SEM - Earnings call transcript Q4 2019 | 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 Fourth Quarter and Full Year 2019 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 year, 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 circumstances change.

will conference I to time, the turn over the Mr. At Ortenzio. Robert

Robert Ortenzio

everyone. Good and us for full for Select joining earnings morning, call Thanks conference Medical's XXXX. for year fourth quarter

was the start Florida a Las of System for another We in rehabilitation us partnership by a New new solid all with in segments revenue, year prior a business added company. development same XX-bed in four me margin. adjusted Let saying EBITDA with new a Orleans. good and partners XX-bed in new University a Gainesville, quarter hospital partnership off very rehabilitation the with for quarter Vegas, year XX-bed Health rehabilitation for exceeding hospital with growth Dignity hospital in QX XXXX was and

our Newport XX-bed a into that We News, Riverside partnership hospital new in also in Virginia with relocated operate we Health hospital. rehabilitation

hospital transactions partnership. two additional In critical recovery hospitals addition, in recovery a critical illness we and added acquired through separate joint four illness venture

We our also ending clinics of X,XXX by clinics with XXXX the rehab under clinics outpatient during XX year increased management. our portfolio

During and fully in the XXXX, HealthWorks we of integration the synergies acquired when it outlined we early captured Concentra our XXXX. we business the into completed business, U.S.

X.X% you increased me to year. quarter and $X.XX Overall, metrics Let the take through quarter for billion. now full the in our operational our the fourth fourth net revenue

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

we net year, increase X.X% the both our days last and in recovery volume segment experienced Patient an net illness hospital to increased critical Again, in year. compared up were revenue For billion. $X.XX to in year. rate illness and was compared revenue critical patient patient recovery was occupancy XX% the year. Overall, days per to up X.X% for our this X.X% hospitals to last per XX% day year $X,XXX

XX.X% Occupancy in Net segment per million hospital quarter compared segment was to X% was per revenue quarter. our rehabilitation same in in our $XXX XX% revenue fourth net last the compared the fourth to quarter increased day million to up increased XX% for year. hospital Patient quarter patient fourth rehabilitation year. $X,XXX in the quarter in XX% last the days same the patient and day $XXX to

hospital $XXX increased For day million X.X% was to to for day days the year, XX.X%, per revenue our XX.X% compared patient increased last rehabilitation and Patient up $XXX to revenue net to year. segment net hospital rehabilitation year. in the hospitals million our primarily full per patient $X,XXX both XX% the in days the to in new fourth was year and The XX% year full this compared opened Occupancy was XXXX. for quarter driven last we year. patient increase by in

quarter our in increased million million million quarter the Patient for increased $XXX fourth compared -- to Net revenue last to $X.XX the to rehab X.XX over on fourth outpatient X.X% in visits quarter. the $XXX visits same segment X.X% year. million

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

and last new overall increased visit, revenue clinics. as almost visits was segment revenue year our from outpatient the visit increase Net acquired the on billion. to over startup X.X per visits X% patient visits year. resulted For increased Patient for $XXX to $X.XX The year, well X.X% per rehab million clinics net both in as this year.

our Net revenue increased for Concentra $XXX fourth the segment to in X.X% million. quarter

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

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

in last net increased Concentra effective and visits For compared driver quarter this to revenue US and was to the X, almost X.X% XXXX, year both acquired by a XXXX. visit year. year. XX.X almost $XXX segment million service year the compared the which in The increase an full The year employer $XXX additional to lower are revenue to centers in increased at per our last visit business our X.X% in in billion. HealthWorks was And year increase of February mix primary our our full Visits centers million XX.X change. visit decline visits per paid per for $X.XX acquired put Revenue was fourth the visits, the rate. driven

XX.X% the same fourth $XXX.X in last compared to $XXX.X with compared year. increased adjusted quarter quarter company margin the last EBITDA for fourth quarter XX.X% to for million at million XX.X% same for EBITDA adjusted Total to year the quarter consolidated the

