Encompass Health (EHC) 2 Aug 232023 Q2 Earnings call transcript

Company Profile

Participants

Mark Miller	Senior Vice President of Investor Relations and Strategic Planning
Mark Tarr	CEO, President and Director
Doug Coltharp	Executive VP and CFO
Kevin Fischbeck	Bank of America
Andrew Mok	UBS
A.J. Rice	Credit Suisse
Brian Tanquilut	Jefferies
Pito Chickering	Deutsche Bank
Steven Valiquette	Barclays
Matt Larew	William Blair
Scott Fidel	Stephens
John Ransom	Raymond James
Ben Hendricks	RBC Capital Markets

Call transcript

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Operator

Good morning, everyone, and welcome to Encompass Health's Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded.

If you have any objections, you may disconnect at this time.

I will now turn the call over to Mark Miller, Encompass Health's Chief Investor Relations Officer.

Mark Miller

Thank you, operator, and good morning, everyone. Encompass Quarter joining Earnings for you Health's XXXX Second Call. Thank

Form not begin, release, a related encompasshealth.com. the if website we on already are supplemental filed available SEC you and earnings Before at quarter do have our with second copy, information X-K the

harbor greater earnings X Page detail last of the safe on supplemental are also will find information, the On which you set release. the the of statements, forth in page

and risks filings statements, the for and many actual are ended and company's and call, cause the to related encourage them. expectations results XXXX, release could and to year the we well in and to are when During including debt our read XX-Q filed. the uncertainties, XXXX, X-K, risks XX, earnings the volume, costs as as estimates relating uncertainties, forward-looking the which XX-K Certain which SEC Form to beyond discussed make Form those ended are quarter regulatory differ our of developments Form for that XX, you from the labor projections, bad subject June will control. like We December materially

a forward-looking on to based events You to not place and undue duty update only as which on speak and these statements. do presented, estimates, are undertake projections, We guidance reliance other not current estimates cautioned future forward-looking information are the of today. of

will this certain on supplemental financial call include information discussion and Our non-GAAP measures.

the yesterday SEC, release which and available end website. measures, of earnings the the part on at comparable of measure of supplemental end such GAAP is available For to of all Form at with the the reconciliation are directly filed most the our the X-K as information

to to everyone adhere remind that I rule submit and question the to one would to a allow follow-up question will question. one we like everyone

feel put back If questions, queue. additional in you yourself the to have free please

and to Chief With Tarr, President Health's over Encompass Executive that, I'll turn Officer. Mark the call

Mark Tarr

everyone. morning, and Mark, you, good Thank

pleased volume very our year-over-year driven continued results, strong labor are costs. We by substantial and in with growth quarter second improvement

revenues QX up adjusted quarter increased XX.X% X%. second and discharges same-store X.X% increased EBITDA XX. X.X%. increased discharges Our total with

continues underscore referral sources, patients. to volume payers our to value strong Our growth and proposition

As with health care normalized the flows patient to to broaden more anticipated, continued acuity our system. patient

continue we discharges which year-over-year, XX% fracture knee up to approximately show other stroke in While each and of were grew orthopedic discharges, hip solid lower growth and extremity year-over-year. X.X% the replacement,

capacity brings de Given year-to-date. X the in second inpatient rehabilitation we novos to X strong de in services, quarter, demand us XXX additions. to have and beds opened This beds. for XXX continued novos the added We invest adding

We also added XX beds in to the second existing hospitals quarter.

Over bed our the add XXXX more shifted plan the of addition existing and XX X novos to case in due to local XXXX to to each scheduled hospitals. balance permitting issues. beds have projects de open Three originally we year, for of

a As to of XXXX. approximately we in result to shift, beds XXX existing this now add expect hospitals

dates with beyond currently opening to We projects, We XX maintain novo XXXX. wholly active de of care owned pipeline continue and hospitals. novos de announced and ventures joint have an build acute both with

from shift while labor XX% or QX, $XX the QX met XXXX. Contract and contract XX% our while and from During or for of we XXXX, again QX approximately million was labor $X services demand sign-on increasing down sign-on decreased bonus expenditures. shift and approximately million reducing bonuses

