increased illness hospital recovery me in both segment year. rate XX% revenue increased recovery patient for billion, quarter segment take in our $XXX which $X.XX metrics. Net business segments. you slightly each quarter net illness X.X% included four of the critical Occupancy hospital revenue our day critical to growth line quarter last million this The per

last quarter to Net compared quarter hospital days outpatient day in segment quarter revenue by segment XX.X% quarter outpatient compared $XXX increased in revenue $X,XXX revenue $X,XXX on per the in the Our last driven close year. quarter to days third in million, $XXX four was our to per patient day increased to same rehab X.X% hospitals Net year. compared the both same The to year. increased Net slightly third in the to same XX,XXX the quarter, decline since million quarter in a X.XX rehabilitation to at same on compared quarter to $XXX visits days last Patient to was XXX year. to quarter admissions last third X.XX third in we XX.X% last the quarter declined the last patient in last of of XX,XXX days, -- million, third compared million increased same Patient million same quarter year. the to million compared visits year. $XXX visits X.X% year. the

revenue by Our was compared for third of per consensus growth in same increased Healthworks contribution to and visit the U.S. revenue $XXX the last over legacy compared $XXX to last quarter $XXX driven million, year. the Concentra million to XX.X% in segment per both the quarter same quarter visit year, X% third the the net in $XXX quarter in our Net on business.

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

we the centers. workers’ third year. million, both for For to per existing compared net at the visits at to -- to per last rates of visit Total EBITDA rates adjusted XX.X% to $XXX.X same and at compared comp and million revenue visit patient quarter the This quarter, million X.XX Concentra year. U.S. and the revenue $XXX quarter employer the to had $XXX service third $XXX.X our for of in same EBITDA Increases and higher quarter third same centers, XX.X% X.XX in X.X quarter last last related consolidated margin adjusted the with Healthwork the in for payment visits per year visit the the net increased compares XX.X% reimbursement centers million in improved quarter.

was for the third increase day margin hospital EBITDA million critical the adjusted the last in revenue net and in due primarily The year. segment third our last the Our in in the compared recovery was quarter, rate year. per in quarter to was EBITDA in quarter, segment adjusted EBITDA same mentioned. previously quarter $XX.X to million patient improvement XX.X% same compared our as $XX.X illness Adjusted to XX.X% margin

The fully Physio EBITDA EBITDA in the quarter rehabilitation margin was for to EBITDA both XX% U.S. State has share am the is was Adjusted same the third the quarter, across open XXXX. third same excludes EBITDA the million million quarter third compared Medical in and year. was for driven in and to was quarter quarter Adjusted adjusted The achieving the the $XX.X the in our at both last Tavenner Earnings primarily diluted adjusted XX.X% third margin segment last Adjusted Outpatient with also the and in share Marilyn million the was per Human XX% experienced We in in last earnings diluted the hospitals million, the earnings same to Tavenner quarter, quarter year. increase Services. the volume rehab Virginia. per and Concentra, EBITDA same the rehab effects fully EBITDA for compared adjusted Board. adjusted third adjusted the increase year. $X.XX an XXXX both Select to million tax quarter clinics. compared to the in adjusted joined announce was in the quarter increased same and quarter the President non-operating year. for Administrator diluted was is this attributable in quarter. the $XX.X fully pleased last of quarter hospital $XX.X year. third was Plans of in the Resources operating the Health year, hospital CEO -- Medicaid in to the Our XX.X% EBITDA and Insurance in Ms. million last $XX.X the compared gains share Adjusted in EBITDA $XX.X increase year. former Adjusted third American in Select Centers EBITDA per former for of by third for in share in that patient XX.X% the $XX XX.X% combined also served $X.XX in new year margin quarter. I compared lower to diluted Healthworks. to to compared improvement last $X.XX last Medicare a segment for and year. and this of as the primarily related Health same margin for business margin quarter, the outpatient and costs quarter, we of relative She Secretary lower third

from significant for State some Jackson and Administration experience will believe through America. Select. Senior she addition Care Operations, Government to In of open Hospital skill nursing before We questions. Corporation the Health proven additional call Martin her Health her by background a to Federal XXXX, I’ll the Level be was benefit XXXX and Executive financial we for in now employed Care to details turn over the call Marilyn’s

Martin Jackson

everyone. Thanks, Good morning, Bob.