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

year. for quarter existing from acquired XX.X% the to was quarter and last was quarter in was year. the to EBITDA critical EBITDA compared the same million our XXXX. $XX both four hospitals XX.X% in our in segment, for recovery margin the EBITDA an in hospitals adjusted increase fourth $XX.X in quarter the compared Adjusted hospitals million contribution the driven The illness adjusted by same fourth segment For last increase in

and year. extended last margin of in closure critical four was increase from this temporary The year illness compared last Adjusted contribution hospitals million increase XXXX. driven $XXX Panama our adjusted recovery acquired Hospital despite our both adjusted segment by was $XXX.X to hospitals the year, million hospital City the and EBITDA was year. in XX.X% the EBITDA existing For EBITDA in our an

to in XX.X% was XX.X% increased in compared in in fourth EBITDA $XX.X both million as adjusted for last in quarter to segment $XX.X opened rehab last year. margin segment the same EBITDA hospitals hospital the margin to the Adjusted existing quarter resulted the million in fourth quarter XX.X% increase year. rehabilitation The well our the adjusted EBITDA contributions as increases hospitals quarter same we in from XXXX. compared from the Our

$X.X EBITDA losses compared hospitals compared startup $XXX.X in adjusted EBITDA from last year, year. and EBITDA Adjusted last rate margin EBITDA the existing in $X.X the our For XX.X% million volume XX.X% $XXX.X hospitals. year. The increases million resulted rehabilitation many our to this for margin hospital increased to XX.X% last adjusted year in to our compared million increases of year year. Adjusted across million to was

year XX.X% Outpatient increased last was XX.X% in same to last the compared the $XX rehab compared the million same quarter quarter quarter of to fourth in EBITDA Adjusted quarter adjusted this million outpatient year. fourth EBITDA margin in in to year. for segment $XX.X the the

year, existing startup last in full adjusted the Adjusted clinics For in the compared $XXX.X increased from and was year. EBITDA -- adjusted increases to compared outpatient year driven year. XX.X% $XXX EBITDA adjusted million X.X% EBITDA to clinics. our margin new million to increase The both by and acquired for was contributions last rehab XX.X%

compared million million XX.X% last fourth fourth to margin increased to compared same Concentra’s was for quarter adjusted quarter to EBITDA year. $XX.X the the $XX.X X.X% the XX.X% quarter in same the year. quarter in EBITDA in Adjusted last

was adjusted For compared year. Concentra Adjusted the million margin of EBITDA EBITDA XX.X% business. $XXX increase year year, and to last for relative margin EBITDA was result The the costs adjusted XX% was the and the lower U.S. Concentra’s last quarter $XXX.X this operating combined HealthWorks across million Concentra in a for fourth year both year. full to segment the compared

on effects acquisition retirement fully to early year. gains tax fully compared to last earnings year. early for Adjusted per earnings last year fully share with diluted earnings diluted last the on quarter year earnings fourth this Earnings share fourth tax same its quarter the related in earnings adjusted share both for for their diluted this fully excludes the fully tax of and and compared $X.XX early the to year the on retirement fully $X.XX HealthWorks last per the diluted the share per in compared Adjusted effects share debt was $X.XX related $X.XX the quarters for per share non-operating diluted $X.XX fully and retirement excludes gains, of Adjusted was and Last was $X.XX effects. share per per for year. year quarter per costs pre-tax related $X.XX fourth Earnings compared losses and share U.S. the per same share diluted the the $X.XX loss was debt, last to excluded quarter pre-tax year. debt diluted diluted per non-operating year. Adjusted year. losses

for details At the up this Martin before we over point, questions. it financial to I'll Jackson additional open turn call some for

Martin Jackson

morning, Thank everyone. you, Good Robert.

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

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

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

expenses of revenue, last XX.X% As net to were the operating percentage This year. for compares our year a XX.X%.

of compares the same quarter. the Cost in quarter services This last billion billion for $X.XX to $X.XX were fourth year.

quarter quarter. cost in to of This percent fourth in XX.X% XX.X% same As of last year. revenue, net a services were the compares the

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

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

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

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

the fourth same $XX.X last in Depreciation to and quarter year. amortization quarter. compares the $XX.X million was This in million

expense earnings the year, compares This depreciation year. We during was of million million million fourth generated $X last million in equity in last same unconsolidated to compared quarter $X.X $XXX.X to amortization the year. and $XXX.X For subsidiaries quarter. in the

$XX million in we last million This earnings For $XX.X unconsolidated equity and year. year, to the subsidiaries. compares generated of

year last retirement loss million. We debt debt $X.X retirement $XX.X this of a the of recognize fourth quarter a on We of in of did recognized year early loss of early quarter fourth the on million. in