a been a other want net update Last seasonality over may implementation. begin quarter-to-quarter We in and State vary hiring basket for in This to result XXX very working August same-store Choice This closely to quarter. is the its higher October Our market on for net talent acquisition is significantly Demonstration, Alabama. based strong factors. you CMS or IRFs rule. Alabama XXXX. Review results that remind X, we CMS final estimate X.X% to RCD, RN Palmetto, the issued We've XXXX prepare for the our which Medicare Contractor increase Administrative week, hires. would with X.X%, scheduled from of of efforts IRF resulted included a XX and beginning in

finalized, have adjustments. details are pre-claim and allow have prepared that believe many as we yet we the While to for implementation, potential and it iterative be more review on for its will a for we focused real-time process

include EBITDA first Moving found our year, $XXX million underlying now $X.XX. of and to to we guidance. Page for the are performance guidance $XXX expectations revenue The balance can increasing of share $X.XX of and billion, XXXX billion supplemental of the to to Based slides. key adjusted XX of be to on half guidance per on net considerations our $X.XX operating million our adjusted $X.XX the revised earnings

to I in clinical want that meeting, and we into more Day labor you September At hosting are including an technologies detailed remind City hospitals, York on of de our XX, Finally, we novo strategy, management. elements provide insight New Investor that will key XXXX.

registered, you do in Investor We Relations Mark or you already see not have may there. you If so to website Miller. contact our hope

for the it Now quarter. to on over Doug further I'll color turn

Doug Coltharp

to Thank highlights, then few questions. morning, open and just you, and Mark, we'll good up the for everyone. hit I'm going floor a

As pleased results. are Mark with we stated, our very QX

year-over-year in We costs. make labor continue to significant improvement

expense XXXX. sign-on in was bonuses Contract labor and QX of $XX million million contract shift from bonuses. QX contract or approximately QX comprised plus in labor Our $XX.X million of $XX XX% in million labor shift declined sign $XX.X on and

declined were relatively flat Agency sequentially. and rates year-over-year

represented labor Contract $XXX,XXX per agency declined and from decline from FTEs sequentially. FTEs sequentially. QX of percent an basis XX FTEs XX% as XXXX labor year rate and level in down year-over-year XXXX. QX was a QX XXX QX XXXX total remained of essentially X.X%, decline also point Utilization XXXX. $XXX,XXX a Our FTE was last from flat QX contract

of -- that contract consistent to see will FTEs expect will a FTEs We total continue remain see to labor percent we as we relatively improvement.

to shift and we $X.X are Supplemental compared million X.X%. and result Revenue reserves. the believe XX% established or The in our are easing processes the by of reserves decreased shift or market improvements review and decreased audit basis to we sign-on QX XX% previously implemented contractor bonuses bad QX trended XX medical or conditions. on from we in an to results Sign points $X.X million sequentially. debt have related bonuses favorably and XXXX in SMERC decreased experiencing

aging-based in reserves QX from Our year. collections in increase year was also benefited and X.XX the of for strong quarter the X.XX, from last this X.XX quarter. of EPOB from in an QX

to be X.XX Our QX and QX. guidance for EPOB assumes approximately

QX de costs bringing million, net totaled $X.X ramp-up and the novo to total $X.X million. preopening year-to-date

million of million $XX $XX expect costs full for to continue these the to year. We

at X.X this of from X.X XXXX. a of X.X end net and QX and of down the ratio end Finally, we ended QX with year from the leverage at

that, And with we'll for the Q&A. lines open

Operator

Kevin Bank of from Fischbeck [Operator Instructions] first Your America. question of comes

Kevin Fischbeck

in So areas, a contract off there interested I but the just to relatively number of side labor comments to labor obviously, sequentially. start about maybe just in on things. the of I expected guess some progress making the guess, stable be

the -- of what to what on And to why So here? need see do kind plateauing make is you progress progress that? additional

Doug Coltharp

Yes.