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

of compares the third compares services our of quarter to As for third million same billion same last in year. $X.XX quarter last $XXX Cost quarter operating This XX.X% quarter. net in a were year. expense revenue for percentage the were This to the the XX.X%.

the net services G&A in was of quarter. debt the same As were last revenue, X.X% third for year. the year. last for last third a $XX X.X% cost a year. same of XX.X% XX.X% the This in This to in compared million revenue quarter $XX.X quarter million quarter. revenue was quarter as to third of compares G&A expense net percentage This in same to in compares quarter. the percentage the

the adjusted adjusted amortization third $X.X total million the million EBITDA and compares million adjusted for to $XXX.X third and Depreciation EBITDA quarter last compares third quarter. the unconsolidated margin increase Bob subsidiaries This This and the is was from in and primarily million of We quarter. quarter. XX.X% year. the an was year. of $X.X in $XXX.X compares the same the acquisition. EBITDA last in to $XX.X margin adjusted the million from quarter of the to quarter Healthworks As EBITDA year. U.S. was an XX.X% same million equity generated of mentioned, in same This earnings $XX.X The result last

outstanding non-consolidating in expense income to This third million Concentra. non-operating financing million the million the $XX.X This acquisition effective company $XX.X Select tax year. year is of of tax of relates expense in The federal for December XX.X%, is respectively. $X.X tax Holdings this Medical was Net represents increase for in last attributable an debt that million EPS third of in of recognized $XX the of At an This same in outpatient subsidiary. income quarter, to enacted was effective gain legislation we $X.XX compares rate interest Healthworks sale This a of share to $XX.X and million last recorded related quarter our were per earnings at in had of compares effects reform balance tax quarter year. tax addition, clinics result U.S. to $X.XX related and rehab The million the billion non-operating to our third the excluding XX.X% diluted the the of the rate the year. the the its sheet. in $X.XX. Adjusted end which $XX.X expense was lower last quarter. In the quarter income and and the the fully the primarily tax million of quarter. the gain third quarter. the $XXX.X same to cash of in Interest during quarter we

the had and million loans, million $XXX of last $XX overall premiums we loans, loans, debt in with a X.XXX% compared $XXX Concentra of of activities includes term quarter a We quarter also to discounts the $XX $X.XX flows and providing billion in in liability notes, at had to $XX miscellaneous Our sheet reduce the term balance third balance debt debt. in end strong very in unamortized lien issuance million revolving loans, $XXX $XX.X senior Select in and million in in Concentra year. million million first-lien cost million Select quarter billion the debt $X.XX same flow, cash second quarter, operating cash Select of other the

to activity activities to days outstanding was XXXX DSO of the quarter. $XX.X investment XX, We the and used repayments XX, cash sales up XXXX. non-controlling in on XX of property December the million as revolver interests, The million of million and and primarily had of in million the days $X.X XX $XX.X during and compares million loans, loan at to XX, million XXXX. the $XX.X days purchases cash related in quarter. Investing $X.X and at in XX payments quarter. of days net cash in equipment, distributions was of Our September quarter. $XX used million term in use This activities June of or $XX.X Financing third acquisition