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

We recognized also during gains million of $X and early year retirement we Last on gains. $XX.X recognized million debt of non-operating non-operating losses million $X.X the year. of of

early for on loan. LIBOR and extend million as year. loss Interest loan, compares able rate. million. senior second-lien well borrowing interest the second XXXX refinancing $XX This year. The decline to retirement repayment a the well in the fourth last the interest activities Concentra's as year million Concentra expense $XXX.X reduce term million to the expense resulted in rates the $XX.X interest as as expense of cost from which same in repayment compares on debt higher of the resulted in quarter in We through in both of This Interest carried The quarter. was from the their decline $XXX.X last reduced were term year. quarter half on the in notes, to rates, the at was maturities Select’s second-lien

million year income million Select recorded expense per this That was compares of and $X.XX. diluted $XXX.X income Holdings last tax to year. the income expense attributable Medical earnings fully $XX.X We $XX.X share of in Net year. million tax to for

the was Excluding the gains pre-tax and related our share $X.XX. losses adjusted effects debt per of on tax year, retirement non-operating early earnings and this

on loan. billion $XXX On notes December the Select $X.XX at full were fourth intercompany structure and in and loan used senior incremental Select the from of then incremental due our combined billion effectively $X.XX Select to into the to majority-owned the issued of end portion in net subsidiary, loan proceeds incremental the $XXX $X.X outstanding. senior used We XXXX completed million the price to the repay term sheet. term incremental X.XX% loan an entered million cash loans balance XX, of who of notes by quarter, during Concentra. At Concentra proceeds debt of from in the and year, had outstanding capital we transaction a $XXX.X syndicated refinancing million $X.XX A the which [Phonetic] of and its billion term

the and balance of year end at of loans, $X.XXX debt. billion million the in debt $X.XXX $XX.X notes X.XX% Our million miscellaneous included senior and term other

Operating $XXX.X activities quarter. year. This flow million of compares same the $XXX.X in in the million provided fourth cash last quarter to

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

sales days XXXX compares was DSO XX XX or XXXX. XX, and XX, XX, at to days Our outstanding XXXX. September days at This XX at December days December

and activities primarily net $XXX.X Investing $XXX.X activities investment cash used to fourth quarter. activities during cash the and property Investing related million in year. primarily used of during equipment and of $XX in million equipment of in the million $XX.X and The property purchases $XX.X was $XXX.X use acquisition use related and for and was the of million million quarter. activities year. investment of the in to acquisition million purchases cash for The

provided cash, million to quarter. net refinancing December. from activities in interest proceeds other and of This non-controlling of part Provision $XX.X $XX.X in the repayment in million including Financing fourth the cash by distributions debt. was in offset of

This million interest the provided overdrafts, repurchases, proceeds and net included repayment stock financing year. provision of of the from refinancing by million part common during was year, activities activities during the of $XX.X in The debt repayment non-controlling cash year. in bank of For offset other distributions to $XXX.X cash. the

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

$X.XXX the $X.XX per billion. $XXX net to expected be in earnings of fully EBITDA is revenue million, billion range $X.XXX million in diluted to be expect of is the to to range expected Adjusted of in be $X.XX. $XXX We and the to range share

up questions, additional for open an I update it the Concentra. we Before on Bob back will turn for to call over

Robert Ortenzio

Thanks, Marty.

remaining of with after aware, total Concentra under voting Concentra a approximately we agreements you was $XXX.X first probably of of three restated consideration purchase Select purchase of venture the of XXXX total our venture After interest XX.X% partners right agreement remaining interest initial joint partners Select the interest are many the end XXXX. joint the put the interest to interest in transaction. outstanding HealthWorks of the one-third to of right Concentra. to of owns and entered a in XX.X% membership year, our As the Select now voting membership to retaining post-U.S. into purchase, operating continue their to The membership rights of in with The in approximately any million. have partners any XXXX for the put the call

time, turn That questions. concludes it open up for remarks. this you. the our prepared At it to will who Thank back I'll operator

Operator

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

is open. line Your

Frank Morgan

to prior this can attribute is in rate the Just any any there? of anything about side noticing the you that Was and any report related period cost strong ERP the rate Just strength the on business, in unusually color that growth growth? that growth in settlements care to tool? strong way new

