Encompass Health (EHC) 8 Feb 242023 Q4 Earnings call transcript

Company Profile

Participants

Mark Miller	executive
Mark Tarr	executive
Douglas Coltharp	executive
Joanna Gajuk	analyst
Kieran Ryan	analyst
Michael Murray	analyst
Taji Phillips	analyst
Jared Haase	analyst
Scott Fidel	analyst
Parker Snure	analyst
Albert Rice	analyst

Call transcript

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Operator

Good morning, everyone, and welcome to Encompass Health's Fourth 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'll now turn the call over to Mark Miller, Encompass Health's Chief Investor Relations Officer.

Mark Miller

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

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

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

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

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

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

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

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

Mark Tarr

and a guidance. good and year, our XXXX for highlights Doug to about our and I'll great morning, quarter XXXX will Mark, results finish QX for details you, discuss everyone. the key then provide a company. fourth strong was The Thank

XX.X%, by growth with total increased up of driven revenue X.X%, strong growth discharges Our XXXX same-store inclusive X.X%. volume of

our with and provide to Our strong resonating that growth sources, continues payers evidence proposition value is volume patients. referral

Our and prudent XXXX revenue adjusted expense by management. driven XX.X%, EBITDA growth increased

a Persistent bonuses. sign-on and dollar $XXX premium reduced utilization from $XXX.X $XX.X to a labor contract million XX.X% percent We in basis, million. same labor X.X% as shift expenses an contract XX.X%, labor period. declined labor of XX.X% the XX.X% in FTEs and flow of part XXX to as premium adjusted vigilance efficiencies. The adjusted to in free million FTEs decrease facilitated XXXX facilitated $XXX.X in plus basis EBITDA FTEs On strong expenses contract by XXXX. XXX points cash these in million growth operating percent to of of total from an on increase decreased X.X% average to a owing Other scale in labor over a an from average of to from revenue XX XXXX in XXXX

than significantly hospitals, with beds de in beds. $XXX market growth invest to opening net of and rehabilitation services. more XXXX, we for XXX adding a to of and meet a X.X% existing continue In inpatient to million underserved a X needs in licensed We expansion XX increase total growing beds novos invested the capacity in CapEx,

hospitals dialysis the rollout We of dialysis our $XX million rollout. through in also to in return now to of complemented our Tablo continue We to XX new locations shareholders with investments these dividends of in facility-based growth XXXX. on and on-site capabilities technology our in approximately stock. cash through business our common continue We our a the we'll like in-house invest initiatives our offer

at X.Xx fund generation with reducing internally-generated the from net distributions funds, XXXX. all leverage end allowed flow these to X.Xx of free strong our investments while year-end shareholder Our us cash to and XXXX at

Review began August Choice Alabama. in XX Demonstration or RCD on

Our Medicare that first claims for every under during rate under is requirements of administrative X above documentation RCD RCD, reviewed address of months program. Recall the our company by targets the is submitted was The claim affirmation affirmation XX% this prepared that CMS rate and set level. well to medical necessity. of remains

Turning for XXXX. objectives to

to hospitals. active continue build We acute and both an with of and de projects, ventures maintain novo pipeline owned joint care wholly

will in We a expect approximately aforementioned licensed XX in to per satellite an open XX-bed de freestanding through location to hospitals as and XXX from opening including hospital additional year announced a for to hospital with on a well existing date, existing novos we've adding bed XX beds as XXXX as the XXXX. We addition. X that satellite XXXX, XXXX beds de be anticipate XXXX. novos accounted beyond an To dates XXX as

