Q4 2021 Select Medical Holdings Corp Earnings Call
Alright.
Good morning, and thank you for joining yesterday, but select medical Holdings Corporation's earnings conference call to discuss the fourth quarter and full year 2021 results and the company's business outlook speaking today are the Companys executive Chairman and co founder Robert origin S. L and the company's executive Vice President and Chief Financial Officer Martin Jackson.
Management will give you an overview of the quarter and then open the call for questions before we get started we would like to remind you that 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.
The select medical 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 at this time I will turn the conference call over to Mr. Robert fortunate though.
Thank you operator, and good morning, everyone and thanks for joining us for select Medical's fourth quarter and full year earnings conference call for 2021.
Prior to providing details on the quarter I would like to thank all of our clinicians and operators for all their hard work and efforts this quarter and for the entire year.
Their ability to adjust to the changing COVID-19 variance throughout 2021 is a great testimony to our teams the adaptability and their professionalism.
Our revenues grew nicely in all four of our business segments.
With aggregate revenue growth for the quarter close to 7% and for the year over 12%. However, we also experienced substantial wage pressure in Q4 in terms of agency nursing rage and utilization primarily in our critical illness recovery hospitals.
Marty Jackson will cover these labor increases in more detail in his comments.
As we have done over the past year, we have outlined our business segment monthly revenue volume and occupancy statistics in our earnings press release and public filings, including monthly results from 2019.
This information will provide a data point for each of our business segments prior to the pandemic compared to the current filing we will continue to include this information as long as it provides meaningful insight to.
The impact of COVID-19, and the company's financial performance.
I also wanted to note that we recorded $8 million and other operating income in the fourth quarter and $124 million for the full year 2021 related related to provider relief fund grant payments.
In 2020, we recorded 36 million and other operating income in the fourth quarter and $90 million for the full year 2020 related to these payments.
Adjusted EBITDA results for our critical illness recovery hospitals rehabilitation hospitals and outpatient rehabilitation segment do not include any recognition of these funds.
Concentrix segment does include $1 million in the fourth quarter and $35 million for the full year 2021 of adjusted EBITDA related to these bonds.
Total company revenue for the fourth quarter was 101 $56 billion of six 8% increase compared to the same quarter prior year for the full year total company revenue increased 12, 2% to $6 2 billion compared to $5 5 billion in the prior year.
Revenue in our critical illness recovery hospitals segment in the fourth quarter increased seven 3% to $577 million compared to 538 million in the same quarter. Prior year patient days were up three 2% compared to the same quarter prior year with over 294000 patient days net revenue.
Per patient day increased three 5% to $1946 per patient day in the fourth quarter as case mix Index was 132 in the fourth quarter compared to 130 in the same quarter last year.
For the year revenue in our critical illness recovery hospitals segment increased eight 1% to over 12 of $2 2 billion compared to almost $2 1 billion in the prior year patient days were up one 9% and revenue per patient day increased six 1% compared to the prior year.
Revenue in our rehabilitation hospital segment in the fourth quarter increased 10, 5% to $216 million compared to $196 million in the same quarter. Prior year patient days were up eight 1% compared to the same quarter prior year and net revenue per patient day increased to seven <unk>.
<unk> to $1888 per day in the fourth quarter for the year.
Revenue in our rehabilitation Hospital segment increased 15, 6% to $849 million compared to $735 million.
In the prior year, driven by both volume and rate increases patient days were up 11, 8% as revenue per patient day increased four 2% compared to the prior year.
Revenue in our outpatient rehab segment in the fourth quarter increased seven 8% to $277 million compared to $257 million in the same quarter. Prior year patient visits were up nine 2% compared to the same quarter prior year with over $2 3 million visits in the fourth quarter.
Our revenue per visit was $102 in the fourth quarter.
For the year revenue on our outpatient rehab segment increased 17, 9% to over one point O $8 billion compared to $920 million in the prior year patient visits were up 21, 1% with almost $9 2 million visits for the year are right inevitable net revenue.