Robert Ortenzio

increased is And much favorable Frank, variables there change in is, been which scoring really two a GG to a that number One the FiM higher that. Rehab our there's census has the associated the rate. impact Hospital, scoring. from two the California driving are with Yeah. has

So seen that. we've impact a have had -- favorable from we

Frank Morgan

care off new Would say like asset? primarily you. of the was that, more -- you a much it's coming you tool the is it attribute [Phonetic] you Got would how -- could weighting driven or CR

Robert Ortenzio

It's Frank. of really combination a both,

Frank Morgan

out start-up in you the have losses do then I for didn't any -- right. but the start-up think -- were believe, brought don't I All you fourth on XXXX? some And just implied guidance -- what's you in losses what there for any quarter, obviously call

Robert Ortenzio

losses moderate. were start-up probably Really

have we coming and think the -- in we I fourth have board. some quarter new hospitals third on

Frank Morgan

market out? Got margins for brought talk for but -- you. LTACs where also these kind there will recently those any LTACs, target And think about the thought Is you those then -- for -- IRF just your of some the really in think settle do that -- What target you just around be of partnerships. obviously business? you should on, you've

Robert Ortenzio

are pleased we're with I the the inpatient where side. now, pretty particular in mean rehab margins right in

good that's where going probably to think as a indicator to it's I be.

Frank Morgan

capital refinancings hop guess you where terms just got a what's Okay. off. obviously you. of debt focus really going from in a focus you've And refinancing do really But done, then now from the be standpoint? that I'll lot activity. structure, I And forward Thank of these capital deployment, to reduction going a

Martin F. Jackson

Sure. Frank.

Robert Ortenzio

terms Concentra minority in from of use Frank, acquisition the primary capital, the of the we think is -- interest. I -- of continuing our focus

some to allocation where don't we're We'll of that's But the of one really any acquire looking XXXX capital toward. And do ventures purchase. joint build would clinics. I significant modest small capital an new bigger the for then So that, than capital eye may allocation some allocations we what new have that be to outpatient rehab we in think hospitals. other up Concentra leading to

Operator

And from our with comes Deutsche Bowers Justin Bank. question you. following Thank

open. Your line is

Justin Bowers

-- XXXX you the think forward improvement guess what of are beyond, I or looking areas most as of you this you focusing what of as you're some opportunities are kind And on? year to? So guys about and then

Robert Ortenzio

is and next to to purchase. of projects a execution. do opportunity, the to think Well, We we up we're year Concentra our of and leading probably focus in grow development the business on think want that each can in where going good we operate our continuing segments with terms XXXX we some to

in our with of de rehab our will the So more and some some add the through hospital hospital joint within with clinics I systems of probably to going be acquisitions of either gains terms new We like around have ventures of Concentra would small steady think a steady some model, the in and to kind illness growth know year or operations. their then some to business novo business it we're have recovery of health outpatient continue through acquisitions. year we think leading execution outpatient net to I another signed country, in -- hospitals some critical portfolio adding a performance tuck-in

In terms of improvement, Martin?

Martin Jackson

Yeah, that continue. our of the recovery some improvement as that is expect we the on also over on opportunity margin believe critical hospitals, expand mean to there Justin. we particular think still couple we I far the in as seen the past are to We've is, then there business. illness there and outpatient quarters and concerned, significant improvements

Justin Bowers

in of illness, external you little about can one in a talk then facilities Got it. in it or the And hospital as efforts just critical kind kind just adding well. you're discussions model? context And what just bit your some during internally existing you with terms quarter facility? portfolio? And there? a added looked are or that having then the like And -- the then hospital environment of Was of of the

Robert Ortenzio

question environment. your of the part first is what the first, take I'll Well, external

has contraction many itself to or recovery As industry criteria, winding the to considerable company there continue refer know new in of as LTAC That us continues the to hospitals, to be phased down of although that features industry industry and to really in adapts illness industry. on XXXX. or of the you the that all follow the resulted and in our we apply be as a for contraction of didn't the who some critical the what the phase

Medicare at looked down of the beds about probably down XX% is similarly probably are I spend think XX%. last numbers number and the I from

patients the that's an rationalizes I So look range. call focuses overall good are inside it ventilation an probably $X lower as that mechanical From compliant the ICU over much billion LTAC. $X the a LTAC billion the, at require just patients, you spend which the in think taking Medicare or to were standpoint, external for if the in industry on what those we and from

