SEM - Earnings call transcript Q4 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 Fourth Quarter and Full-Year 2018 Results and the company’s 2019 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 your questions.

Before we get started, we will 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 circumstances change. will conference I Mr. over time, this turn call the to At Ortenzio. Robert

Robert Ortenzio

call morning, Thank quarter Medical’s conference Select you, and XXXX. everyone. earnings for operator. Good Thanks joining us for full-year for fourth

operational Before comments growth On for of and summary updates the an and metrics, Concentra revenue revenue I EBITDA. respectively. basis, some outline prior I to HealthWorks was with and year last provide U.S. spoke adjusted XX.X% a we terms team great our nice exceeded XXXX net of job us want this adjusted since overall in some last you by quarter. year our of Net XX.X% doing and acquired We integrating EBITDA February acquisition. is a

ventures, hospitals of new commenced construction signed also partnerships. joint We on and in some our joint JV service our lines existing venture or closed new expanded several several

two During venture Ochsner Orleans in New with XXXX, hospitals. in we Baylor partnership was hospital added One market. in Health the additional Austin our one new and rehab an in joint

We new critical year. critical four hospital, closing throughout while hospitals recovery illness one started up illness recovery also the

Arizona Also, Our to with into and City, hospital temporarily Michael. remains due a scheduled XXXX. the two new services includes on currently a devastation started Hurricane in by open joint on Florida to venture without which construction Banner caused XXXX, Health, closed patient Panama entered in hospitals rehabilitation in

to year critical rehab opened Health illness recovery with market. venture illness open construction Ohio Diego We San a venture a UC UC to commence and our Health recovery include this services this and hospital later also to we joint hospital the year. expect Diego both the and Diego San on hospital announced earlier in to hospital plans rehab the new The San joint outpatient announced partnership expand critical

Additionally, on Gainesville in with expect quarter. of later this new hospital XX rehab partnership open bed Florida to our we University system

in with in rehabilitation the the partnership Las new to and Virginia to in scheduled under with Dignity Health construction quarter hospitals scheduled Vegas partnership open in Riverside in quarter. Health News, second also We third open have Newport in

remains pipeline development robust. Our

had full-year. For growth revenue growth and outpatient million Cash now the the in million quarter repaid four which the increased you growth which during line XX.X% a fourth revolving included quarter in I will quarter, business billion, Concentra the was and for through fourth our both XX of in each the during flow and year. million double-digit Overall, debt the million and an EBITDA, $XXX adjusted business again net we rehab generating we quarter $X.XX take in operation in from by over our included strong very segments. segments. growth an revenue top additional operational and XX% metrics Select’s to $XXX $XXX this year-over-year for quarter our our fourth

in For fourth by Occupancy fourth revenue year. to $X,XXX day the to in recovery the X.X patient improvement $XXX driven in recovery quarter. critical increase billion. Net hospital in fourth segment increased our increased in last the quarter The quarter XX% was to million. illness XX.X% in XX% rate same per compared illness was slightly to our and the X.X% segment full-year, critical almost net revenue the hospital quarter,

closed Our hospital our driven during year, slightly, Panama days as City. four damaged year, quarter declined by patient admission last well and same to in as compared both the we hospitals

days Excluding X.X% were the quarter. would the patient closed, in hospitals have increased that

X.X% both $X,XXX facilities last increased $X,XXX in for recovery last Patient compared to patient the quarter XX.X% the year. $X,XXX last days to increased to to increased illness quarter year. the hospital XX,XXX decrease days year. patient revenue was million, compared revenue admissions revenue million our almost Net for Hospital. for XX,XXX to quarter, fourth Net hospital patient to day the we Net Medicare day our same for quarter at XX% compared the For days year, day billion, quarter in to in year. year. compared our for $XXX compared increased to this in the critical in the in patient year, and revenue driven day occupancy year same fourth segment was our compared patient $X.XX a million of last last year. $XX.X days, $XXX with primarily was segment The net net reduction slightly in per in by same California Rehab the last Despite $X,XXX to in the operated, at rehab rate XX% decline in number revenue year,