The with first least move made end like what rates comments and total mid-XXXs and of had anticipating So and in and in on signs total a and felt market represents the we percentage continue labor where we're XXXX, rate for it that terms for know kind FTEs, getting we I bit per Kevin, a hovering a the be X.X%, at improvements a the horizon of roughly the run the of quarter, see are but this made stabilized is think move we our level, it's little this are that to rate, we're is clinicians that both into hit we the we as FTEs contract pockets. pre-pandemic. permanent is percentage of at is around further the skilled relatively perhaps will up FTE now Doug, there that consistent X.X% compares in that the of We labor. of better, as to don't there around

fairly than labor we the those XX% QX, the it contract of than trends. which it's the was and hospitals during of concentrated of terms XX our had kinds are second of hospitals spend was consistent less It Our was still in concentrated. more comprise not in in but still quarter, quarter experiencing

premium visibility, of XXX our efforts continuing to labor. spend quarter-to-quarter factors relatively get from the saw anticipate based those more we're reliance consistent until the you reduce RNs the we prudent year. on than balance quarter Again, our greater in not think that of it's So as that this for on we to evidenced the suggest doesn't recruitment during

Mark Tarr

labor this labor. Kevin, they volume, the to that get one and guided just out and it's if they I even operators go our would if is Mark. add, point have need contract the We've

of they've of the to grow been we've in to So labor. continue certain because our been and accommodating very marketplaces contract volumes, fortunate availability

Kevin Fischbeck

would were talk question, volumes the came I guess good -- Is bolus from there utilization been industry then to anything the the than base we is here? and in the this the the year. moderate kind about volume were expecting. side, me to you And of to love lot here the leads Or makes of that a like this that and on sounds kind is a to this higher the look because expecting that maybe thoughts of just second of your hear "Hey, volume you start about say, think is in about way in future." I in at strength I'd growth guess And there's which your a

Mark Tarr

Well, grow volume with continue think are value saw differences this post-acute we in volumes. obviously to settings. payers the is the various our and that our proposition and recognizing are We And the the patients our second with and Mark. help very clearly, sources us outcomes I I mean pleased referral to think we quarter.

behind there's to our perform. continue gains of think to ability are So a I our momentum that and lot sustainable volume

Doug Coltharp

strong The categories. all volume was across growth virtually

neurological mix, So stroke instance, his our some this up about and look mentioned if top X.X%. categories, about and acuity in for it, comments, within Mark patient was we was up X.X% first of at

still the major we're believe double-digit on But RIC growth in in then saw categories. based largely quarter. category for flows the health system, care throughout we market growth every and gains So we normalized seeing what other in are those share

across mix very was strong. the patient So

as should the by mix patients that well. also We we COVID the was basis, number a payer acknowledge strong as was growth treating coming of that across It year-over-year on even about XX%. were that, declined

basis. that was on well. within year-over-year saw then anticipating book really Advantage well. we geographically, And it was Our in the of a X%. during the growth same-store we the calculation, a at Rico, very XX basis XX% greater than states our broad in that geographies which are quarter plus look had on patient we Puerto same-store had about If fee-for-service broadening up was included as up those strong the that Medicare Medicare as Advantage of XX%. business X.X% been mix And was

Now the got particularly and same X%. challenging at a having that said discharges on growth don't basis, of year-over-year to up as year-to-date our And that, second more the a up prudent comps we we've in roughly are all on volume is know, X.X% of it's basis expect levels. half the year same-store just

our to plan way. the doesn't moderation half. So in seeking. for second what that's that think -- we're the business guidance mean that growth includes prudent We volume just we're It some it's

Operator

Your Mok next UBS. question from comes of Andrew

Andrew Mok

was and With indicators provide mature reach to year de novo I EBITDA start-up X margins? the in takes updated the losses hoping and total incurred it views recent on early you positive breakeven could around time performance,

Doug Coltharp

Yes.

start costs them year. while new for into start-up consistent. X-wall haven't question. and typically a we this remember, which those ahead Generally year between our to for units somewhere an X- online, levels XX-month I as for year speaking, be period, time most appropriate they're been of that's it EBITDA up, of come what seeing changed we're within X, ramp think your to our So positive a is but takes relatively will X segue and ramp-up second But doors and to estimate getting even maturity the new