MedPAC, stable, becomes And will think of for the So around lot probably seeing us the by even is as could to proposed LTACs. that read I the commentary I more selectively think a through out regulators XXXX. itself won't rules, to out LTACs we I effort, that big opportunity better for but the be of think and ring that it the that we add rules add viewed generally country. some coming we there as think much continue balance and us we're a some of an incrementally industry is the what Well,

opportunities So the we of were that's the opportunity backdrop I given think really is where and the industry. think

Operator

you. Thank

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

now is open. line Your

A.J. Rice

in When a Maybe but a I guidance I those necessarily dangerous, starting significantly. of that really it are there. XX.X% you your just of XXXX, in I couple weren't said question. long. I'm roughly may start-up out in at or about you're could -- of I for sure look conservative and U.S. XXXX, synergies guess looking I all a was is was played And I year If increase. ask. there moderate really your is is what what midpoint in much This 'XX, -- I you point at full sort that cost a increase. for benefit XX EBITDA year calculated would not growth buildup be things, synergies if HealthWorks a but -- you'll look of the get at conceptual the X.X% know

are of probably to picture a did leading mid-single-digit So sort similar positive. as any incremental you that is in puts What to and something of sort takes an what that's big to you -- still XXXX? opposed

Martin Jackson

after guidance something we'll it's first in we -- the I conservative, that if make conservative, think time. relatively look now. is provided quarter, that an with A.J., the it we're take it very adjustment. we're We'll it's Yeah. at a And right was at but we'll comfortable -- point

A.J. Rice

very some at in posted see you the in you 'XX? results segments, see what do if But would others. obviously is you where But you moderation clear-cut major -- any example, good versus for particular there look had segment you

Robert Ortenzio

that say see this of significant segments. our don't at moment, in headwinds to any fair it's any we think I

right I but Concentra seems now. the know sensitive You always business economic will think be still general strong the pretty more conditions, to

any inpatient question openings that in we've hit new of don't business and have think stride is any there side next our the scheduled have rehab the I of the we couple for We -- quarters. don't really

just LTACs, the a maintaining driving on So remainder of mean there. of bigger of that census can to tailwind suggested, Marty question continue the on a much we I year focus they've the headwind. be depending a there. And as flu had And that's want the a performance hospitals, to or season base that

And but feel about so are we actually where pretty we now, you know. good

A.J. Rice

all see the Okay, When year, of toward you've intercompany you the the I right. Concentra, think about here you repurchased the loan, done end first tranche there.

I tranche. or the you think -- that purchased first

I schedule. think that was done slightly ahead of

So can't you own there way is question about would today, opens a if anything as things intercompany something formality. get it is if do that of that a I in of buy the is two-fold of of are way out? for in going you it's because should the But me. perhaps stakes then is there you retire out sort that loan the there agreement? until accelerated second, priority probably the to think a structure of possibility pieces is guess structured XXX% any you deal those those current to we some I do an is current or know Concentra And play might One, is

Robert Ortenzio

own we see there's would I'll what first. be if will meaningful of and own. think today different that that versus your Marty part of we XXX% that anything No, let don't take I Concentra we I we think take second today the doing question the be

think no, there. there So anything is don't I

A.J. Rice

anything or moving way the that An other cash anything? Nothing or and any in flow business investment straight? into

Robert Ortenzio

partners the the would all not are at stability I growth there we as say great and that of long-term No. viability, feel who had company. are constrained. focused on We've do we

there. the probably would one I think no, did. second I'll would part, I the Marty the constraints And that but way there first first no put to so in, play let out say, way is as And the would

we right about their very at Marty? or think partners end beginning XXXX? putting our to next the so And right us would of of XXXX tranche

Martin Jackson

right, those I Yeah. No, Bob. think ancillary

at investment agreement take partners determine at look what you and you -- that that given if using in concluded is, At no evaluation. this a us was the with the fact two done methodology What based thing we banker. space largest itself of to accelerate other look hire a EBITDA. And the year-end given partners that, structured there the able expected our end to transactions regards need the an of on by all we to an XX.X the The to times. was at agreement were the take day, was it were banker and in investment really

XXXX, So I indicated, Bob as as well play will think out that in XXXX. as

A.J. Rice

then And my last Okay. question.