We combines and is continue enhancing modeling outcomes patient by focus fall innovation model, innovations. which predictive investing clinical our such prevention on to resources our core protocols. clinical One practice with

and patient fall XXXX, X,XXX seen have per model our improved we prevention fall XX%. days Our since rates initiated in was

outcomes rehabilitation We additional have clinical consistently intended high-acuity enhancements ability care. which to and produce an underway, medically-complex to patients are for quality our need in innovations advance of array of inpatient

to I'll Now over Doug. it turn

Douglas Coltharp

and Thank you, morning, good everyone. Mark,

over driven stated, Mark QX Total discharges broad-based Volume growth. inclusive X.X% our from primarily X.X%, partially of bad was exceeded incremental and also mix by the by increased offset XXXX. prior the As and expectations. QX operating Revenue the volume same-store EBITDA over patient increased X.X% a the expenses prior was debt reserve. for increased to grew adjusted an volume finish strong as and year was favorable geographies contribution quarter strength X.X% year, growth. across

our adjusted the of approximately $X.X of net $X.X $X The to million outperformed novos to in million approximately by preopening costs. to EBITDA venture ramp-up favorable expectations performance and compared relative Our expectation our XXXX de generating driven primarily in novos. million de was QX, joint

net XXXX, of Within anticipating new novo to openings preopening costs venture de novos. costs. For ramp-up considerations, XXXX million. $XX preopening $X.X the de balance ramp-up to year-over-year million our largely and timing and wholly joint net $XX is novo hospital guidance the year we the attributable of between of The and full were owned our and are de million difference

year-over-year labor improvement bonuses premium costs, costs. to labor totaled and plus labor in was see continue $X.X We sign-on million million to $XX.X million QX $XX.X labor compared million as and basis, and premium contract were QX bonuses premium contract QX Within $XX.X $XX.X sign-on shift ship $XX.X year. last compared million and On by in $XX.X sequential a XXXX. labor of decreased million. million to

included million These out reserve they $X.X Our favorable favorable EBITDA period are insurance. as comp of self-insured XXXX. approximately general workers' a reserve XXXX reserve prior adjustments adjusted $XX.X million adjustments to professional programs. claims On QX included and in basis, relate these for adjustments approximately for year full to liability in

self-insured million from Our QX X.X% as and a to to the program. QX pending our appeals These $XX year result Departmental denied also XXXX reserve are various to experience medical programs adjusted approximately our assumptions Board to benefited debt prior experience have date. courts. of revenue the Appeals EBITDA updated appeals and trends reserves at Board full and bad a claims now to related that an of revenue review relate increased points percent district under of in our reserve as before federal and have group XXX different to under primarily RCD. TPE a claims favorable given We Appeals basis related Departmental from

this million. to giving favorable interest, was EBITDA impact the to increased $XX in reserve free working maintenance quarter debt approximately incremental the $XX.X cash changes of and QX adjusted capital. Adjusted adjusted EBITDA, flow XXX.X% million bad minority lower effect to due After for higher CapEx

guidance. to on Moving

$X.XXX net revenue includes open on considerations underlying guidance XX billion per of to to supplemental XXXX Our that, share EBITDA operating line adjusted $X.X earnings be of Page the $X.X and our slides. With can to of The $X.XX billion, billion, adjusted of for guidance $X.XX. Q&A. we'll the $X.XXX billion found key

Operator

Kevin Bank we'll first [Operator question from with America. today Instructions] And our Fischbeck take of

Joanna Gajuk

many filling things Joanna for too many There's today. time. same Yes. is this Kevin too the at on going Actually, --

So to this way. we've got do

volumes So around internal clearly, obviously, I highlighted better your because robust came than question growth in and year-over-year. expectations my very also guess you volumes,

or volumes broad-based you that guidance? And in understand category mentioned any assume guess for out strength What same-store geographically. kind I the So is as guess QX? question you you I I or the impacts was can that flu, whether XXXX payer guess, But well stood maybe in and seasonal is, any talk there of was about do growth the sustainable? maybe I that

Mark Tarr

I Joanna, Mark. a We we nursing saw a this is continue first. nice volume a at One, -- X we to of there's of this take where number all market think noted, I'll homes. you share from regions. taken shot see we have -- And we across our geographic things. growth as

with outcomes capable going having higher them. that think proven X we've acuity patient of back to very years, or a great and I X ourselves taking last