Our visit was $102 for the full year.
Revenue in our Concentrix segment for the fourth quarter increased 3% to $411 million compared to 399 million in the same quarter prior year for the occupational health centers patient visits were up eight 3% with over 3 million visits in the fourth quarter revenue per visit in the centers was 102.
$25 in the fourth quarter.
For the year revenue, a concentric increased 15, 4% 12 versus $1 $7 billion compared to $1 5 billion in the prior year for the occupational health centers patient visits increased 13, 4% with over 12 million visits for the year revenue per visit in the centers was $125.
In a year.
Total company adjusted EBITDA for the fourth quarter was $138 $4 million compared to $221 3 million in the same quarter prior year.
Our consolidated adjusted EBITDA margin was eight 9% for the fourth quarter compared to 15, 2% for the same quarter prior year.
For the full year total company adjusted EBITDA increased 18, 3% to $947 $4 million compared to $806 million in the prior year.
Our consolidated adjusted EBITDA margin was 15, 3% for the year compared to 14, 5% in the prior year.
As mentioned previously adjusted EBITDA results for the full year included a $124 million of provider relief funds grant income compared to $90 million in the prior year.
Our critical illness recovery hospitals segment adjusted EBITDA for the fourth quarter was $24 $6 million compared to 75 million in the same quarter. Prior year adjusted EBITDA margin for the segment was four 3% in the fourth quarter compared to 14% in the same quarter prior year the reduction EBITDA was primarily.
Driven by labor cost increases due to utilization of agency staffing.
For the full year critical illness recovery hospitals segment, adjusted EBITDA was $268 million compared to $342 4 million in the prior year adjusted EBITDA margin for the segment was 11, 9% for the full year compared to 16, 5% in the prior year the reduction in EBITDA is primarily related to.
The increased labor cost throughout the year.
Our rehabilitation hospital segment adjusted EBITDA for the fourth quarter was $39 $3 million compared to $42 4 million in the same quarter prior year adjusted EBITDA margin for the rehab Hospital segment was 18, 2% in the fourth quarter compared to 21 six.
Percent in the same quarter prior year, we also experienced nurse agency pressures in our rehabilitation hospitals during Q4.
For the full year rehabilitation Hospital segment, adjusted EBITDA was $184 $7 million compared to $153 2 million in the prior year adjusted EBITDA margin for the segment was 21, 7% for the year compared to 29% in the prior year.
Our outpatient rehab segment adjusted EBITDA for the fourth quarter was $27 6 million compared to $27 7 million in the same quarter prior year.
Adjusted EBITDA margin was nine 9% in the fourth quarter compared to $10 eight in the same quarter.
Prior year for the full year outpatient rehab segment, adjusted EBITDA was $138 $3 million compared to $79 2 million in the prior year. Adjusted EBITDA margin was 12, 8% for the full year compared to eight 6% in the prior year.
Can centra adjusted EBITDA for the fourth quarter was $70 $7 million compared to $69 4 million in the same quarter. Prior year. Adjusted EBITDA margin was 17, 2% in the fourth quarter compared to 17, 4% in the same quarter prior year.
For the full year concentric adjusted EBITDA was $389 6 million compared to $252 9 million in the prior year.
<unk> EBITDA margin was 22, 5% for the full year compared to 16, 8% in the prior year.
Earnings per fully diluted share were 37 cents in the fourth quarter compared to 57 cents per share in the same quarter prior year.
For the full year earnings per fully diluted share were $2 98, compared with $1 93 per share in the prior year adjusted earnings per fully diluted share last year.
Dollars 89, excluding nonoperating gains and their related tax effects at this point I'll turn the call over to Marty Jackson for some additional financial details before we open the call up for questions.
Thanks, Bob and good morning, everyone.
For the fourth quarter, our operating expenses, which include our cost of services and general and administrative expenses.
144 billion, which represents 92, 4% of our revenues.