the competitive any than sort this a have competitive seen of in any hospitals Is be about or the access been comment landscape? changed again wonder different terms in structure model. of ownership that? space competitor change -- in adding is the the If I And a referenced, access and in year. those so there now result you know properties Your a you're thinking a I'll is of any major world I And growing critical of you on mean interest? LTAC of with more in as world, anything in whether hospital any landscape there I critical thinking hospital continue that's would your about for freestanding

Robert Ortenzio

Yeah.

yeah, -- thing First A.J.

for terms freestanding In our critical would probably different hospitals, people critical of not a be specific do illness access hospitals, as of illness hospitals We recovery whole us. other that hospitals. for familiar, looking critical be illness critical just recovery not to class is may

where have a hospital has could licensed -- building. seeing that LTAC the may a both rehab that and post-acute in emerge bed model we you are Now same you

smaller are an LTAC-compliant only these about bed So tend is we might do because we to patient-focused are that. particularly But is have our that to think model complement. we

and best hospital So within least model. we that's a a like served that hospital XX-bed in

directed The So the on that the of be really LTAC expect us to for hospitals. only see capital to you the hospitals. or break should construction ground acquisition not rehab freestanding would

terms new competitive to nature the most of the is for I mean In out in good probably everybody space pretty us criteria. there, a time this adjusting because the is

that years criteria a seem of does it operators reports, adjustments. couple but the way passed the and companies it like was Now remember, some phased making individual lot through in cost XXXX, in still it's a of was are been

in more stable XXX our we to at a opportunities. because jump of hospitals that got look on does of of allow So platform terms have as a a bit us we of these plan, now it very

in there compliant -- of we that saying a from factor market providers it's I right not and patient competition way is not nearly population. that sure just space, that is So great making it's the long the that those get of really other availability that

need a where lot move those the have programs the to market and long they there So disproportionately if stays out to ICU a care be may is clinical patients in having faster there hospitals. beds acute short-term of need you are a where

competitive as I that factor your not answers hope nearly that. question. is the big as So

Operator

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

Your line is open.

Kevin Fischbeck

I more little a provide the store revenue growth same was color by wondering if you on division. could

like a growth, looks in I wondering think consolidated but organic QX? you the like gave what growth profile

Martin Jackson

Kevin. Yeah,

expect store there. in new. rapid But We same store other growth. on, have I of the may on versus provided growth that's outpatient have because start doing same occurring -- something not particular We that, that early you the shouldn't mean to not see we than like side

Kevin Fischbeck

or to to of guidance I of XXXX capital be add would on looking outlook if deployed assume it you you are Concentra, outside and certain how Does amount you upside of kind that? mentioned deploy to each number the additions a your capital tuck-ins then guess these and basically of your division hospitals.

Martin Jackson

joint inpatient business $XXX put -- million of putting we've there we're out shovels we that the rehab know in the think, includes some of it I capital in worth ground. that expenditures. Yeah, And the on ventures the includes signed the somewhere side

So outpatient side. capex with clinic on it increase our would and does associated the illness include the include includes anything on that critical hospital. it some It not recovery

Kevin Fischbeck

Okay. And sector outpatient then it's spent haven't time a clinics it rehab about the sense to clinics, guess maybe makes talk that of we lot because maybe on. I a the

you a you been that clinic kind forward? there? nicely. adding that put place big How capital to wanted just that is have can it hear, can of So is to you opportunity and get What pretty site the -- why guys

Robert Ortenzio

fragmented, Well, of it's all. very first

by outpatient So margin very while revenue our as it's fragmented. a wide do geographic we and an pretty opportunity are see both the footprint, number And for in growth. of terms we and I still largest clinics think that of provider

that to history the we business. HealthWorks, company outpatient really think not much we the the latter as rehab to after focus that primary recent had we development the and time focus. while the when the focus criteria of LTAC half very capital a of U.S. XXXX the inpatient going or then look taking quickly one now same of kind follow-on all accelerated acquisition to at you be back more the shape company. our was If inpatient and was of beyond and that XXXX we pivoted then rehab in the allocate Concentra is that that and much did of really The of the And greater acquisition

management we've focus net So deployed the the also growth. actually assume -- see because as when clinics, we capital much with we've reported that more the And capital significant business. more that you even deployed number on it's you of in growing can additional that growth the there, with