Andrew Mok

then And volume up follow I just discussion. the on some of wanted to

called out procedures. orthopedic You

XX%, incremental driving strength quarter. in the said I think up volume you

of elevated year? sense durability orthopedic you the of in the your August, procedures partners referral for balance As of July, your speak the to the what's

Doug Coltharp

like this is feels maybe certainly pent-up It some a result of of demand.

that of about before, in over deferred was orthopedic believe time. But the nature. talked we are facilities ability be or we've for for As conditions the do of that treated some the there nondiscretionary run, these conditions period intermediate our are to a long in

so of volumes strength that And to little so contributing that's across the half. might said expectation part of forth, that's are our is reason geographies, some bit Having and it share the second and like feel a that again, the we mix attributable moderate we to gains. is across seeing that, payer market in the sustainable

Mark Tarr

see. final orthopedic mix the we comment that And on one

reminder, comorbidities. a XXs, in their late these are patients typically I multiple Just mean

All to threshold. have of medical necessity our meet patients still that

in -- knee patient. cases, they they typical So replacement aren't your many

Operator

Credit comes question from next Your A.J. Suisse. Rice of

A.J. Rice

Hi, everybody.

seeing So that's of first on are be? years, a have number and would Or it's a potentially much further you're the the down. or you wonder pretty still -- same-store looks as it do on that you XXX guess what highest more new the that happening there's that available I question hires see supply that nurses open you therapist. a who obviously, lot hiring suggests bonuses step-up? sign-on plentiful Or in of positions might are like you a I basis,

than bit want at quarters. last point? and this like hire of to different need a quarter looks It couple to this quite was the hire

Mark Tarr

from my and quite there's in of A.J., quarter-to-quarter, points. comments, variability some by noted, I other a it's of affected bit As seasonality

that, I some come nurses marketplace. are the we back a, seeing into think

some general. markets there's that too to and terms in starting think I of own I recruit. to think strategies just But tactics that softening gotten in use also we we've be our the in better

education, scholarships the strong orientation centralized And nurses reviewing whether RN particularly flexible we us. really to around ourselves through a acquisition want back recruitment, we've is then opportunities just degree. our dividends We've nurses, we our ago, process, looked to at employer, We've which a that better taken scheduling. our for on functions talent real for ladders. that clinical make that years has may at nursing everything paid to in improvement go for their clinical could look for support been Two

it's opportunity for an RNs done get and we think I are and that them. So marketplaces we've the we combination to externally things of retain make RNs internally, attractive to once also sure our

Doug Coltharp

go, more hires get there, you A.J., kind out kind pleased question the using of maybe number the you can than it by quarter how of you to data to what RN during obviously, your far of So do openings about net very XXX to we're have on triangulate points. have a

we referenced FTEs there. First, are the that contract out XXX labor

need labor, So existing go that suggests that the to were X going of replaced usage would to got XXX FTEs system. to you've roughly you if be contract in

that, turnover improving In and addition currently a it's on been about year-to-date to our RN basis has at XX%. running

that be a in point that time, XXX finally, XX% FTEs. as going kind novo at our then that any backfilled. XX XX-bed has less you're not de I XX recruiting efforts needs we at XX% utilizing you got well. staffing that in that a of somewhere, to in but the are de nursing. And FTEs opens about you've to have to for remind typically basis, think, of about those So are that's going It than same-store stabilized and included novos be because And I'll

to tackle and So it's all is attempting quarter-by-quarter basis. together, pieces our those team on that's recruitment what a

in and it procedures because with QX, and costs, really sign-on bonuses reduction shift efforts. sign-on overall our recruiting not bonuses related recruiting and efficiencies shift in And related improvement did marketing our we we is that do marketing have but standardized a with an honed we and using they have gained in in that year-over-year and only for also and did

A.J. Rice

Maybe if I my could follow-up. get

up shore You're wanting the seems hear calling care on looking of for We you're the from any X% opportunities you any et cetera. side MCOs about creating rate pretty if networks, activity lot their to contracting to consistent. wonder managed at? a that incremental value-based I That out is increases. that X% post-acute