Same quarter prior year operating expenses were one.
128 billion and represented 87, 8% of our revenues.
Primary driver of increases in our operating expenses is due to increased labor costs, particularly in our critical illness recovery hospitals, we have seen nearly a doubling of agencies nursing rates in Q4, and also an increase in nurse agency utilization in our critical illness recovery hospitals are off.
<unk> done a good job of controlling other operating cost as most have decreased on a per patient day and per visit basis.
As we have mentioned in previous in previous earnings calls our critical illness recovery hospitals strategy.
Just to continue to admit critically complex patients sent to us by our referral partners, even though our labor costs have increased substantially we have developed strong referral relations.
During this pandemic and believe continued acceptance of these referrals will provide for strong relationships.
Okay.
For the full year, our operating expenses.
<unk>, four 3 billion compared to $4 $85 billion in the prior year.
As a percent of revenue operating expenses were 87, 6%.
Both this year and the prior year.
As I mentioned in our Q4 operating expense section the majority of the increases in our expenses are the result of increased labor cost throughout the year.
Cost of services.
We're $1 4 billion.
For the fourth quarter. This compares to $1 two $5 billion in the same quarter prior year.
As a percent of revenue cost of services were 89, 9% for the fourth quarter compared to 85, 4% in the same quarter prior year.
For the full year cost of services were $5 to $9 billion. This compares to $4 $7 billion in the prior year as a percentage of revenue cost of services were 85, 2% for both the full year this year than prior year.
G&A expense was $38 million in the fourth quarter. This compares to $35 2 million in the same quarter prior year.
G&A as a percentage of revenue was two 4% in both the fourth quarter this year.
Same quarter prior year.
For the full year G&A expense was $147 million. This compares to $138 million in the prior year G&A as a percent of revenue was two 4% for the full year. This compares to two 5%.
Prior year.
As Bob mentioned total adjusted EBITDA was $138 4 million and adjusted EBITDA margins.
With eight 9% for the fourth quarter.
This compares to adjusted EBITDA of $221 3 million and adjusted EBITDA margin of 15, 2% in the same quarter prior year.
For the full year total adjusted EBITDA.
It was $947 4 million and adjusted EBITDA margin was 15, 3%. This compares to total adjusted EBITDA of $806 million.
Adjusted EBITDA margin of 14, 5% in the prior year.
Depreciation and amortization.
With $51 9 million in the fourth quarter. This compares to $51 5 million in the same quarter prior year.
For the full year depreciation and amortization was $202 6 million. This compares to $205 7 million.
In the prior year.
We generated $11 $2 million in equity and earnings of unconsolidated subsidiaries during the fourth quarter.
This compares to $9 $8 million in the same quarter prior year.
For the full year equity in earnings.
Were $44 $4 million. This compares.
To $29 4 million.
Sure.
We also had a non operating gain of $2 $2 million in the fourth quarter. This year and a non operating loss of $303000 in the fourth quarter last year.
For the full year.
We had non operating gain of $2 $2 million and nonoperating gains of $12 $4 million last year.
<unk> expense was $33 9 million in the fourth quarter.
This compares to $35 $5 million in the same quarter prior year.
We also recorded interest income of $600000 in the fourth quarter this year.
For the full year interest expense was $136 million. This compares to $153 million.
In the prior year, we also recorded $5 $4 million in interest income this year.
Corded and income tax benefit of $8 6 million in the fourth quarter. This year and income tax expense of $35 1 million in the same quarter prior year.
For the full year, we recorded income tax expense of $129 $8 million, which.
<unk>, an effective tax rate of 20.
Six compared to income tax expense of $111 9 million.
The effective tax rate of $24 five.
Present in the prior year.
Net income attributable to Noncontrolling interests were $16 $5 million in the fourth quarter. This compares to 24.
$9 million in the same quarter prior year.
For the full year net income attributable to noncontrolling interests.
Were $97 $7 million.
This compares to $85 6 million in the prior year.