So has a that is driver -- primary us. been to

seemed did that. other extremity and Relative acute We we it's that lower small program from stroke orthopedic orthopedic have increase joint that secret no program neurological other and percentage in But in nonetheless, continued get see see our we some which did a think as categories. to volumes, base pickup conditions. our in on had a the well. I growth hospitals another placements impact the strong was downstream care quarter it of mix, to

overall So building we're terms very we're good it was growth, foundation. of and our broad-based in that a confident

Douglas Coltharp

Just question. other out round things to to a your of couple add

the the solidly the of The XXXX, you In volume guidance obviously be in that longer-term of growth terms a if get but that. a of is is with number coming parse of in years. discharge range within rest growth to that of through the low our of target expectations strong X% for the of range slightly of kind line kind off range would considerations, above the X%, end you

opened breakdown will units new new this store. that obviously the between and that we we have the of terms store, X a year same-store be In

CAGR north growth And extends to recognizing XXXX that's And a of X%. same-store it's bit you from there. worth tailwind X-year of XXXX, the that's that in look a so at if that

it's a year-to-year. to fluctuations X% we year-over-year basis. to to continue But be not generate that very some on There to position growth demonstrate going a numbers will we're suggest there. same-store in So positive from be

broad-based, growth The stroke. neurological We some in in see growth saw just of like about but and patient of mix growth in X% outsized Mark ortho, mentioned. as did to in the continue X% categories was smaller very excess

are those numbers. So good

payer points But mix managed relates finally, basis came and of then by XX basis, And basis a as out about XX increase growth XX Medicare year-over-year of care Medicaid. points points. or that the Advantage payer XX out of importantly, we to another came basis mix. saw it general On

into So those lowest categories higher a category. positive out were both reimbursement trade reimbursement representing of a our

Operator

with Next, we'll hear Deutsche from Pito Bank. Chickering

Kieran Ryan

reserve, reported your idea It XX margins. looks to when should on figures, You've lots the a like of strong calls. less of that benefits that for this could and how broadly, about about the actually we guidance from get should year-over-year adjusting the margins contraction ask bps headwinds Ryan cost as on implying to growth than seeing? for wanted you very Joanna fixed we de when think earlier, the just novos think labor same here de the and these the XXXX on lower about you're outperformance. But Kieran compared Pito, got on volume is novo year-over-year, maybe leverage drive bit little I what

Douglas Coltharp

exactly Well, I hit FTE. you all increase in we've to on it, got Kieran, X% assume which SWB in is per X% and think

X% labor growth per year. offset then being of with to And fact outcome which increase relatively is premium attributable and assumed general favorable largely so benefits cost benefits this X% what's an internal to we SW had is leverage across driving that constant a by the in volume the assumed cost, increase some an is getting and FTE such that

X% next that so to And to increase. X% an SWB the for

significant factors joint joint anticipating it. much that million in half that's little for a of towards a million it's XXXX of number a first openings, In of we a the partners. heavier pretty facilities assume XXXX. venture of of opened and were going including those ventures, a over to from $XX that weighting in existing year in preopening got the to XXXX. terms had XXXX, then with net $XX And million swing in X in costs couple were $X XXXX for the And we're And X implied

we are and the EBITDA So the those growth story. on bit the And of factors an as faster are could have repeatedly, create those margin. said primary we're XXXX. But EBITDA ramped balance we than that rub a an X that in anticipating little

in and as there leverage We market But margin always We'll high-quality are that we're can gain a not need necessarily extremely to that story. care services, the we are we underserved. important thing believe rehabilitative inpatient volume. and is more provide who the growing of seek continue to get do patients is most out to

Kieran Ryan

right XX that XQ, follow-up labor you've heading think down kind a where to into Or But net solid, XXX it what Appreciate labor the down of RN up given here? already that. X.X%, and bit a should you're are in side, the quick you're range. the obviously, 'XX, this on last quarters see from running hires just as in accelerating as X down the where then of we about pace that contract to targeting volumes from you X.X% do further cut FTEs? And

Mark Tarr

We're that actually very number pleased with QX. in

a and difficult look you If of new to hire in particularly think that's negative the period at it's back the if was net. about you QX. And year, extremely prior that around holidays staff year the

ramp-ups to and hospitals new and support So acquisition has well our the been Town finding helping successful in nurses. as as hiring the team very

calls, in with that that retain that we the we about too, hired have nurses in have focus so. been our those a particular focus year to real already employ or talked past hospitals in retention the We've on on a last