Doug Coltharp

risk-bearing seeing contract. say, really value-based not any movement or We're to

we've paid we the rate the companies. rate. that. very for that rate the to And with major able percentage What priority are them. had basis. payment that a a think basis just we're As it to our fee-for-service we for to is be increase whatever a seen positioned to a some discussions per hasn't of continue that been some care up we've move case to actually diem to suggested managed do contracts is close reason, on And have of versus well before, we And that tends

discount to the previously. And and fee-for-service that to was the into little That in that look Advantage Medicare expanded something from to our the acuity MA I expected grew details, book a within to XX% on foreshadowed not of as broadening QX. contracting you and but again, related bit of earlier, business, If which was efforts, specifically basis. year-over-year the alluded get we a

Operator

comes Your from next question Jefferies. of Tanquilut Brian

Your open, line is

Brian Tanquilut

lot about got I still and think to I obviously guess, you're a facilities. existing mean, success you've adding and as de Mark, I beds, novos of additions it,

with what Maybe versus mean, you what like I forward, novo seen and doing share with us are that JVs. de more anything announcements stand-alone of like conversations I've is builds? in look we your can As terms pipeline those about hospitals

Mark Tarr

Yes.

owned a both JV wholly So opportunities. our pipeline nice of complement is and

the of I venture joint IRF the venture of to looking from and that existing at all are back that they're processes a themes they joint less care the bring in-house they desirable don't hear acute hospitals. grow operating running that an around different the the with than the in units we to our their think to that They're partners and knowledge kind be care grow Typically, their opportunities we and looking IRF may from can't that potential expanded of acute have that hospital these are that relative portion business. partner. something the is have partners regulatory particularly in

go I their systems how XX doing hospital looking partnerships care so really with and out a out to this us good expand And business know want over that and is the now to to point And partner. are we it been model be we've acute. an last years, to with acute post thing that then opportunity for grow gives

Doug Coltharp

we effectively. arrows them and we both quiver, think in We like use our having

determines prioritize or what acute the hospital others of JV some that are not care has useful that states where There really much. aligning to with we're yourself relationship do in we're in be can presence a in that market with whether in as state entering. an And or a doesn't COM, that has market securing we'll certain already it matter

at When today, terms at the opened you pipeline, our those hospitals just of closer of are were below identified pipeline are If potential that have currently number is been the XX% our broader that JVs. look XX not look in just portfolio likely we already beyond those which at the about projects, JV announced that as that about running XX, have XX% we partners. total but XXXX, active or it's to of

So we'll both continue And that change think I I a effectively. in versus non-JVs. a utilize of we'll our portfolio wouldn't significant to the composition of as JVs terms see in expect result,

Brian Tanquilut

Doug, That's And early us maybe with on then on reads share you awesome. can any RCD? color

Doug Coltharp

position of appropriate probing the them on alluded Palmetto, when in claims for with surprisingly, our asking and that ahead of our We been admissions sure systems we're comments, for discussions satisfy As that in believe, having administrator. very in practical and great to appropriate the a processing. with even the questions to to is up. to we be these think starts We are with a both our proceed based who to the to provided. been the there's not CMS of terms Not capabilities MAC have We've and Mark we're competition think, our his been of we've and documentation of going productive the all all some make details provide MAC Alabama. application a that to resources curve this lot

as Palmetto. on think added engaging there we to a that's we've iterative back any at forth be go chosen really comments, and effective Mark are an that's very And with we'll his going on where questions in be in patients why that and review pre-claims to process,

Sitting that So debt claims impact, knowing our than in not we capital that's bad of be be would look and any processing best long-term guess. in terms working what that could kind here a really today of think expense there like, a of implementation will delays some issue? more issue

Mark Tarr

has with I've had CMS amount meeting yesterday that based. both South surprised We've up and tune, Palmetto Palmetto been where pleasantly a is with at dialogue the providers. Columbia, very including in involved been the Carolina, Brian, of that

So hearing been process, learning if for providers nothing Palmetto as hearing from Palmetto, CMS. us else feedback a like from well us both and as that has

-- be there's some about gone still I it's questions that process-oriented it's say from to type So as perspective, as although would of answered. well expected,