of re-pricing in amendments amendment points facilities to Concentra XXXX. the $X.XX EBITDA to retirement early facilities borrowing loss to year to the fourth our retirement the $XXX loss does be updated million resolving in the of XXXX business any $X.XX. per range outlook be of and acquisition debt to costs, adjusted of both revolving in to from Additionally, that We diluted re-pricing our share related calendar reduction to credit the range on adjusted operating updated earnings of release, the $XXX in October term Adjusted earnings range debt, million. XX basis We we be We and and tax first-lien to in now negative slightly $X.XX, in resolving billion expect Select closed $X.XX $X.X business revenue effects. the XXXX. and now credit on in for range per per loans early on press share U.S. Healthworks expect the quarter be spreads. impact expected and of the from earnings net not The fully in the $X.XX billion, excludes to gains, share incurred of earnings in non-operating a completed to XX, outlook include our a

reduction first-lien We loan first-lien credit in which and call concludes This on credit also pricing up to it basis the for points like its an amendment prepared operator remarks. our the that grid internal the open improve. XX the completed I’d facilities loan result resolved ratings over basis could questions. time, the spread And the at should Concentra’s revolving to points back reduction in in XX Concentra to to this turn

Operator

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

Your line open. is

Frank Morgan

left that you may you’ve it little that behind on of on sort up more see love there four LTACH I’d know progress you see of Obviously, a with the of and and But but morning. there still this I done, you, over opportunity color the last the a think that now you. Bob, to occupancies for movement have the opportunity criteria. state get Do there? lot really just and elaborated. pruning made any color be to you’ve of or patient much get is quarter Good one upside in I any year last pruned an you’ve

Robert Ortenzio

Thanks, Yeah. Frank. Yeah.

you probably came generally about way LTACH said in know know the the biggest pleased extremely we’re change previously -- hospitals. descriptively was to our know you and years why that know as the reason last to I’ve is LTACH you recovery started this this see which you XX segment the it’s criteria, on we through You changed really the critical referring we the more the as industry, we hospital criteria

of XX% answer we narrower that the the that upside the can virtually question your are course, ventilation. sense really I an think is, to patients all we It’s or dependent that education. see that is do group or of it. seeing more of from of It patients a take we we’re kind mechanical patients or our on ICU where patients, yeah, of

comfortable can referral smaller But, a so think numbers it is sources said that yeah, of upside our safety patients, So The feel do them. terms around that we’ve of and the do sure a of occupancy are and patients They us subset think for the with the is highly making patients. acute we that that that bit. we move there take will I things time. in

back we don’t least that pointed hurricane, the also our think sooner. hospitals in that wish have we be most Panama We we for or service be lost another hospital and four from in out, not As hospital closed. will we year. recent may at hope did City Unfortunately, that

good of we about there’s traction it that feel a and do lot continue So see and feel upside. to

their critical or we’ll inability closings if the patients, additional I our as of acuity as hospitals call compete course result don’t be to closures high think closures, ordinary will for a business. additional more there’s far illness it that see I any of As would what of

Frank Morgan

with drag good Panama for loss how the you How City you. will account be, Got the that? of and

Martin Jackson

of drag $X.X our EBITDA. XXXX, million expectation the Frank, going is about that was into

Frank Morgan

Okay.

Martin Jackson

in of reflected provide beginning of January. that the the And at be guidance will we December, end

Frank Morgan

changes Switching the through gears weathered patient the you. on reimbursement criteria. Got having

specifically the thoughts initial patient ERF would changes, over in all those it, that Just just a and curious new XXXX with you coming I assessment of are how do and on that how side, changes about thoughts on prepared kind tool initial over looks some be new for the on any think that?

Robert Ortenzio

have of don’t any as you -- see details game as really Frank. changers. we on it. for as will I any of mean kind that No. is adapt it kind said to XXXX any don’t that I those you We

with -- our the think feel we it. I that we’ll the operations Our hospitals have model that we okay in be that with of

Frank Morgan

you. Got

appreciate a last get the next hospitals process coming the rollout hop, when these on does it’s about will the that open the that certification a certified. in Okay. terms I don’t California shorter of protracted in have one, and to these these here, year, so the losses obviously, these the you time know of little But takes geographies, of ERFs matter you color think cycle it in area over other And like little everything are geographies some I’ll really these the where in be bit here. start-up longer.