So this to year we're our with be the year another we've hiring and that. made with that very would of and progress RNs accept strong pleased

Douglas Coltharp

to seasonality rate Yes. quarters be we QX to X pleased XXXX as in assume some in will But going saw hires there there. very all because that. new that the We steady can't Mark run in we're across said, is necessarily stay

class and a from With been turnover, and turnover XXX from of for a of was our has basis therapy, low basis. down points XXX on which turnover always XXXX year-over-year some points specifics RN best down perspective on XXXX all basis was

combination manage turnover really and reducing hires better. us a those So allowing new of rate is labor to premium costs

saw we percentage kind assumed terms labor, around that get X.X% fourth X.X%. We better anticipated. we point total than was FTEs stabilization in FTEs in as contract we'd the of frankly, quarter of that Now a had the of

for we We'd predict. when but continued number, XXXX industry. the As just spike that we've noted the previously, to very had below hard X% see like just to QX towards occurred run of pre the overall it's progress

in an Embedded in with we dollar remain our million in labor that run of from total XXXX that QX. cost $X.X guidance established from QX, rate the assumptions for sequentially premium XXXX which relatively down is aggregate a consistent perspective, was

Operator

next Our will Markets. Ben with from Hendricks come question RBC Capital

Michael Murray

for on Ben. is This Mike Murray

XXXX years growth few So to like moderate SWB is internal FTE sounds it expected a per in after of acceleration.

little you're a this seeing more talk what labor inflation? And you you forward? wage and moving about can broadly, the Just will for do bit market think continue to moderate

Douglas Coltharp

per increase of thinking said, I the And Mike, QX. FTE internal probably to X% both the As SWB assumption the that's range on is end I point about of higher an ends to we've than was a got X%. -- frankly, at

that market number What different there's we're really is paying sure improving, extant at as top to that. we coming overall are across the these labor is are of adjustments. seeing market to got we've And what bringing rate parity larger make in that in conditions a they're market important that stay hires, it's workforce, of if although on new we're than

-- market We we that, cited, We're the metrics the progress of on second difficult that bank all we've improve, of we're particularly conditions. labor half again, as optimistic that. XXXX, seeing that to it's but will across improving into

we I environment a current assumptions So progress and no that further as with we set went think year. the improvement reflect the of through

Mark Tarr

to you behind to market terms adjustments. stayed awfully tried rates than of along at once our you stayed it's you market we've it the market the analysis behind make have level the and market, we typically had with Mike, their get get more through you Once if that have. in catch sure all at that up, costs hospitals difficult market

the look done of staff and new last at another. percentage you adjustment there's X.X brought the some If we've we a on, that adjustments between years in market our high have had that the staff or overall pretty

assumptions this for So the logic into the of that's we took year. going part that

Douglas Coltharp

did find to mean in no constraints. proving of all labor to tie interests domestic bunch and metrics, together a it's take trade. in look the it a the constrained think good take best during safely at and ourselves because At very or of volume XXXX able volume these to I patient we being And point of be growth. you the I

rates, down basis, as therapists year-over-year enough turnover new a on progress before, for markedly workforce. and both great cited I've to salaries Our our and are clinicians competitive are continuing we're into recruiting RNs our that have in

Mark Tarr

team time labor in contract that talent with labor. the helped de couple last the noted on note at of final acquisition us One up be open of our X novos years It the should majority the vast has opening. of

a huge fitting. take Doug to in ability the and to solid volume So been a markets on terms markets on these the good, it's off our of alluded start in new support that to

Douglas Coltharp

recruiting to an And HR their of ways concentrating creative the team where and to dollars having function we the find looking across out the function recruiting efficacy has also with were centralized the dollars the impact in comes talent efficiency. in were those those And expending been then greatest at that credit, areas. very the our

in So XXXX, had the that with even actually year-over-year recruiting course the decrease a did of with success hires new on costs. during we we

Michael Murray

That's Okay. helpful. very

Just is mix. more wanted moving you're contracts case progressing. working I gears how at I a little towards shifting this know to just bit. see

Douglas Coltharp

Yes.