to segment net compared year, rehab hospital million, driven was primary million the driver to the growth to primarily driven XX.X% increased revenue over patient last in opened in year. revenue hospitals we in of increased year. patient XXX,XXX days and XXX,XXX growth $XXX our patient of was XX.X% XXXX. which in our maturation for The by days, to $XXX The increase For XXXX days days the compared last

year. the compared rehab patient per revenue in per to day patient day. on increased $XXX million primarily was quarter increase visits X.X last to X% year. quarter patient day Patient last quarter in X.XX last segment million the increased year. fourth quarter, $X,XXX, million, revenue in to to revenue for visits year our X% $XXX net in to related same million non-Medicare net per compared to of Net compared the the was revenue increase $X,XXX net visits outpatient Our in same an The the in fourth

joint non-consolidating sold Health Baylor venture. several we and During Banner XXXX, to our joint ventures with clinics

X.X% sale, the effects year. to same would in last quarter, clinic compared the increased of quarter those have visits fourth the Excluding

was $XXX the visit quarter in per Our compared quarter, the per revenue visit $XXX year. last net to fourth same in

new to X.X% of compared improved $XXX net is rate year, per our The last year, last to visit billion, per in a year. of visit Net in $X.XX increase to year. our per the to sold resulted we result with For year. million rehab clinics revenue of in outpatient visits visits joint contracted billion X.XX X.XX year. well effects excluding some the increased revenue overall compared increased $XXX visit to have payers. $X Visits would increase the segment acquired X.X%, increased to compared X.X% this ventures, starts, compared Again, from as revenue non-consolidating was to visits, as clinics. The last visits million net last

non-consolidating year, related comparative the same an XX.X% U.S. fees fourth also the in in services periods. revenues contracted the our segment was and both in the management We had to $XXX our fourth quarter ventures compared driven million, to quarter provided four-year increase of and revenue by labor Net which primarily joint for last increased quarter HealthWorks. to contribution $XXX million Concentra the to

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

million had visits per per the of or visits million last to and X.XX same net This X.XX and we patient of centers, $X.XX visit visit year. $XXX in in the $XXX million visits quarter of the For revenue fourth quarter. compares

fourth $XXX on to For The last in Visits adjusted increase compared compensation the increase. Centers. X.X per to the per for $XXX last an Revenue adjusted EBITDA increased year billion reason visits segment in HealthWorks, Concentra related the last year. XX.X% quarter to last the this for in per worker’s visits, million year, billion, to year. XX.X EBITDA million XX% quarter $XXX.X The our visit company revenue U.S. primarily net fourth at centers to million compared $XXX.X with was visit margin revenue for our of XX.X% $X.XX this rates the same as in visit year. in to quarter, same Concentra year. compared year, to was U.S. increased million, the consolidated primary as XX.X% to compared year, X services increase last HealthWorks of to February compared increased quarter addition our Total is well reimbursement in $X.XX employer XX.X% existing

For total the margin million at year. consolidated for EBITDA year, XX.X% million, year with to XX.X% adjusted last to XX.X% compared the increased year, EBITDA compared XXX to $XXX.X adjusted last

in the the fourth quarter, to recovery last EBITDA compared quarter year. same was For our $XX.X margin in adjusted $XX XX.X% segment same in quarter, to fourth quarter million million last the compared EBITDA year. Adjusted segment, the illness in for the XX.X% critical was hospital

EBITDA the same to by to changes relative impacted net expenses other quarter, were last fourth margin our adjusted operating year. compared in the quarter and operating Our revenues during

Adjusted the other operating hospital this year. was EBITDA $XXX.X impacted For EBITDA year. recovery to were margin segment to cost year in million, expense critical year, illness adjusted compared was employee compared to last both Adjusted increases EBITDA and by million last XX.X%, XX.X% compared year. $XXX margin last