Robert Ortenzio

I markets. But our is, number opened regions when count shorter provider be And rigorous hospitals if we a and gets we count a places can’t Unfortunately, I it’s I opening longer. we nature of that’s tend less could and in -- delays overall. it as and would in receive provider time our our than that’s little less and our quicker, it will the the budgets on little in predict to but with become we bit it. bill Louisiana, better, does being more think can’t the we point We or it saw consuming hospital other these against getting California Medicare when larger, are wish out others you in regulatory our projections on order some in places of numbers to the Ochsner think some some some delay impact the than environment it the company of it

impact the smaller of big opening you be others California So particularly had it saw won’t and as as a when we base. of rehab some on

base As impact. as I big the of think will don’t it larger, gets be

Frank Morgan

you. Thank Okay.

Robert Ortenzio

You’re welcome.

Operator

from next the Costa from Peter question Securities. Wells comes Our of Fargo line

Your line open. is

Peter Costa

Good morning, is job first the Thanks. the on guys. quarter. rehab outpatient segment. question Good My on

kind all stuff there on core some that what You in had there. you EBITDA is should Physiotherapy project to of And nice is is we going I associates from the of of pickup or that sort how forgot, a and do margin in that the rebound much future… into tied going think

Robert Ortenzio

Yeah.

Peter Costa

running this business. for …

Robert Ortenzio

We’ve It But improvements The business drive clinics. continues and past a have efficiencies this additional is because and actually seen our have of that. did on operators quarter. of improve -- the additional job volumes, done both. combination Physio legacy to therefore, great they

Peter Costa

pickup the you out. the those do do still about way, that add that? settle that And you so a So margins from should EBITDA forward EBITDA where going associates I thinking to consider Physiotherapy is think think will going in purchase accelerated to more

Robert Ortenzio

be think that XX% EBITDA acquisition. and is margins in Physio on the range We still should the think upside we do there

Peter Costa

Okay.

Martin Jackson

room still is more to some There there. grow

they over say upside I would I accelerate of a time. Now, will that are wouldn’t period happen still say

Peter Costa

and of do past going you and you see And forward stayed you why business negative flat right. it actually on the think move in as believe a All near-term that’s critical the sort business do this didn’t year? to in illness XX% LTACH that hospital recovery then over move forward year-over-year side, the

Robert Ortenzio

to to be occupancy a Yeah. We think we historically. back where to are that position we will certainly get in

the lighter quarter in quarter is than first second typically third actually and fourth and quarter. Now quarter

believe we overall XX% that periods, to see our historically, we’ll educate both for as continue increases sources. do So, we

Peter Costa

you didn’t from quarter And then do of third it last pick why think year? up

Robert Ortenzio

some of I some think of we’ve we’ve it’s different couple pick-ups decreases. some that changes hospitals some had in nice in closures, management a spending hospitals, seen a these of we’ve we in some is and of and had seen combination a hospitals. our In factors, management addition was four time closures to other there on

Peter Costa

Okay.

effect it quarter? in Did the going the the through hospital that So all the transition. at Panama occupancy still City

Robert Ortenzio

It did not.

Peter Costa

Okay. there. I’ll Thank stop you.

Robert Ortenzio

Pete. Thanks,

Operator

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

Your line is open.

Bill Sutherland

Thanks. rule how you the I your out the it correct is X.X%, illness also am morning. impact to CMS, I think taking for side around The final me Thanks going ERP from the going recovery net questions. for on be if to wrong. is what critical side? Good for And

Martin Jackson

-- Bill, you’re could you increase? trying figure market to talking out. we’re Are repeat the about question, about that you basket talking

Bill Sutherland

are use that of things the I out update, impact to? there’s the these how the specific always specifically issues numbers with because specific but And CMS Yeah. always to know it applies put