Net income attributable to select medical holdings.
$39 9 million in the fourth quarter and fully diluted earnings per share or 37%.
Net income attributable to select medical holdings was $402 $2 million for the full year and fully diluted earnings per share.
$2 98.
At the end of the year, we had $3 6 billion.
Landing $74 million of cash on the balance sheet.
Our debt balance at the end of the year included $2 1 billion in term loans $160 million in revolving loans, $1 2 billion and $6 two 5% senior notes.
And $85 million of other miscellaneous debt.
We ended the year with net leverage for our senior secured credit agreement of 377 times.
For the fourth quarter operating activities used $68 million of cash flow. This includes repayment of Medicare advantage is a $75 $7 million and deferred employment employer.
Payroll taxes of $53 $1 million, we expect the remaining balance of the Medicare advances of $83 $8 million.
To be repaid by April of this year.
Our days sales outstanding or DSO was 53 days at the end of the year. This compares to 54 days at the end of the third quarter and 56 days at the end of last year.
Investing activities used $99 $3 million of cash in the fourth quarter. This includes $55 million in purchases of property and equipment and $60 million in acquisition and investment activities during the quarter, including the acquisition of acuity healthcare in this quarter.
Financing activities used $513 $7 million of cash in the fourth quarter. This includes over $660 million to purchase membership interest in Concentrix, which we know 100% of the voting interest.
For the full year operating activities provided over $400 million of cash flow.
Which was after the repayment of $241 million in Medicare advances and the repayment of the $53 million in deferred taxes.
Investing activities used $256 $6 million of cash for the full year. This includes $185 million in purchases of property and equipment.
And close to a $103 million in acquisition and investment activities for the year.
This was offset in part by $26 $8 million of proceeds from asset sales during the year.
Financing activities used $647 $4 million of cash for the full year as I mentioned this included over $660 million of purchase membership interest in Concentrix in the fourth quarter.
The company paid cash dividends to its common shareholders of $16 8 million in the fourth quarter.
<unk> $56 million for the year.
The company also repurchased over 387000 shares of common stock for a total cost of $11 1 million during the fourth quarter.
And 177 million shares for a total cost of $58 6 million for the full year under the terms of its board authorized repurchase program.
Given the uncertainties due to significant increased labor costs, resulting from higher than expected use of agency clinical staff, we're issuing issuing our business outlook at this time for revenue only for 2022, we expect revenue to be in the range of $6 billion to $5 billion.
To $6 4 billion for the full year 2022.
We are also reaffirming our previously issued three year compound annual growth rate target for revenue, which we expect to be in the range of 4% to 6%.
Our 2021 through 2023.
We expect our capital expenditures to be in the range of $180 million to $200 million for this year.
We do plan to readdress, our business outlook target compound annual growth rates for adjusted EBITDA and earnings per common share when the labor climate stabilizes.
This concludes our prepared remarks and at this time, we would like to turn it back to the operator.
Yes.
Sure.
Ladies and gentlemen.
If you have a question at this time please press the star and then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.
Our first question will come from the line of Justin Bowers with Deutsche Bank. Please go ahead with your question.
Hi, good morning, everyone.
So just on the on the withdrawal can you maybe just talk a little bit about the philosophy behind doing that and then.
It sounds like.
The kind of the labor issues are isolated to.
Critical illness.
But we did see some margin compression in some of the other segments in the quarter as well as are you seeing any.
No.
Some labor issues in the other segments as well or do you think it's fairly isolated to <unk> at this point.
Yes, Justin this is Marty good morning.
So we basically have two questions here one is.
The guidance that we provided we provided typically when we provide guidance Justin we provide guidance that we feel comfortable with that.
We we have knowledge of we have very good knowledge on.
Okay.
Very good sight on what our revenue is going to be the unfortunate thing is we're looking at macroeconomic issues in the labor market.
And.
To give you historical numbers, we typically do our salary wages and benefits as a percentage of revenue in our critical illness recovery hospital and the 52% range.