We make there. continue to progress great

versus as Advantage greater MA basis. We we have diem XX% to -- And less compared X%. even rate on a to remains fee-for-service rate per other than at continue an as contracts grow about the episodic Medicare categories payer just are our of a differential, our than

Operator

question next Brian from Tanquilut come will Our Jefferies. with

Taji Phillips

quarter. Brian. Taji This is for the on on Congrats

labor. about question more one just unfortunately, So

you that the labor you And you Just market? much currently, would see growth? seeing not, if like how that the more in able need all volume to are upsize to demand you're fill

Douglas Coltharp

Yes.

no mentioned, means are even volume because the who continue take in at -- paying we'll patients labor are are constraints. to to in all going serve of were XXXX are we inpatient of point in, rehabilitative which just premium it I markets in unable of we the prioritize And if care need As to we labor. in

Taji Phillips

And Joanna's called different I had in a condition categories. out Okay. is question. differences know from seeing then this you're slight follow-up you

follow opportunity in-house know if -- see incremental about. to of yield. an thinking out growth wanted any if there of see expansion dialysis, called are to increasing anything you're where I wanted I that Just you up see else and or investment your as but it terms see like specialties you in revenue there's volume and

Mark Tarr

So we've put need a because big past have the think for rehabilitation. patients whole And getting several we promote to we in call think a huge out demand focus there's on outcomes. nationally these the patients. We education to a We with back as Association neurological community. we've for we categories particular help job -- strong the really partnered like a stroke American stroke feel years. and for We good do Stroke stroke the the a

specifically. we call at stroke So

As remains had categories top in a growth terms in total last of almost percentage one and X% our of we of that year, Doug noted, it discharges.

So between to as grow. see neurological, continued those stroke we that call opportunities and would other out I areas

Douglas Coltharp

don't for I injury think a I count we brain that one and in like point don't credit with one and patients. to maybe that dealing would perhaps the other is forum get this enough enough

very mix, overall XX% settings. and effectively between and injury runs patient so can't many Obviously, that's our was the treated medically-complex up too XX% And in and of so in patient, they a brain be quarter. XX.X% it typically

Operator

[Operator with William Instructions] Jared hear Blair. now Haase from We'll

Jared Haase

just Medicare a about broader bigger general ask in take just question. and of of then the value and MA maybe curious general. that partnering would just lot love a those perspective proposition there's around leverage far. guys in been I your the commentary lately sort environment Advantage a around get how terms perspective with utilization thinking outlook potential your Maybe a or I'll to the all are in for your for Appreciate plans the plans? you're hear experiencing. sense in of group just I'm thus rate negotiations on and Obviously, picture focus the back rates just to step detailed general

Douglas Coltharp

Yes.

So Medicare upside again, significant we for be to think us. there continues in Advantage

rate growth the been Although has over very last impressive. the years several

Medicare at Medicare same-store run go same-store from the through that CAGR, you I Advantage If and up again for back XXXX XXXX, Advantage CAGR X-year XX.X%. to and before XXXX, picked is look specifically COVID extending our

category. our So fastest-growing it's

But that and per narrowing of grow or number we've X%. maintaining on and keeping while than been the able that a are fee-for-service that keeping at those paid to rate versus case differential contracts payment less a versus then increasing that basis diem

lower, is in percentage rates fee of admits real we that means to is Advantage, number the think for continue see a Medicare service. as that I and lower opportunity referrals than of that conversion the significantly Medicare

of will patients pressures focus think to based or those some the metrics bode the to of that internal algorithms in us from just future producing to And not they the necessarily and about trends complexity we're best that Medicare seeing for the that care and able denial which of the that quality some outcomes you're the treat expect on place patients we're is where of effectively. to well for on outcome. plan CMS the and can of We the directing the access patients, is care MA now Advantage those utilizing authorize