So on or number we either just consolidate X,XXX natural that process. the there of of a is significant because base close every of X,XXX, clinics clinics, year nearly a

clinics, we're as more -- number. really add much XXX add, can because this adding as So clinics or if maybe when if that's we net just assume year, we XX a you that

we the -- I So what that see we're focus of as as think management opportunity. become it's much management a to more reacting a

U.S. and and strategy the venture see as HealthWorks and we outpatient been really good can inpatient leaves synergies, that that joint rehab has focus our transition we on we've the have criteria in where an LTACs, you area momentum can on Concentra value. drive as the successful the So realized the some

Kevin Fischbeck

then And the Okay. that Can division something What us you you're when maybe multiples paying you're range three question. other of what across the a of different last you sense in paying? kind buy divisions. of kind multiple give

Martin Jackson

Sure.

compensation know, critical the you neighborhood to that When there one-offs, take we range. X in The four was of to and we that. But we'll at not X we as times paid in On strategy times there. times some acquire to adjustments really LTM times things the the owner joint the times. is And like is multiple there in X illness to rehab, paying the then do hospital, acquired Concentra, X a for And hospitals. the times EBITDA. recovery outpatient neighborhood we're X times X of number On on that that anywhere times inpatient X X rehab, to also is inpatient do look rehab, really Concentra really but ventures.

Kevin Fischbeck

Okay.

times talked things, XX So Concentra going When to platform modest multiples? the you do your be big that you type as as that deals. far about it's multiples. be would relatively That's the smaller

Robert Ortenzio

look a States, player I augment Kevin. good it's owners XXX Yeah. entire occupational in a matter of are of we two, a the three, when question, And centers pop. fact the you centers most four country. The United -- has take medicine have the really, largest is, mean throughout have at the the well, business next XX. centers at The

much a smaller multiple. be will it So

Operator

Thank Capital Morgan RBC you. of Markets. the And our next question Frank line from comes with

open. Your line is

Frank Morgan

quick one healthcare therapy? a the PDGM with there and What the Hey, there undergoing seeing home [Phonetic] be for industries. therapy believe Obviously the you just those seems this that PDPM, follow-up. will to going, going side be sharing on the industry capacity industry of labor [Phonetic] two in to SNF are

on So might Thanks. improving yet are front labor seeing anything your that for be business? you the that

Martin Jackson

do taken in of substantial benefits We that But to seeing have think side. the -- from the have SNF of early too place companies. changes layouts we it's on therapy been little we a particular the PTs contract see

some from benefit expect we do that. So see to

Frank? there, You still

Operator

from Sutherland Benchmark. question our And with you. Thank next Bill comes

open. is line Your

Bill Sutherland

this be a hospitals -- will year, of rehab wanted two they hospital Just side. on to couple follow-ups consolidated? planned the The

Martin Jackson

not-consolidated. Yeah. Bill. They are

Bill Sutherland

And cadence 'XX? margins operating in look margin range was be about in to the the these hospital of there -- it that when the we the Okay. we kind rehab think but stay going on the with consolidated so aren't when likely the -- cadence, the quarterly the be to -- since year, of this back half

Martin Jackson

you think the to be I expect Bill. can same, that

Bill Sutherland

tool want this then I And on just the to impact rates. Okay. care and on understand

improvement. said us And to average help specifically? guys probably all you why can think experiencing I understand X.X% you you have than applies better you're that that

Martin Jackson

I has which FiM We it a is scoring Bill. change mean the cannot, happened from historically.

for look implemented. felt a probably at changes headwind be would the to thought the Our be us We All are a we're seeing to slight can pretty is it that what versus reimbursement you do that's being comfortable tell what people difficult that we that finding. at it's And you see. benefit seeing. we're time took think I and a tell were we competitors what it and what us we not would

Robert Ortenzio

at posting they mechanics. do the the It's Yeah. just the coating I and facility. mean

Operator

Ortenzio the And I'm no at any Mr. turn back comments. closing I'll further this call time. questions showing for to

Robert Ortenzio

No again forward quarter. closing And we'll and your the in attendance for questions. next Thanks updating your comments. look to you

Operator

for and Ladies this gentlemen, today's Thank concludes call. participation. conference you your

You disconnect. good day. may Everyone now have a

Select Medical (SEM) 21 Feb 202019 Q4 Earnings call transcript