This past quarter, we were at 66% and given that given that large variation. We're just not we just don't feel comfortable providing guidance, where if we did it would have to be.
The spread would have to be so large it just wouldn't give anyone any comfort so for that purposes. We provided on the revenue line, which we feel is very strong.
And.
As we go throughout the balance of this year and we see changes in we hope to see changes in the labor market will provide clarity at that point in time.
Your second question could you repeat that Justin.
Yes, it was just around.
Yes.
Kind of what the labor issues are isolated to al Tac.
Or if youre seeing.
If youre seeing anything.
And the other segments as well.
It looks like margins were.
Came in a little lower in outpatient rehab and <unk>.
And.
Concentric to some degree and if youre seeing anything there or nerf as well.
Yep got it and I guess more importantly on a go forward basis are you.
You know.
Are you anticipating any margin contraction in those segments like for 2022 just directional.
Yeah.
Yes.
As far as the labor cost in our business segments, it's predominantly in the critical illness recovery hospitals.
Thats by far.
<unk> the largest area no. We did see at the end of the fourth quarter some impact associated with Covid co ops, where we had to use agency.
<unk>.
Our rehab hospitals.
And that that was in the neighborhood of $5 million to $8 million those costs.
And we did see some impact associated on the outpatient rehab, where we had a call.
Call offs.
We had to close some of our clinics because.
Many of our clinics, we only have one therapist.
So we had missed visits.
And that was a couple of million dollars, but again that was really it was either someone that had COVID-19 or add to quarantine because they had contact with COVID-19 patients. So it was really a tender 10 to 15 day.
Type of impact we saw a spike in in December we saw that might continue and Destocking in January and that is down very.
Very significantly.
In February .
Okay. So it sounds like.
The other segments largely in control things seem to be isolated to al Tac.
With the ICU CCU nurses.
Okay, and then just on Capex.
You put out a number there but is that can.
Can you just kind of.
Pressure on the development plans for 2022, and where the where the Capex is going.
Yes, the majority of the Capex is really maintenance capex.
We're in the <unk>.
<unk> $30 million to $150 million as far as Capex conservative balance is in development.
And.
To the extent that we have additional on development projects projects coming in this year that may go up a little bit, but right now we feel comfortable in that $180 million to $200 million range.
Alright. Thanks, I appreciate all the detail I'll hop back in queue.
Thanks, Joe.
Your next question will come from the line of Kevin Fischbeck with Bank of America. Please go ahead with your question.
Great. Thanks.
Wanted to go back to I guess the guidance.
For a minute.
I guess your previous guidance had some assumptions about what the right margin would be for each business line has has your view on the target margin for those business lines changed at all or is it more just a near term uncertainty that's causing you to Colby.
Profit guidance.
Yes, Kevin.
The guidance is if you take a look at three of the four business segments now those longer term guidance on those margins that we think are very good.
And I think even in the critical illness recovery hospitals. It is in the near term, we think that our expectations are for the next couple of quarters, we will see some equilibrium in the supply and demand of our nurses in that in that marketplace. I think it's important to note that.
At select.
Being in the post acute we compete with the acute care hospitals to Repower ICU in CCU nurses.
And unfortunately, we're not getting that 20% add on.
For Medicare and that that puts us at a disadvantage.
So we think that once.
Once.
20% add on.
Buyers, we think that will be helpful to us and see the market adjust pretty rapidly.
Yes.
Okay. So so it's really not.
Not just uncertain about labor markets.
The Outback business, that's that's causing.
Yeah.
What we call the profit guidance.
Yes.
Yeah, I'd say, that's accurate and that's it.
I know, it's not something that you're not the first time you're hearing it. So it's it really is primarily in our critical illness recovery Hospital Division and it is the nurses as Marty mentioned, we did have some costs, which.
If COVID-19 continues to go on a downward trajectory that it has been over the last couple of weeks I think youll see that subside and we'll be back to that.