Jared Haase

lot specifically priorities Thinking just guys you a just ask makes sense. would out a about other investments of workflow That it. improvements. in maybe Got quick And I'll technology call around then XXXX or any follow-up.

driving or the on clinical new But obviously, rolling analytics really curious hear of predictive out or the improvement. I just that around things operational that's you're if some incremental anything think the map alluded have dialysis you to focused this well. kind of you road year technology and to on as

Mark Tarr

driving years couple been on data our a this and utilization out our clinical the from outcomes. huge and collect we've and that team over predictive of that that information them. are working is our always at clinical to whether there, look clinical of analytics amount We of the named able innovations system with through You've

that There a the on clinical therapies help this swallowing out the helping stroke of nursing is common number technologies patients the full particularly were patients. assist in issue around that with our at a look which their for aspects, either us or new there, difficulties, dysphagia, that patients. in in are working are treating year will We them

We around. devices patients ambulation our in help have weight-assisted that can in gyms our

any there, our we XXXX, it year, in to particularly more them better including or different if helps get given number take access on So of innovation efficient. staff to enables a outcomes studies, become

Douglas Coltharp

this far that by our We regard we believe patients at get the of more clinical outcomes that, our of the those And are number produce. of look that share, continuous market very vast wide from comes we protocols advantage just than operate to our seeing they the scale margin. that common any patients that competitive smarter utilize a about data we on is the self-perpetuating see competitors IRF treated the and if in And improvement. providing that you our mean, under a and philosophy by of in conditions I based setting,

in do, They really more comes rest effective using focused how really, And refine treating saying, on their become better what that these continuously do the we protocols on getting almost our been data clinical refine we do our have how every leaders at even they're focused. on and that through we just patients. models, analyzing patient the to never laurels we're

Operator

Fidel question next come will with from Stephens. Our Scott

Douglas Coltharp

but Scott, don't say be We'd presumptive. we to want

Scott Fidel

Scott... It's actually Scott -- real for the here

Douglas Coltharp

to the regarding of way express others. any in not any disappointment is Which

Scott Fidel

about XXXX how the up more and still or just of for And did that of accelerating just potentially thinking sheet want target your leverage range. capital leverage further thinking the you a given end some would whether cost here given Understood, as here. capacity just balance environment? long-term understood. ramping you a Or just incrementally high so capacity up But about to such seem below influence it how growth does here, you target buyback rate of that's I keeping the a just Obviously, down returns not lot have interest are you comfortable investments? environment, like about that below necessarily you're capital ask terrible thing. with

Douglas Coltharp

Yes.

at flow XXXX, you we in if cash perspective. essentially about we were were a $XXX million total to Scott, So just go running CapEx, from and back breakeven

a I generated the matter our plus of of fact, million $XX internally funds, As $XX million. increased with I beyond think almost or dividend funding we that debt modestly, think maybe all --

net similar XXXX, was As be on with budget our would to XXXX. with we the think prudent at in breakeven be with an year necessarily were CapEx relatively And shareholder we a dividend aggregate, and into initial that we distributions. we came we like once be it starting would again that constant, deploying assuming a assumption pretty that given would utilizations the time, that in based essentially towards that were potential further didn't X.Xx leverage start capital that other guidance,

EBITDA and cash to we overperformed with Well, to through CapEx. adjusted bit the course regard with flow. of XXXX, we underspent a regard mostly based timing on And

is capacity funding brought our the And we beyond mind leverage thinking to of to anticipated earlier get CapEx. about comes allocation. uses the So down, really had created capital some than for immediately it number of once these that we additional that but distributions one more discretionary us start shareholder

that be certainly frankly be had We got is it a is that the through in to considering of able than this going So Board consideration year. we something sooner anticipated. course to position the to have

Scott Fidel

Great. Okay.

consistent just we'll that progression question would should quarterly out be cash call from just of with -- patterns? eye that's the sort for modeling seasonality. around to out a it we typical different flow sort want that. of follow-up normal either you'd And or modeling EBITDA the certainly patterns? from just Or than So for an then about keep Anything think

Douglas Coltharp

of terms feels really of that like we've required after gotten seasonal in regular normalization our kind volume period flows. being It a some back of into pattern

difference impact the the novos. so going And is the timing the to year-over-year and be of biggest de

Operator

Parker Snure Raymond come will James. from with next Our question

Parker Snure

want I This just is for John shift to over XXXX the Parker guidance. on to Ransom.