Martin Jackson

take there’s X.X% a as negative But, wage good you an those look Yeah. announced The XX for and And There of to a negative policy. investment is X.X% the way that was a seen Totaling X.XXXX% question. negative reduction take basket actually up, adjustment, at Medicare negative that point is adjustment have area some the it, CMS due that know, to I’ll a increase adjustments we look all a the walk neutrality of finally as XX-basis have back Xst. how -- XX% elimination also due negative you a market it’s we you then, There factor. that out point level at then we threshold negative a a October to through there it. basis recovering. increase. reduction, occur will budget X.X of adjustment X.XXX% the additional starting are

Bill Sutherland

about asked I -- How the zero. to close pretty That’s LTACH. Okay. about also

Martin Jackson

Bill. Hey,

have said The all is other you these too. things you so in things just those other XX-Q, outlined that should are note -- the just I

Bill Sutherland

right. Okay. All

Martin Jackson

I know stated tough. pretty I could writing down it be there quickly,

Bill Sutherland

other the And hospitals? is in Q as the the side, other well, that

Martin Jackson

yes. ERPs, The Yeah.

Bill Sutherland

Yeah. ERPs.

Okay.

Martin Jackson

Yeah.

Bill Sutherland

you for Thank that.

very level you what’s your you with look how et as target? rehab nice, of What and about can lift. that outpatient plans you do should what was on cetera, expansion think -- sustainable we going sort growth rates, a at guys is these the nice So sustainable, feel

Martin Jackson

X% -- growth on pencil volume X% know, increases we is on next for zero, visits the X% that and We on to the outpatient probably, side. side, down year pricing you what X% think

Bill Sutherland

you the adding else your LTAC mentioned the and -- Is the JVs. LTAC then, Okay. capacity, a I And let finally as what anything see think, in beds with there had be might adding I have expanding or capacity? of -- as one you works on the few far

Robert Ortenzio

I We a that mention respond we and last we LTAC. saw did in I would the we think we in the -- Yeah. -- call question if to if growth think

So be mode I said that likely we we in the acquisition that LTACHs. consider would weren’t but to of opening new some

you a rapidly are really As joint of is know, change, mentioned since hospitals higher hospitals I conversion of our weren’t markets. to acuity we some probably down opportunities criteria do going number big closing, in being the the the as venture but it LTAC to such requirements some the the spend is as very Medicare able see that acuity perhaps that we make lower

markets. critical As hospital owners’ have joint the you with extremely or some partnerships our know, some our ventures systems. Cleveland We recovery LTAC Clinic do other rehab large with are and

some we So joint the have venture, those in do a partners. and our would those some perhaps, consider of of with pipeline and

Bill Sutherland

at me. Last specific from one moment. Nothing the Okay.

Concentra. the You didn’t mentioned, led comp on that. both little increase better I per There net visit at Health? on U.S. What Concentra, bit workers’ improving revenue catch of an was the a sides. revenue, at

Martin Jackson

California in rest country. of the that some rate Healthworks. and typically centers than significant their The increase, the the to do rates with of are that A Healthworks integration higher had cater U.S. number of Yeah. U.S. of

Bill Sutherland

about then? mix we’re issue talking So

Martin Jackson

you necessarily of wouldn’t a well, in mix, be it about it -- terms talking to we’re put want yes. Well, geographical mix, if it if,

Bill Sutherland

to impact mix your mix … of mean in positive how improved a coming it’s USH I -- terms -- in on the has -- as is

Martin Jackson

On the rates.

Bill Sutherland

Yeah.

Martin Jackson

Yeah.

Bill Sutherland

Okay. got it. I

Martin Jackson

Yeah.

Bill Sutherland

it. Appreciate Thanks guys.

Martin Jackson

Okay.

Operator

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

Your line is open.