EBITDA to the was the year. margin adjusted segment to $XX Our hospital quarter compared same rehab in last in year. the quarter same quarter, Adjusted the slightly compared million XX.X% EBITDA to rehabilitation last $XX.X quarter in increased the hospital XX.X% for for fourth segment fourth million,

revenue hospital last quarter XX million rehab in were and increased were margin XX% as in our quarter I X.X $XX million compared day million we adjusted compared primarily hospitals the net opened of to Adjusted year, increase XX.X% year, the mentioned. in The XX.X% per EBITDA quarter, million the XX to rehab adjusted quarter compared compared increase same outpatient year, XX.X% the previously last increase million million, Adjusted adjusted Outpatient our $X.X to related this year. to losses maturation year. XXXX XX.X%, margin last to well EBITDA year. for segment EBITDA fourth For EBITDA XX.X% was in EBITDA the year. fourth to the hospitals the of in in to startup to was last same XXXX, compared last in in Adjusted EBITDA year. $XXX.X as margin this

adjusted million For quarter to last increased both compared year. a quarter, to the payment the the rehab and to was in the last last I XX.X%, Adjusted compared the in result year. XX.X% EBITDA was fourth EBITDA margin of same visits quarter, $XXX and million in The million, EBITDA rate in EBITDA million last margin the XX.X% quarter for year. X.X% fourth Adjusted XX.X outpatient increase growth to to the adjusted year, increase quarter previously year. was adjusted for margin was $XX.X Concentra full-year same compared mentioned. in EBITDA and the fourth compared $XXX.X XX.X%

in compared for the year, $XXX the EBITDA of Concentra both relative U.S. HealthWorks. diluted across last was fully XXX.X compared EBITDA compared of for for the fourth lower in quarter for acquisition the quarter fully and $X.XX XX.X% Earnings in the tax share the margin earnings segment to quarter year. margin year, share is Adjusted quarter U.S. diluted to was share quarter, The for the EBITDA year. same operating Adjusted result fully of its fourth losses the increase to a was Adjusted effects the for year. earnings adjusted Concentra EBITDA primarily the on diluted fourth for fully result Concentra quarter exclude this full-year last fourth this HealthWorks The XX.X% debt million, compared businesses. $X.XX the in year. early combined $X.XX to same year. retirement increase adjusted For the last related was in the share diluted adjusted million cost pre-tax and for was last $X.XX

federal HealthWorks diluted I’ll and well Martin last some details legislation. acquisition last opening as federal During income turn adjusted to debt, U.S. debt, to cost $X.XX year, over diluted as now year. share year. HealthWorks additional the from U.S. tax cost the acquisition income HealthWorks the share benefit tax retirement fully per on was Earnings it losses and excluded our diluted diluted excluded for fully earnings legislation. on $X.XX fourth benefit related year, year. excludes pre-tax compared resulting earnings for resulting for last cost, before as fully questions. gains, related the the financial and the as earnings early of for year, retirement well effects, share the related effects Jackson loss for call $X.XX Last quarter tax for per Adjusted fully the from tax and adjusted tax compared per share year, the was our tax up share earnings for $X.XX effects, the U.S. reform to acquisition share tax reform non-operating Adjusted for

Martin Jackson

Thank you, morning everyone. Bob. Good

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

in our the of for the This last expenses percentage year. revenue, XX.X% compares XX.X%. a operating were quarter quarter As to fourth rate same

For $X.X This billion the year, to $X.X compares year. our billion. last operating expenses were