Operator

from question Chickering Bank. next Your comes Deutsche Pito of

Pito Chickering

guidance, last pricing you have still quarter. assumptions, your fourth your Versus with the increase Street strong, despite for you're very implying expansion which Medicare pressures relative estimates is today side. tailwinds margin the on XQ offset XQ to was inflation increased inflationary better of labor labor the from

what of order you than quarter talk beginning So I shouldn't is you're the OpEx about was can year for OpEx it And reason the getting these Is leverage seeing? better had to there leverage, pressures? last inflationary curious the assumed offset XXXX? labor any or if you at in why into continue

Doug Coltharp

those question, is -- So into we growth expense of yes no, a some saw It's you that sustainable the moderates categories where a feel if will go great and of even we -- there some lot if and categories if bit. answer a leverage, those of be volume are right? Pito, you parse it's

increases the food and the day. in been improvement some as year. we And from market have day as see believe the conditions be year utilities leverage we expense the significant of of course and drive we areas the and would we year the second will more per anticipating that half will through anniversary prior this So case, like of per into that expense incremental stabilize,

half. we gained that be as and expand source even And of leverage improvements of efforts clinicians we we continue and and year-over-year retaining and other certainly we in that expenses. believe recruiting our that on second that the to made some nurses recruiting our the a based on will some marketing revised I efficiencies related procedures significant in earlier mentioned

utilization an X year, group first of maybe the both Weighing our we incredible the in against to the overall medical that, of to program performance One dollar self-insured in some or terms or extent the half is consider, of of had within X. higher number claims. rates just a and things couple

us mean is that, that tells experience Our reverting.

actually And sustain, half, second that anticipate that's guidance so that's into and of assumption. margin little a pressure would bit to the source that we be to our built and of going don't in a expect

quarter incremental experience We the based debt really the prevailed else put assumed on hand. for related the a as balance And of as with and second to that of quarter, in second up the we in some we targeted reserves had regard year. a the with back smirks with information normalization audit very down. very the being the smerks again, that was in favorable higher and ultimately, bad a came more experience much a quarter, rate that first that anything at the We've to at that of little

two that going know up X.XX quarter. I second a to EPOB really the to again, that important then from that was length esoteric, sound we're XX.X they're move a what And continue is things level, to towards going like are in stay current to and little can the is that, which anticipating increase is of consider its

lot know further the leverage I into we term. a categories forces to some absolutely in a There There be here are it's few considered that there. on. So are anticipate near need just the thrown that mix countervailing expense

Pito Chickering

to different any trying of more or the July quarter XX% on the as saw behavior maybe just in the the spike from then of follow-up just end you're of Medicare Medicare Advantage authorization curb the Advantage the curious with in you're absorbing hard at that growth seeing stringent prior you quarter. as be days utilization? or And if I'm

Doug Coltharp

news plans with growth and even market, it's XX% so and to payer. from those payers we brought has is better. also evidenced MA procedures We to their it pretty market and And generally forth regard growth the really geographies. aren't. but And think admission from Again, a with how across on within MA good I as getting been with authorization can basis, significantly that deal by prior speaking, year-over-year the vary to payer the

Operator

comes next Your question Barclays. of Steven Valiquette from

Steven Valiquette

The inpatient payers You in touched some versus more obviously referral second about the talking on of the utilization quarter. outpatient little bit, a sources. setting Advantage the elevated this just patient talked about Medicare in

and during other just into into referral of the versus curious the sources Can you patient in referred guess tied from to I just patient from patients the sources kind at hospital and into outside So comments your already you. quarter your that of mix a trends regarding shift inpatient Just us all to I remind up that flow managed companies. all greater you of that, on your incoming was coming just are patients from some shifted of with mix setting? did setting trying care the -- the of quarter marry of in amount inpatient the

Mark Tarr

we come change of XX% from hospital, a to quarters. an see close So in care acute directly our didn't admissions significant in that QX past from

meet multiple to back sick. they all our have have comorbidities. medical necessity, of that to typically patients goes the So kind point of They're

really because outpatient nursing them So option XX-hour they an for need not is care.