Kevin Fischbeck

about Thanks. about implies and be ask to business wanted to least QX, you going QX below this from of little the looks we’d up QX and expect think bit forward QX the is a seasonality to usually at your relative to with that’s be year this going Great. the hospital that to QX. business, way on things guidance I about it into going mix Can the talk changes? like what’s

Robert Ortenzio

good question. Kevin, Yeah.

second consequently annual As -- know and rates on particular be should what guys you doing. is and as you do you critical saw so in know on provide which the is quarter. understand it There’s there yearly fluctuations wellness you you guidance in basis, exactly recovery hospitals, we we in a those

think there comfortable that candidly extent provided of but at that with I was day -- out the of a we but when we’re We’re quite quarter historically take us the the the to for analysts done the that look some and have right, they think good we I guidance fourth third that provided, provide. comfortable the end guidance they here we we a certain the quarter have very with at

Kevin Fischbeck

Okay.

maybe well strongest better? little remodeling companywide wasn’t terms from I or higher few be help us through forward as of do this, going being recently I guess, perspective, a it just to as us how QX maybe is So in XXXX going or or being remind lower you just are being than QX -- I bit maybe then about there mean think what thinking to going think QX quarter XXXX, sure about we forward

Martin Jackson

Yeah.

bit was think I QX little better.

right So it to I think best now. that’s the leave place

Kevin Fischbeck

All right.

Martin Jackson

the regards With what’s for quarter the always been to best quarter best for QX. us, has us

Kevin Fischbeck

then revenue business? is flattish that by declined Does Okay. it year seasonality despite more hurricane. of about -- in kind guess there Great. the Last sequentially And that X%. I Concentra’s was

wasn’t think I sure about that. how So to

Martin Jackson

but up fourth first has typically always than are industry, that what down. business, fourth been Normally a higher the we’ve what quarter That’s historically in you Concentra lot the is down. typically normally had and we’ve first is, Yeah. in first have past quarters quarter although seen quarter for is two years,

always Second typically close pretty another. to quarter are one and third quarter

Kevin Fischbeck

Okay.

So not off that far down of two flat. is

the going growth there bring of were but XX% side, growth leverage why don’t obviously I get then it’s the to able number, might and And with on you thought that that patient to to more Okay. a the kind a margins day more ERP huge that have margin? volume leverage flat would

Martin Jackson

Yeah.

question. good again is think I that

We have start-ups.

little that quarter we’ve go have the called, and it the some some years a of and a startup. what just to was about half only --it around we to a is mature. we Ochsner, losses takes that So have startup, for said in $XXX,XXX Ochsner hospitals And then year, hospitals because three those probably for year we bit, typically of two we the have,

we I the larger, of continue and think Bob of as gets will the become hospitals, total smaller and base new these up mentioned small openings ERP open So a Kevin percentage that types business. to

Kevin Fischbeck

than were were a year far higher saying and the be hospitals Yeah. was I like over margin last open startup year? last on little I $X bit as thought this just performance, as about a but but that, bit That they nothing… could year? recently even losses you’re the wrong million little

Martin Jackson

Yes.

Kevin Fischbeck

at … point. worried about this

Martin Jackson

We’re not.

Kevin Fischbeck

the out the last obviously about down good interest And points you rising loans a is on that? question have think how job done the there rates guys any these terming rates but thought these you do are Okay. knocking about refinancing, or at

Martin Jackson

you loans, fixing? mean you do out When the say terming

Kevin Fischbeck

putting putting, some out Yeah. floating debt. term of bonds the Exactly, into rate

Martin Jackson

Yeah.

always we’re We’re,

Kevin Fischbeck

debt? bonds putting of out the term into some exactly, Yeah, floating rate

Martin Jackson

one see, banks We’ve to, the going over they we’re We’ve constantly what all evaluating were with keep going years. which a LIBOR of from X% gone or -- LIBOR our month We from at the look LIBOR. probably From the going we’re -- couple perspective, taking there. make you and gone a paying to to a always next we’ll and to not. know whether on three continue e-commerce be anticipate, to one we’re sense month attention that Yeah. yeah month

a in will us. something think perspective will that would -- over range that use is if for our we’ve cap, got opportunistic the makes do is to couple At of I be floating. in but our X% we which buy we So sense we’ve the from be we’ve it to to got vehicle, on been economically to do fix, to this point been and past time X% years, that probably that

gets we continue X% to in there be We will LIBOR if and X% that to be range. even X%, still

Kevin Fischbeck

you. Thank sense. Makes Okay.