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

a services year. XX.X% of fourth for of this and were As the net revenue both cost of last quarter percent year

billion. $X.X For the $X.X cost were year, year. to compares of This services billion last

last a fourth million U.S. in cost last XX.X% year were percent net million revenue HealthWorks the percent quarter compares As net $XX.X compares same X.X% acquisition expenses included in year. revenue quarter. same million G&A This costs. quarter. fourth $XX.X as G&A services to net for the to quarter in in were in This the of expense last of year. year. to last XX.X% was year. the the of This of $X.X quarter G&A X.X% the compares revenue for a fourth

year. as this was a This million. to our of G&A to expense X.X% year. was year. year, last $XXX.X compares revenue million This compares X.X% For percent G&A $XXX the last

million. Bob XX.X% of the fourth last XX.X% in same compares the was to amortization Total Depreciation to was the XX.X% adjusted This the This year. margin adjusted EBITDA $XXX.X total was this quarter $XXX EBITDA margin compares quarter million margin and million million This for $XX.X in same As year. quarter. year. XX.X% of EBITDA year. in compares adjusted EBITDA year and million, for last $XX.X $XXX.X and million fourth mentioned, last was to Adjusted compares quarter. was EBITDA adjusted year. the adjusted EBITDA last to $XXX.X This

expense in million We in compares depreciation quarter the increase fourth unconsolidated generated last amortization $XXX.X equity is primarily For amortization the depreciation earnings same and last quarter was to in acquisition. million million result full-year the HealthWorks the fourth the the and of and million. $X of and year, during both The year. expense quarter. This the $XXX U.S. to in year. subsidiaries compares $X.X This

year to generated million of recognized last loss of $XX.X earnings year. year, quarter debt $X.X equity last retirement early fourth unconsolidated $XX.X had million. items this subsidiaries. and the of compares several year. we one-time We in We For and million This both the in a of

million of year, For we retirement the of recognized $XX.X on losses debt. early

$XXX.X and to recognized Last also during million to $X mentioned. was attributable of upon the to the revalue non-operating was primarily for loss We million that the legislation, U.S. $X.XX. a income gains diluted Banner primarily $XX.X Baylor outpatient we HealthWorks income sale from caused clinics on benefit million an effects year, earnings This Holdings in reform the the year, of federal year. to of debt related financing us was $XX.X JVs quarter million early of per in year related expense last retirement reserves compares of This tax recognized expense tax $XX.X Bob tax recorded the the was Net quarter. Interest the the to fourth year. our compares million. tax million same compares includes year. expense The the legislation. income The which in increase interest share year. Select $XXX.X enactment $XXX.X at expense fully Concentra. tax Interest year. of Medical the to million This the to benefit was million to XXXX $XX.X million. $XX.X We last in resulting last for of This this is of

the the pre-tax early of earnings per Excluding was end and net year $XXX.X related this of gains, year, of we $X.XX. in tax our At billion on balance outstanding the acquisition the non-operating cost, sheet. share losses and $X.XX HealthWorks U.S. million effects had adjusted cash the debt, debt retirement of

reduce And in debt. unamortized loans, quarter million in Select the balance million loans, liability. $XXX term $XXX.X This and fourth miscellaneous first provided balance notes, loans, X.XXX% issuance $XX.X we $X.XX in discounts, million activities debt debt cost $XXX at same Select second lien in Concentra's million had cash year in term of term year. $XXX.X senior billion million premiums, billion the includes to $XX the Select to lien in in overall million $XX.X the flow loans, quarter. Concentra sheet other last $X.XX million end debt the compares Operating in of Our of revolving

million compared year. $XXX.X For provided the last to operating million, activities $XXX.X year,

noncontrolling use or XXXX. The property days The was and cash U.S. in $XX.X to quarter. the in compares use in of equipment HealthWorks related XX $XXX.X days $X.X cash was in loan of XX, Our outstanding of XXXX. September quarter. million in XX million cash and of of borrowings in at at cash December This sales revolving of December Investing property the loans, in and purchases of used Investing $XX We year. in activities to million Select’s repayments the XXXX days of year. quarter. XX, $XX.X of This payments million part $XXX.X primarily interests, distributions related primarily and during million. Financing XX XX, the $X.X and $X.X term million primarily to net million other $XX.X used had acquisition to the activity at activities on related activity, during debt the net used DSO $X.X acquisition million of million by million and equipment days million was for investment the and purchase investment to quarter. fourth in $XXX.X of was offset acquisition activities in fourth