Margins.
All of our business segments that we've had previously.
Okay. That's helpful and I guess you mentioned.
You know COVID-19 subsiding, but the 20% add on for hospitals going away are there any other.
The levers I guess COVID-19 remains elevated.
Yeah, he was getting at.
Extended.
The things that you can do from a rate side or from a labor.
They were management side or anything like that to help kind of create.
Creates an improvement or is it maybe more about that.
The market more broadly normalizing.
Well, yes, there is.
There are things that we can do but they're going to they're going to cost money. So.
You would see a continuation of what you saw in an a and a resurgence of COVID-19 .
And you're probably going to see.
Similar to what we saw in the fourth quarter I mean, we don't we don't expect that but those thing that you mentioned are things that we can do yeah there'll be things that we can do to to get.
Attracting keep nurses, but.
There's got to be cost associated with that.
Okay.
Thats helpful.
And I guess.
I think a lot of the companies are talking about our 2023, you should see that get better Medicare rate update or anything like that so I mean is there a reason to think that there might be some help them there.
It's like it's like we're on the right side for that.
Not really the way to think about it.
Reflect the rate increase in 2023.
Yes, Kevin.
Thats I think Thats fair I think that.
To the east.
To the extent, we see inflationary increases in our expenses youre going to see that in the basket increases we would expect to see that in the basket increases for Medicare.
Okay and then maybe just last question. It seems like you know Covid started to spike at the end of.
December and kind of peaked in January so should we be basically be bracing for a similar cost headwind in Q1 as we saw in Q2 and in the Opex or is it is it actually something you can deal with of course.
In Q1.
Yes, Kevin I think you should expect to see that now we will say that we certainly saw it in January .
We've seen that come down significantly in the month of February .
So I.
I think.
As long as there is no other spike I think.
Should see downward trend between February and March.
But we did see.
Significant impact in the January timeframe.
Okay alright, thank you.
Thanks.
Your next question will come from the line of Bill Sutherland with Benchmark Company. Please go ahead with your question.
Hey, thanks, everybody.
So Marty you were just referencing.
On that trend.
<unk>.
Total compensation cost to revenue.
And <unk> when you said it was still very elevated in January improving.
This month into March.
Yeah.
Or were you, referring simply to put two to that.
As you know.
The labor.
Cause I.
I mean, it was really one that wasn't to say, it's one of the scientists.
It is it is purely focused on the labor cost bill when I when I gave the numbers of 52%.
Salaries wages and benefits as a percentage of revenue.
So it was really just the labor cost and we saw that spike.
In Q4.
And then the January number was very much like that for.
The Q4 number and then you are saying, it's starting to improve in February .
We're saying we are seeing improvements in the February time frame.
To see that in March.
Yeah.
Was it elevated earlier in 2021.
I'm trying to remember when in March.
Not not to the extent that we saw in.
In Q4, I can tell you that.
In Q4 agency rates on average was about $140 $138 to be exact it was about 118 in the first quarter.
'twenty one that dropped.
$207, and then down to $102 in the second and third quarter. So we saw a trending downwards and then we saw this big Spike in Q4.
Yes.
And that was pretty much nationwide that's interesting.
Well that was across all of our critical illness recovery hospitals.
Yeah Okay.
And what was your core and teen rate.
Did they get up into the mid single digits.
At the peak.
The quarantine no it was.
I mean, we're talking about for the.
Companywide our specific division.
I'm thinking yes.
Yes, it will both would be.
Just I'm just kind of curious how you were impacted by that.
Five or 6% for some companies.
Okay.
No. It was it was double digit bill I mean, it was it.
It had a two handle on it it was north of 20% range for our.
Outpatient.
Sentra and our inpatient rehab.
Hum.
Okay.
Switching gears.
Last.
Our last question is on just.
Your priorities for cash now that the Concentrix.
Purchase is complete.
What are how should we think about your priorities.
Cash going forward.