Operator

from question next the Credit A.J. Rice Our comes Suisse. of line from

line Your is open.

A.J. Rice

everyone. Hi, Thanks.

like looks you was been Healthworks organically. up mid-single it’s know ex-U.S. would run of higher a Concentra’s now rate that days, digits been I Concentra has early questions, at of this of quarters in what it couple of that sort handful point a about X%, now of quarter, well discussion where sort X%. and the growing normalized rate Just run that one evolved higher sort is growth. of Do the for driven long-term think somehow -- that rate it’s

Martin Jackson

first A.J., it’s good have of all back. you to

A.J. Rice

I be Yeah. Yeah. be back. I’ll back. will

Martin Jackson

little then are integrate next an both Good. to job listen we the and and absolutely concerned over probably have believe year as that moderate growth. that’s done and think and fabulous to regards a I growth believe they to operators that bit with I the a I Bob going just Good. With U.S. year half Healthworks…

A.J. Rice

Okay.

Martin Jackson

successful business subsequent but we of as the legacy levels. concerned, potentially then could those to is return as integration … full far think for I types to

A.J. Rice

us on update $XX generally And just million. Can that just update follow-up any at that what right. Healthworks, you when expectation, to is in works synergy you’re that that’s timing a doing? around is All going moved and stated how to think, realize target all, the Okay. the U.S. then on whether Healthworks U.S. is I

Martin Jackson

Yeah. good is U.S. number. Healthworks very going very a well. $XX million The integration is

with There comfortable some that. be very We’re to that. upside may

be certainly be XXXX. on obtained $XX As that in anticipate on will basis in annual that majority the million we far as XXXX of timing will realized and

A.J. Rice

then margin my last the obviously, was, businesses improvement. Okay. a lot have shown And of nice question

can the you that labor mature that cost and maybe segments. segments productivity major any are those respect in item seeing? in general wage tracking, just of What biggest seeing cost to it’s Your is with terms labor, you reference turnover, a increases across metrics to you are trends

Martin Jackson

side, A.J. are on is price we the side, clinical the labor seeing the is What what really increases nursing is X%. about seeing annually and of Yeah. we’re wage

A.J. Rice

what Okay. That’s pretty last saw you consistent year. with

Martin Jackson

Yes.

A.J. Rice

lot I you And similar think dynamic, of not there assuming? Okay. therapies wage about the on pressure when a am

Martin Jackson

different the about six pockets past got we years the on therapist, over that is years. some always you’ve location to is five seen that depends with increases, haven’t it Well, are geographic where you nothing but there talking the

A.J. Rice

a Okay. Thanks All right. lot.

Martin Jackson

Thank you, A.J.

Operator

comes from Costa question Fargo next Wells from line Our the Peter of Securities.

is line open. Your

Peter Costa

bit. like stay of to then little sequentially the have it day year-over-year, We problem the a kind you the the threshold and with is go about one lower little Can continue did labor Thanks drift bit? talk saw quarter’s the this you lower can up the letting you it’s that it’s a again a little of up here, of through issues manage us marginally -- day per tell threshold on me did follow-up that length the here. last quarter with patient in revenue back did or away bit cost, queue It’s you or days. the while for

Martin Jackson

they Threshold regards good threshold so quarter, we Yeah. bounced were, Peter. back were in shape with days this Sure, days. to

quarter talked had basis, -- year-over-year it’s about actually a of same the down. On the You stay. length

Peter Costa

of it, Down up year-over-year sequentially.

Martin Jackson

the about It’s Yeah. sequentially. same Yes.

Peter Costa

Looks XX bps like -- bps. XX there are

Martin Jackson

Okay.