trends. So seen from out our that anything we really in stood quarter the past haven't second

Doug Coltharp

Yes.

that at on not then our acute point facilities an way we're and trying and an surgeries getting orthopedic on I receiving because basis think of finding into those their inpatient the level basis who is the those there to are ultimately comorbidities. their make or outpatient care patients

Operator

Your next Blair. question of comes Matt from Larew William

Matt Larew

was you again private rate, occupancy Last higher high briefly reflecting towards quarter. rooms. this long-term target, Occupancy quarter, skew rates the very touched on

occupancy to to target. shift as So about expect year over more how near that next or or some long-term builds of medium-term Maybe rooms. X you given think private perhaps rate the less theoretical could towards trend the about you targets us help novo thinking de

Doug Coltharp

bed increase. it And very will the the think I from mid-XXs, don't we up would honest, the move additions expect term, I the occupancy recently increase I but downward fair to you've be I we from a as push XXs reasonable. the I de it the goes that room, would because And on fair haven't recent pull near on it the you're all are this bit term. expansions. question. of Matt, out, private It's that bed well me say novo the how into Yes. and low got that's pressure getting to In in continue or know opened near mapped activity it's think to see as a rate to occupancy define me facilities that little more

the year extent base, part then the legacy It within increasingly going To it's will smaller upward a try to opportunity becomes remodels of even base, addressing which stay against an that de you we've it, we on it, definitely between that take the to is current beds in year ongoing been at, ratio base. adding beds, opportunities to call to build start Where call per the new on novos levels result kind where but just new continued of I to and north in so while if XX%, XXX-bed particular capacity occupancy. larger the that of depends coming occupancy company-wide XXX rooms, take a have base. a create because level see But get think any roughly capacity while theoretical XXX some to up. private it should we're to trend upside. that That limit for really the of it gets, more at

Matt Larew

And framework you of thus, staffing -- have run to from presume always occupancy time? any the acuity and rates that as maybe about your rate obviously, up, have experience of in staffed as -- level flex you'll curious, benefits perhaps add or I a sort do shifts that management that perspective. staffing within be and And sort think over about theory, how has so And XX% obviously, sort around network facilities just higher as give and XX% at margin around for with level. facilities up curious, take. that necessary of have moves years, I'm there company-wide then you thought But a that been

Doug Coltharp

from that, get you've You little EPOB definitely a got really you margin so of you're benefit lot just running a that bit there can and because whole when staffing. get on expansion. The at you'll against dynamic high work a efficiency

environment you're out of there. XXs a XX%, running the taking If leaving equation margin perhaps and way the pricing facility it now. the you're all you're that's up, to way the right all the through for I'm about pushing getting gain opportunities low in

and no of is the a unless you expansion. out, bed assume that, When facility get XX%, that tapped let's for -- north opportunity there's though,

many see other your that way. the any go is growing to going further. because volume you're going to capped in You're And margin instances, on pressure be

therefore, increase and annual to and increase. will P&L you have pricing on inflationary greater SWB may be annual an increases the pressures, the revenue than pricing limited basis, in are growing Your that elsewhere

Operator

Your of Scott next question comes Stephens. from Fidel

line open. Your is

Scott Fidel

of what trending, talked Would that interested back thinking that just over Wanted some if us maybe MA about Advantage you'll where on stat to often, are you backdrop year And guess, fee-for-service. about those the here you're relative you actually I about utilization the 'XX. I -- then is balance the of guess updated that. discussion. and of I I'm the had the how Medicare and And question rates And circle shifts are reimbursement into there. to the the between be know give thinking affecting the broadening

growing about assume, I talked also you could time, same would your that. the market share, At benefit which

to I against think net guess, how out friction of So those points each sort trying other. about,