How to return cash to shareholders.
Well.
Those priorities.
Could always be shifting Marty and I have been consistent that we.
We want to be pretty opportunistic I would say that are our plan is to continue the dividend.
I would say that that's.
A priority that will not be abated, we we have development projects that we're constantly looking at as well as some smaller M&A projects on the outpatient and concern for area some development projects and the.
Inpatient rehab and the critical illness side of the business.
Then, we obviously will be looking at.
Debt repayment or stock buybacks.
Okay.
I think all in all of the above is on the table I don't want to be evasive in the question but.
We will we're monitoring all the time in real time, where the best opportunities are so right and make it and they can change.
Well I understand Theres no reason this set of priority list 1234, just you know.
Without.
So.
Alright.
In any given time at any given month.
Some opportunities rise to the top as being compelling and that can be.
And then an M&A opportunity.
Or or something else or stock opportunity.
Sure Okay.
Alright, thanks for the color guys I appreciate it thank.
Thank you Bill.
Okay.
Your next question will come from the line of a J Rice with credit Suisse. Please go ahead with your question.
Thanks, Hi, everyone.
Just a couple of questions maybe on the code Sentra purchase I know a year ago, a little over a year ago January 'twenty one.
Purchase the state you bought was about half as big as the one year by now.
Thank God.
No.
Was it was about <unk> <unk> accretive is it fair I know a lot potentially changed over the last year, but is it fair to think that because the stake is about twice as much its potential.
Potentially about twice as much accretive is that original is that purchase last year.
Yes, I mean, that's that's.
Youre in the ballpark AJ.
Okay.
And I know you just mentioned about some of your capital deployment priorities, but is there anything about the concentrix business.
And I'll bet, you Couldnt pursue and how did you own 100% of it.
We'll.
Look forward with some initiatives more rapidly or move into a little bit.
Incremental way.
No I don't think so I mean, I think that when we were operating can centrally.
The joint venture with some of our minority partners.
I think way we thought about the business was the same way, we would think about it when we owned 100% I mean, they have some good initiatives going going on right now and I think they put out an announcement that we've allocated some capital for them to do some more cutting edge stuff on the work comp business for employer services and so we will deploy some capital.
<unk> to that we'll continue to do acquisitions, a one off or two off on the.
On the Ahmed centers and continue to do development.
I think.
They have accelerated.
Some de Novo.
Projects, which we were not.
Pushing as much during that time.
Time that we have minority partners, but we think that that's a good use of concentric cash to do some de novo's as well so some strategic investments some de novo's and continue with their small acquisitions, I think which is which is very consistent with the way consensual was run.
Prior to the Alaska, a buyout of the minority partners.
Okay.
And then another question was I understand youre not giving.
Our expense guidance.
And probably futile to try to keep talking about that but.
You are giving revenue guidance and I Wonder if you would give us.
So what your assumptions you baked in where do you see can center, where do you see the outpatient rehab business is it is it back to you know.
Sort of pre pandemic levels, maybe even a little better in terms of our same facility type of comparison and obviously the critical access critical illness.
Hospitals.
We're benefiting from some COVID-19 patients with some quicker discharges out of acute care ICU used into your facilities have you sort of assume that that moderates a little bit can you give us some parameters around that.
Sure a J.
Let me start with the critical illness recovery hospitals.
We have seen a substantial.
A reduction in COVID-19 patients that are being admitted to our hospitals.
And one of the things that we're very pleased with is the strong relationships that we've talked about with our referral sources. We've seen this reduction in COVID-19 patients and yet occupancy remains very strong and not only does occupant occupancy remains strong but case mix index is up.
So we think that really.
As we look into the future we believe that that is really.
Terrific event, that's occurring there on the on the Concentrix and on the outpatient rehab side I think in most cases were well above where we were even on a pre pandemic basis, and we continue to see nice growth opportunities in both of those areas and certainly on the inpatient rehab that continues to.
To grow strongly too and the pipeline looks very good there with regards to a joint venture partners.