Peter Costa

So QX? patient days get revenue bit last I the improvement are down. it the down is did so having comp it quarter helps, but we just of it am your from third in was how I are you with guess year, just, a threshold per easier or where still

Martin Jackson

I just tell you.

the patient have I you’re take quarter back look think a rate in ‘XX, about ‘XX, I’ll at second go to per talking day $XX.

Peter Costa

‘XX.

Martin Jackson

are talking about We supply.

Peter Costa

Its’ just figure to trying amount, out I but want a am to… small just

Martin Jackson

-- You looking are nothing.

Peter Costa

I a am it quarter. sure last such that make just trying this in understand. I topic have But quarter. was resolved we to

Martin Jackson

a it’s point those reimbursement Like Medicare to averages. not Yeah. is on the continue so they it’s be we system, and that there rates in -- mean, fluctuation of made last it’s the again quarter is part fluctuations based that I problem, will

Robert Ortenzio

of full said average to had action. take days to was it action I they sort anybody patients of quarter, a and we remedial there said and had I year and we what there. to it that When had was will be up we at with of we threshold give will it a because talked they across a the -- the were about said issue, year. We we problem. that say quarter Yeah. they they impression what be didn’t said and are tend I threshold course the that just what remedial a last critical are when day don’t time are Those the want higher out, would are down nothing a over it we day they this that that threshold was is think, we think

So we that. actually can’t manage

Martin Jackson

it’s last really said determination when based are we to quarter, you on physician’s the As patient. as the going to discharge

Peter Costa

Perfect.

Solved normal. because or this is Thank very solved you not much.

Martin Jackson

Yeah.

Robert Ortenzio

a just are half people, threshold it’s out, they for that wanted not one to mean I clarification it’s heard And and track think it that’s Exactly. calling it be. to that’s because I do mean, to started track, days good the going but shows the in when people Exactly. I natural now indicator first more about right, it’s good so we think indicator the way up a I rate,

Peter Costa

good. Thank you, guys. Sounds

Robert Ortenzio

Yeah. Thank you.

Martin Jackson

Steve. Thanks,

Operator

comes Our question the Matthew from of from next line Gilmore Baird.

is open. Your line

Matthew Gilmore

had those now question, most Thanks. those reimbursement Hey. I are another -- are popular.

how with might change your in just changes XXXX of you the the in side FEM growth measure, of and think the But about curious a have. one are bit terms rates a impact XXXX. For most from little it care pressure terms think of peers, thinking you’ve that their what that’ll got in people on to the create moving the, tool of I

Robert Ortenzio

don’t a just being I… we’ve I Yeah. as big it, looked way game at for so the we just I mean it us see think changer

Martin Jackson

we don’t comment we, don’t close borrowing, bit rigs. And comment we’ll do proposed usually be get more we what Matt, XXXX the see we what some as little to and on specifics we to is able

Robert Ortenzio

made But any look, have mean, think the it, by Yeah. alarmed we’re not go time I through we is yeah, these we’re, changes. I we comment

our just So with we see stable it’s post-traumatic live stress, it’s all for time we’re the because an years criteria. will of not it been -- going the it But years changes one to LTAC many XX rehab it doesn’t not don’t industry be we in be as, so and like last in we maybe LTAC adjustment. have has going the always grand to scheme that

it So that throw hope will it. will, sort of

Matthew Gilmore

enough. it. you. Got Fair Thank

Operator

further back to We management turn I time. for closing at remarks. question now have will no this call the

Robert Ortenzio

quarter or No. of everybody the next the fourth us of That’s comes look out forward come to guidance we’ll updating our for end and Thanks ‘XX year. all. next when joining quarter for beginning the you at out,

Operator

Ladies and concludes gentlemen, Thank this participation. today’s you conference. for

wonderful a day. have You

may You disconnect.

Select Medical (SEM) 2 Nov 182018 Q3 Earnings call transcript