activities cash. and year. borrowings million by of of part during the offset distributions Select's loans the term from $XXX.X We million of year. of in proceeds million $XXX of $XXX.X year, noncontrolling interest $XX million net provided had repayments in net purchases was $XXX.X on loans the other For million net This financing during debt revolving of in and

reaffirmed year. Additionally, calendar for our earlier business earnings this release, press XXXX year our outlook in we provided

fully range XXXX]. billion. to to expected remarks, prepared open the the of would range expected And our is to earnings the in per $XXX to share at turn is be up diluted be I call of $XXX range back Adjusted to this $X.X to over $X.X We operator the like the EBITDA and in be million $X.XX of $X.XX This expect net to to to time, in million. revenue questions. [in concludes it billion for

Operator

Frank Thank is from you. with first Our question Capital Morgan [Operator Instructions] RBC Markets.

open. Your line is

Frank Morgan

Good talk maybe morning. going a growth, how question, to see curious and a I implied you out get to growth volumes the if attract how correctly, pulled segment? in two-part those the LTACH which understood the criteria the so those regard in growing I then guidance I’m year, Thanks effectively is LTACH guidance your divestitures, in when to X.X% for a same-store, with on about bit the color local clarification wanted is patient like more and a uptake into there and little your just little but So, you guess there? what’s you those the markets patients with what’s implied the growth and ability

Martin Jackson

continue the all to Frank. for is, we and is XX Thanks XX The XXXX. we guidance – we no any LTACH’s have question have assumed LTACH’s There will XXXX. forward not did during moving we’ve LTACH’s through of increase

Robert Ortenzio

high-end senses a there’s of pre-criteria In to to we’re do we many that pleased. as have difficult. that, driving bit doing are how I the is we And Frank what phenomenally the a hospitals have have know as more more as of well, terms in think and going, are across take we nuances prospect very little I you levels bit local that back-up a generally think communities, terms of hospitals is some of you we’re our going to our local when time, states just the of mean then, market the obviously I because group and at expectations. many little

with and some and are some it’s just is think of I critical [decidedly] doing illness even hospitals. we when good ones of have that portfolio the give we now hospitals that across takeaway doing It’s can hospitals So, much you were are some our I our uneven well struggling of great were that phenomenally better. the biggest that not and are

to pretty bit over time the have back levels. pre-criteria we hospitals optimistic that that be So, up able portfolio the it’s one of and that occupancies to we're we a but still is little right the will uneven, drive

Frank Morgan

terms Got expense other some there? items operating of your and any it Marty, discussion you of you. us margin was give margins, think out, factors could there, I you the about pressure And in color one called line the

Martin Jackson

very Yes, with I job good Frank. volume Actually, did decline I controlling the operators a think think expenses. the

look quarter. X.X% up If about you expenses for or on basis at the $X were take a year-over-year million a they

You really was [indiscernible] line know, the the issue

Frank Morgan

but, guidance, timing tax other of Got the of. its this, operating of of on talking change Thanks, you. in know are so any there I okay LTACH’s or want openings we’re say probably baking any And much, you I'm other the probably semi-fixed, you business expenses I’ll but I in losses guessing guidance in that in couldn't it, you a that just rate? more those And Concentra, you’re whether assumptions general just since as hop hear start-up to just then, on seasonality I think sequential see basis? terms about

Martin Jackson

Yes.

you and see And north we’ve quarter second that, will are north you them. that XX%. Let with first it me Concentra. question back is seasonality and years for know, down is always you – first, Concentra And of address mean I of drop. fourth go quarter the over the fourth margins always associated had quarter last can your in will that a in you since see quarter the

the question all kind So, the asked. you model moving analyst built Frank, remind we me that forward. sure of of should into make that their first

Frank Morgan

assume just more start-up rate it. and timing assumptions guidance in your you maybe That’s in like areas the around tax Yes, losses some now expect, and openings, year. general openings, of

Martin Jackson

And the year Yes, XX% the be of will of which then the end any Hospital the hospital side. second for regards on opening do one we and our quarter. Florida LTACH opening, the by anticipate rehab, opening in-patient is be not in this the Dignity to should openings it’s University should anticipate Shands, quarter we with of have tax rate, we Openings, about the year.