Doug Coltharp

absolutely. Yes,

rate mean our those now is a like of to disorders it's differential based the That That's X.X% we was attributable that time MA trade-off quarter, it like solely X.X%. MA acuity, fee-for-service which additional proposition of was and the really neurological value was basis that we volume first positive between getting for in to quarter, the in fact a points evident been and period broadened and the gain resonating by and where with stroke on second us. lowering patient for long the So beyond the plans. I mix. XXX complex

all the we've more plans of added per and a widens assumption year. basis. bit Put the into a and which believe be The at of second into we within but success that the on with acuity to of you'll discount will MA of that a the aggregate in those mix the move that two faster continuing have of the basis, valid same go-forward existed revenues that, to broadening our what more forces that counter we time, fee-for-service, those, quarter second already grow MA, is gap continue the are our impact that than in contracting in diem will will half that about believe in XX%

Operator

question Your next of Ransom from comes James. Raymond John

John Ransom

pay? us with they you are but there how CMS kind length any not left inkling just but any strikes on that stay, look hospice But is They ever. this they've happy of with the payment unfair an the current indication rule. It of question, structure? tweak to all with is So used the rule. they're the It you guys home alone is that happy may XX% at since horizon unhappy health is to not XX% there be

Doug Coltharp

left on, other of all quality sequestration we've digest to that and easy rule. of indicators might first stuff since the always not everybody and challenge with we've XX% been We've had and that had kind been Section of John, have more GG along else, . we all, alone

John Ransom

structural change we divide some -- a Well, the big to per minutes pay of hour, XX structural big change, or now of like but thing. you about want sort

in the think stays current you do place? So structure

Doug Coltharp

hearing not We're anything John. to contrary, the

you in areas substantive quality significant going a fact, has have without between and make of revision . recognition out a been residue and accomplishing way, would like very forth, to a be to is trying and the combined CMS considered seems significant for IMPACT more improvement so that rhetoric the that have and things which there reporting As necessarily through, other to the it it of some that complexities of even Act, the been at if instance, the matter then look MedPAC made

Mark Tarr

and instrument. -- this post-acute complexities prototype direction the the And saw they the what think an impact of So they that ago going is were common to various certainly assessment in of have I now think was I their presented x they that settings indicator looking years across in creating number I prime CMS to this would that structural from initial regulatory time your body. any agreed or we're to as for changes not hinted any major required. But other back indicated ready everybody seeing that was But difficult at point or not question, that, think implement. to be very go and

Doug Coltharp

John, like of immune we're but we're aware we have anything enough horizon. hubris not on that it, feel the to we

John Ransom

follow-up would XX% And so I are be, your rates you of think day, said right? just per my MA

Doug Coltharp

our are rate on MA basis. of a revenues current Yes, case XX%

John Ransom

Okay. Got you.

you're again, any as paid? they indication want think you will So Nostradamus, in do also payers, how you that think if MA be to place? talk do could to Or these you stay you change

Doug Coltharp

making that we're progress think a ground XX% pushing I up north, so game. it's

that now, to are increments. north. significantly trend only suggests push small grow I but that think be attractive of an revenues right our those the it's able basis continue case percentage revenues the But to not to on we're going MA So line rate

Operator

Your of next Markets. question Ben from comes Hendricks RBC Capital

Ben Hendricks

the is It just John's rule the wanted final call of pertaining rate in other follow late first to is from kind rule, your kind update program the specifically on from to they anything final with But to rebasing for or with I else, any looks up rebased to Medicare. market like industry. it's of question that quality reporting a year? out the there, there given basket observations the of specifically the any whether be implications COVID line

Mark Tarr

it quality yes, It in was we major continue thought was a to And with no really rule that we're saw. line out. benign initial final takeaways they have reporting full that. rule. We compliance the and much came There's that in with very pretty

that major our change indicated on that anything thoughts seeing the that. not in we're would So final rule

Doug Coltharp

well. the by we want rolling as for month RCD things really injecting with rule said, To out didn't this as consistent or Mark wholly the have providers was is case system rule, MAX the may some into extent, something which for it the to CMS either the final cognizant the thing. almost of that was do complicate be proposed the But overly that good a payment fact and

Operator

call return comments. to for session Miller Mark today. for the question-and-answer concludes closing This to I'd be the happy

Mark Miller

XXX-XXX-XXXX. anyone for questions, at joining Thank you. again you me please additional Thank has call call. today's If

Operator

This does today's conference. conclude

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