$XXX if or EBITDA. If guidance did charge, for of XXXX I your normalize quarter bad $XXX So that's I look at the million. that you just at the EBITDA, look million if I fourth debt

novo kind billion If billion $X.XX there's you $X.XX is maybe of in annualize there, some billion. de rate. you let's that, guidance added say, so maybe the run is $X.XX get costs your But

maybe talk a Is into quarter jumping And certain rate a a be in reason more the the there? there of would point good nature? onetime kind So why wouldn't of be difference that just why as kind items fourth about fourth we quarter were look run there off XXXX? were in -- there

Douglas Coltharp

Yes.

XXXX adjustments, Then So you're million in all GPO $XX of medical $X the favorable to QX. out group contributed reserve for and of $X that that have comp as going for first, million $XX of expense. workers' to and novos in period portion you that then some de you EBITDA suggested, the back to is million prior you in XXXX million, for a attributable assumption normalize QX,

got a you've swing So there.

then again, to going to against got core our that nuanced you've you've assumption that, top delever On of And is to some labor got the extent X% which pricing. is X% more inflation, items.

We year ratio. aggregate. to that for at towards EPOB normalize XXXX sensitive fiscal there We're close That's X.XX continue a believe X.XX. now right in pretty will highly

EBITDA. $XX X.X million an So up that's which of you a impact, from impact to X/XXX moved about million $XX just on even year-over-year if X.XX to

all -- it's those of we're combination I So And we're a XXXX. think into a here, month things. it's

call is, consistently consistently. demonstrated have to regard we strikes what so we is very with and And particularly guidance balls

a business according that environment is better have deliver consistently philosophy So we'll out there guidance we the we the assumptions set of is this that to is and if now right starting the year. that we're the But think results. better, reasonable if that providing is applied the

Parker Snure

there Is it you chance guys more, move can charge. another just know of I that that is changed your just one related there and recur? Okay. kind these Yes. some be expectation could you said reserve one year. of squeeze bad one-off that as practices you And That's next charges? one-off fair. was shouldn't I into reserving a of any if the to in of Or the this kind debt

Douglas Coltharp

the the back suspended is our for on, than methodology looking the to which quarter, ever to now we there And Courts, It's older that we at it that's a took originated, methodology. to latter. write-off that probes them these reserve specific level specifically was really XX% the base to right? change We prior activity stopped while experience EBITDA a to TPE, necessarily the methodology place in the but right on to didn't the -- came mean in lower impact District those related which is that had that reserve $XX we it any have fact appealing reserve under related XXXX. The really widespread Federal million Because XXXX. lot I specifically a and started things been claims DAB up when were didn't this of the

ramped into backlog year rubber ALJ to its found right it the And stamped attempt claims clear the higher that a now. the ruling the number were We're by that stamped is court as denials unfortunately, up, rubber dictated essentially were levels judges we that getting an as is what the at in federal of well. they

we largely the sheet, back to resolved. been the there write-offs and fully say claims, of balance look admitted we're treated look we move out things, it's patients that has and is at on. essentially right now them effectively back right yet and which still we going these frustrating. reserved. The We balance claims So those it's on our at We backlog and take did

Operator

We Fischbeck question have a of Kevin Bank follow-up with from America.

Joanna Gajuk

Joanna. This is

bit cycle I creeping guess guess proposed the a regulation I but a topic, also different little on us. up So

And prior home expect was for I else? rate guess, So expectations kind health of that proposed your specifically, anything comes rule, update I cycles. policy there XXXX to it when the change 'XX lagged to guess you what transfer or

expect 'XX? as seem Or die you would like guess show down? it, would the just expectations be think guess -- about this I Because you in I expect of thoughts to here, to kind in have why you So up should that if -- do same this do why any transit when would this So for that? policy? terms different? of because this But be hospitals the we

Mark Tarr

is this Joanna, Mark.

discussed point. heard latter relative transfer other the what any as feedback the from more take We've they RFI. me did than ruling health last to home not Let was year the CMS

is point progression patient. at patient rule a care of little about and think, normal a primary think different case the of or it's the IRF for the that IRFs, health bit actually health pretty when good substitution And being I time, is a transfer home you not that an rehabilitation home made industry a a why care.