Frank Morgan

know quarter]? you In losses, XXX,XXX startup [perfect implied are you about this in

Martin Jackson

$X per neighborhood startup know million million somewhere of probably those to I would going the for Yes. of to hospital. anticipate, losses There in you be is $X hospitals.

Frank Morgan

in the back hop queue. I’ll thanks, Okay,

Operator

Thank you.

next Costa with Securities. Wells is from question Our Fargo Peter

open. is line Your

Peter Costa

morning Marty. Good and Bob

So you and to to going many in be improvement you up and has better is you to year? per a is well. talked that’s you get or than how do thing X% year things slower going it The did you of little the the more it administrators? Is can or little that back going a seems much slower, what of LTACHs the that X% markets been either can be bit be do something or think education only you year-over-year, but in occupancy that it an it the being holding those process about is competition a in the clinical staff that’s

Martin Jackson

thanks for Pete, question. the

you think after modifying care in the educational acute is in I It patients, really short-term the patients their historical discharging the you Remember the as hospitals. patterns. it’s And hit an compliant compliant head. that are process. just these really nail go actually

continue I and time. take people sources to that’s Our do going a think just great our job to referral educating

assumption. the terms in think occupancy increases, year is a X% think rate good a So, I probably I of

Robert Ortenzio

take have in of that I care acute makes we’re Yes, some of criteria, discharge environment that of the a which hospitals really coming and through demonstrate hospitals statement. and and patients are education planners involved patients work that’s of and so acuity that that harder some care have physicians slower, process many their the out markets, We high very of get comfortable we patients, of in fact know enabled units good for to there definitely you exclusively, intensive on. you providing say I LTACH acute programs patients they would and be acuity and would to general in In keep cohort have know wherewithal have patients know new those it’s taking the of to we just we markets most you mean, relationships of to patients still and working the as and do. you that the the and some is over we process have safe group with care we clinical we the very the smooth. all we’re as work general a high it compliant have the those feel clinical transition others to these change the not a to that our the others, competition

Peter Costa

more the is staff And it referrals? the or educating to it get the is clinical educating administrators

Robert Ortenzio

think patients clinical for I staff. of the these it’s more

Peter Costa

on hospitals more just as spite weakness, of staff illness the employee is In how board, recovery of to being volume? raises, contributors the the trying to versus pay of on know cost that for having you ready critical one patient much more the get raises

Martin Jackson

Pete, a annual question the of to is staff. increases the it really

Robert Ortenzio

is, of you former. criteria. and more The It’s we’ve that the into Yes. for latter that mentioned going really been And done. prepared

it’s of very hard just just is that an retain former. very into recruit a It’s the work patients I is it’s area. tough So, to – this venue much critical when hospitals in hard the this is and a there for illness to population area work. difficult mean, shortages. a clinicians to it’s in time nursing Taking care of

driving out I there competitive and think So, what’s staff very it. it’s for that’s that

Peter Costa

we getting or And do you forward? as getting think worse better that’s go

Robert Ortenzio

different on the depending depending same see we and is it I but don’t it getting the on worse. in, market that the say would you’re although geography think I

know think I see probably I we it getting but as this worse. getting we kind of, certainly that would better at don’t it not point, characterize

Peter Costa

time. Thanks. Appreciate the

Operator

Thank you.

with Suisse. Rice question Our is Credit from next A.J.

Your line open.