Okay, maybe one final thing obviously.
There has been some benefit with the public health emergency around the site neutral payments for the critical illness facilities and then there's the Medicare sequestration benefit can you just.
As that rolls off in the second half of the year.
Can you just remind us what the.
Yes quarterly run rate.
Benefit that might go away in the back half of the year is those two things and anything else that we should highlight that kind of thing.
Well, Marty Marty can comment on the sequestration I will say that on the on the site neutral change we don't expect any change what we have we have not.
<unk> utilized the the exception to.
Take the site neutral patients and.
Wait be opposed to extending that.
We've been longtime believers that we want to position the <unk> industry to be a segment that takes highly acute patients and right after the public emergency.
Supporting.
Back to.
So criteria patients to have full criteria patients to benefit from the higher reimbursement and to return the site neutral to the.
A much more reduced.
Reimbursement.
With respect to sequestration I'll, let Marty comment on that yes.
Yes.
Hey, Jay when we take a look at sequestration in the back half of the year to the extent that debt.
Does not continue that represents about an $18 million headwind for us.
For the full second half of per quarter.
For the full second half.
Okay Alright.
Thanks, a lot.
Thank you Ajay.
Your next question will come from the line of Ben Hendrix with RBC capital. Please go ahead with your question.
Hi, This is Michael Murray on for Ben Thanks for taking my question.
It looks like consensus screening and testing revenues decelerated during the quarter and really over the course of the year given the current environment with rabbit tests.
Do you view, the testing and screening outlook for 2022.
And could you give us a general sense of cadence for the segment as we look at a year over year comps.
Thanks.
With regard to the screening.
Yes, we anticipated that would decrease.
Towards the end of 'twenty one.
And certainly going into 'twenty, two we don't anticipate the same amount of revenue and EBITDA coming in from those activities.
As far as could you repeat the second question.
Just just given that declining revenue source could you just help us with.
Cadence through the year and year over year comps as Covid.
Wanes, but the testing.
Revenues also decrease.
Yes, I mean, I think consensus is doing a very good job replacing.
Those dollars associated with the screening and testing so I would anticipate that we'd still see.
Growth in revenue for Concentrix in 'twenty two.
Alright, thank you.
Yeah.
We do have a follow up from the line of Justin Bowers with Deutsche Bank. Please go ahead.
Hey, Thanks for squeezing me back in I, just wanted to follow up on <unk> question and your commentary on acuity being up and in Covid patients.
Being down I just was was the when you look at kind of your mix of patients in <unk> and.
In <unk> and maybe throughout the year was was that lower.
Then <unk> or earlier in the year in terms of like the mix of Covid patients and then could you.
Can you tell us what the what the case mix index was <unk> <unk> as well it sounds like that was up sequentially.
Yes, Justin the case mix index was up in Q4 to 132 and I think we've been in that one three range.
So, yes, it's up nicely.
With regards to it.
Admissions of.
Patients with Covid.
Through the first three quarters.
It was a little bit north of 20% and the.
The fourth quarter it was about 7%.
Okay.
Thank you and then just just a quick modeling one now that Concentrix now that that's.
Wholly owned.
What.
Yeah.
Whats kind of the level of NCI.
We should be thinking about on a go forward basis.
I think it would help help everyone.
With the models.
Yeah, Justin we're going to have to get back to you on that one I think.
Uh huh.
If you don't mind.
Okay, we don't have that.
<unk>.
Yes, I mean, as you know as we acquired more and more concerned.
Over the past.
Over the past two years.
That has come closer to what we anticipate NCI will be but I don't have the exact number for you.
Got it.
Okay. Thanks, so much for the follow ups.
Thank you.
With no further questions in queue at this time I would now like to turn the call back over to Mr. Orton DSO.
Thank you operator, and thanks, everyone for joining us and we'll look forward to updating you again next quarter.
Okay.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation and have a wonderful day you may all disconnect.
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