And the also for that CMGs IRF across out from In it at all other patients healthcare stay consistent. remarkably those that a a to pointed think financial have I of it not are if transfer was a length average mode length reduce aspects been has been rule. different words, sectors was you've average perspective they've stay. in looked where than of other And there there seen

within anything. our in changes And is We'll the We'll So included regulatory do believe it. adjust we've We'll information the accordingly, make done evaluate act we've through new We'll If other understand not all we've the history. what an final rule it changes. rule. done rule. historically we'll with proposed it. with the or digest or major like just other we there heard

Douglas Coltharp

beat point provider another Yes. history its changes. you at that regulatory agility know has to and Not to demonstrated our chest, I over can that responding don't greater but to adeptness

underlying most to fact the grow the treated currently underlying at need patients and capacity going inpatient demographic. of we that underserved be is effective the do services Those the continue in that. patients by those treating somebody, is of this to those either services and and on demand for are based to expanding this And only country to the rehabilitative in is all

with perspective, we of it comes the regulatory and alacrity will regardless our pipe So continue from business. will to down adjust a we to grow what

Operator

A.J. with Rice will final question UBS. Our from come

Albert Rice

the that's managed that quick programs, incentive you X% type for in discussion those your curious about here. piece if things saying know and along was of lines? discussions overall were or commentary increase of But in to business. any care you're I of a I small arrangement, value-based a the deck A X% couple updated looking any

Douglas Coltharp

previously. the overall it's much their know just redundant we're of that dialogue of don't I see of going in to book I with complex. sound And really we We -- relatively with said it's what still think A.J., small. MA business, plan. terms it's A,

about emphasis ability great our types plan our we models, -- any the of we participate willingness now inquiries we to are to MA and if -- an desire those expressed from get a do in so. So

really outcomes, overall are to manage greatest our Most rate the to of structure parties believe the centering a where clinical efficiency. the what value patients able to the the proposition efficacy involved all on and is benefits discussions we we're case MA of the in to moving

Albert Rice

you hitting demonstration then rates know affirmation above your the the I the said is is Okay. XX%, which project on And target.

that it Do major here, everyone if any you supposed change think was on Do any it have I going a hitting -- to make are of Does targets? right. sense think Any if X-month be a dropped? just the project, the to have go we I we idea? from where of get players they're this?

Mark Tarr

A.J., it's Mark.

As it's initial laid the I months the will end out end of February. now, mean, X at

it's And projected and to XX% to XX%. to up so XX% go from then ultimately

So it to to we would up XX%. expect go

goes is given -- that see think, it's we'll seeing, CMS that the rate seen and from affirmation certainly, I the industry where has here.

you'd entire so the its we're they performing sure. quite industry if But continue is on wonder the noted, they with if demonstration, years, entire As why the X-year would as X you it. well, not note, take

Douglas Coltharp

It's of states the list, following wanted in the where think that some then not initiation had next surprising number Alabama, given the of Texas Florida, identified this ultimately this I has to our they me, Pennsylvania. -- understanding go and They Pennsylvania, demonstration, to notice about that excuse to without on that starting IRFs in up certain given the a states. date in project MAC, given CMS they those have Novitas

are Palmetto. but Pennsylvania in of different hospitals our X with X MAC. a That have all hospitals We is

to demonstration the of Pennsylvania And right Pennsylvania. that our in so as would into hospitals now, extension it stands not be subject

Operator

over will session. turn remarks. any the conclude now or will Miller call for to the additional That I closing Mark question-and-answer

Mark Miller

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

Operator

today's This Thank program. participation. for you does conclude your

You may now disconnect.

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