A.J. Rice

thanks. Hi,

combined First growth Concentra mind]? quarter sort me [you the business ask think you as HealthWorks in anniversary year, line you U.S. to what is of would business organic the generate first of of look if that this don’t let all, that on about that, for I the the top

Robert Ortenzio

got year. I you’ve X took of February – think the last A.J. place Yes, correctly it that as acquisition

bit So, it because X% X% anniversary of won’t – we probably growth was first quarter is, XXXX trying January that February see anniversary, X that guess. acquired in to quarter won’t of the see until see to the The second you I’m we really will of you organic is see we range. I a in be little What XXXX. – will topline

A.J. Rice

in your sort year going – one have guidance, is by, quarter business this I IRF I quo this how wondered tool you overall When assuming to be a are point? that not guess of new I this look transition at it’s in what is status impacted your to or huge you would the of that business for describe mix, Okay. know a will have headwind, at care you your I view on also but is with that that

Robert Ortenzio

status assuming We’re quo.

anticipating headwind. as are it not We a

A.J. Rice

XX.X Marty Okay. I I debt quarter interest point things prior I in of I the your about fourth is a in know on going guidance, million. expense know any your the the there hedged, and behind And XXX XXX you remarks might you’ve in to of but running you’ve million think how then of calculation go I what interest to any that tranches, about about that if million? don’t various got to wondered, impact got is that or the do, are you assumption you or much assuming assuming debt floating that how of probably mentioned anything ability refinance on know there are of this and much then is there, of rate call the guess as at your mentioned guidance interest

Martin Jackson

going down debt guidance, assume X.XX% notes XXX X.XX, that in be balance the with on we regards what X.XXX% X%. to which some the the LIBOR our are will senior year. have would of good the floating. of our we in are one-month million. debt to assumed In be is next it LIBOR we that, we is debt are pay fixed With we will over that composition The A.J. our we our is, at expectation

A.J. Rice

just slip last might one in. one I

in fourth situation that was a XXXX? and in part in a any consolidated You it the drag quarter way remarks, or in your the early mentioned will was of drag the immaterial results be City Panama that prepared

Martin Jackson

in drag EBITDA The a on certainly $XXX,XXX, was quarter quarter. fourth City loss an I we about incurred It on a in the And annualized fourth the of think million. around Panama $XXX,XXX. basis $X does

A.J. Rice

you that at point up or assuming for running? you assuming mean, persists that get XXXX some are I and

Martin Jackson

will Panama the back the probably think board don’t We Yes. XXXX. quarter fourth until of come City on

A.J. Rice

lot. a thanks Alright,

Martin Jackson

A.J. Thanks,

Operator

you. Thank

Our Patrick from next with question is Feeley Barclays.

open. is line Your

Patrick Feeley

Hi, good morning, everyone.

come to expect in? for you a recoveries follow-up City any on insurance that Just question. Do Panama

Martin Jackson

do. come won't until interruption, I mean under probably that, we XXXX. in third play. the insurance we that quarter of portion fourth Yes, realize the expect policy, to or We again business of our

Patrick Feeley

my on other rehab the just side. And outpatient question Okay.

some us you back update some therapists – let you give follow-up. issues with by the with I'll on on the lost question answer you the stand you post-acquisition? Can in First you where Physio stabilized replacing and those the come past. other And that just of in an now? that of experienced Has

Martin Jackson

the past of that can done quarters. Physio The – a Sure. that think you great job, operators we integration, couple in the our and see have

the see can right been been now. for made, Physio where and purposes, intents You improvement and has all integrated with we're are we the yes, that's and comfortable fully

Patrick Feeley

outpatient question other on And the rehab. the Great.

think Thanks. Can on it's And The about fee pretty primarily how bucket, revenue while material, so. management materially that? what's to color XX% other that not any terribly that? there? or revenue XXXX? that you the been up Is for non-consolidated just What's in from JVs it's comment Just driving that bucket? driving

Robert Ortenzio

are a item can also all is both right. Ohio as is the those health we did and also is the management pointed there more labor two That Banner Those up – JVs JVs and and for There's that out that. – as That but primary Yes, absolutely the us. continue there we non-consolidating. categories is as actually as a we pass-through. fees, going you line Baylor. of components those non-consolidating some And do are do in of are – to you're deal, we the called –

that's see you the big that So item. on line why increase

Patrick Feeley

much. very Thanks it. Got

Operator

you. Thank

Our with Bank next is of Kevin America. question from Fischbeck

is open. line Your

Kevin Fischbeck

closed helped wanted go that would color I Great. underperforming the have there boost year-over-year. might is the thought you any profile some know you sites? for sites margins. provide to to year-over-year, four I guys of have I can were margin back Many I LTACH margins of if guess, the down Thanks. other don't there? their

Martin Jackson

you three four where take at there positive it moderate All to at when years continue was look Yes, four coming – at were five-year EBITDA a – least generating and the when look we out, sufficient the five take closed hospitals lease marketplaces think EBITDA. we Kevin. four The EBITDA. just were that that a a wasn't I But thought those we actually wasn't of increases there of those the up hospitals was lease.

Kevin Fischbeck

margins year-over-year we're Yes, in having should the probably benefited that or not number, I implied same-store say? in so were I guess by still your number, them but the that consolidated

Martin Jackson

if we it's – have I to actually. that. get Yes, I'll want don't immaterial it's to basis you talk points, back to – on

Kevin Fischbeck

growing does year-over-year down if said starting and volumes X% XXXX? in getting is were environment again margins Okay. basis, to the you forward even then, that right And that on be LTACH a going guess labor assume same-store better, were expect you though as I And guidance point. X.X% you number the not were down a your margins your

Martin Jackson

thing. want talking I same right? – an sure The want talking the percentages were rate, that about I the about we're X% to about we occupancy X% comparison. was apples-to-apples that are that to talking it's make we're So, sure, make

Kevin Fischbeck

occupancy X%, I But right? at was Okay. in guess your this quarter up

Martin Jackson

Yes.

Kevin Fischbeck

And growth figure that’s I I'm it – the just be just similar or out in else, what saw is in expect what the future rates you understand on you sounds growth so you I you trying margin like, something trying down, here, if are to talking if if or down about guess, were And here? volume to assuming wage XXXX obviously will going you're and similar offset margins this forward saying you're as saw costs? somewhat was

Martin Jackson

comes at we'll was That We Case be X.XX a down rate well that Index. X.XX, X.XX, should we think $XX fourth to like the was the up We're to at X.XX. differential. the think $XX, rate you in – if I Case represents about was was what X.XX back up range. Well in be Index quarter fine. Mix the Mix And

Kevin Fischbeck

on were a I would've have And and down if down think bit. Okay. little take down. IRF margins EBITDA, with it startup losses the I guess at the guess the wouldn't side, were the actually been all, out you then – losses startup grown though I even

going is – something the is So, what on there think... to which we

Martin Jackson

had we that – was – where rate was than that that – California of rate mentioned Bob think XXXX. Interim startup Medicare of the QX down. I was Rehab it lower impact QX the from because Medicare had had hospital what rate of XXXX XXXX in an in of Institute We actually was an the in Well, nature the

two So, that really had. – as that two impact, in were We store. the as volume. had a we And hospitals negative that well had same hospitals some softness

Kevin Fischbeck

And – headwind next thing a think was going rate the or just comps to be dynamic? how are for of California something couple that that onetime and that QX year-over-year quarters still do was Is about in normal we going that a the forward?

Martin Jackson

rate Yes. fourth quarter it impact. No, we're the – was

going we forward. will be fine So,

Kevin Fischbeck

Okay. Alright, great. Thank you.

Martin Jackson

Thanks.

Operator

call I’d you. And further Ortenzio that our over the today. for any to Mr. to for does remarks. Q&A like session conclude Thank Robert back turn

Robert Ortenzio

Thank joining again you next we to quarter. everybody forward updating for you us and look

Operator

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

Select Medical (SEM) 22 Feb 192018 Q4 Earnings call transcript