Q2 2022 ATI Physical Therapy Inc Earnings Call
On product provider productivity I've been working closely with Ray and the field leaders to ensure we support our clinicians remove barriers and allow them to focus on treating patients.
The performance metric, we track is visits per day per clinical FTE, and we seek to strike a balance between increasing access for patients. So they can get back to their best physical health and affording our therapists the space and resources to provide outstanding patient care.
In the second quarter. The metric was nine one which is a quarter over quarter increase of <unk> six visits and represents solid performance by the field team at.
At the same time, the net promoter score remained high at 75 with.
With the investments made in clinical support in the pasture, we can sustainably execute visits per day per clinical FTE across our national platform higher than nine.
Related to our provider base the tight labor market has impacted our pace of hiring and our ability to meet patient volume projections.
Offers with increased wages stimulate movement of providers from one <unk> organization to another and creates a higher reliance on interim contract labor, both adding to our cost per visit.
While referrals and request for Hei services has grown quarter over quarter, our ability to meet demand is constrained by the size of our provider team.
We have been prudent with our actions as the labor market has tightened and wages have increased we remain driven to overcome the market labor headwinds and are taking targeted actions to attractive providers to hei, including expanded recruiting efforts and a steady focus on fostering our employee first culture.
Within the next few weeks, we will also be announcing a new chief people officer, and we will bring her she will bring a renewed focus and Susan guidance to our talent acquisition and people development strategies.
Despite the positive trends in our performance the gap and adding providers is having a direct impact on our ability to deliver our 2022 growth plan.
We are revising our revenue and adjusted EBITDA guidance for full year 2022 to reflect the current labor market and Joe will speak to the details shortly.
It is important that we establish a realistic outlook for hei that acknowledges the labor shortfall balanced with the need to grow our bottom line.
Yes.
Looking ahead, we are evaluating evaluating a baseline operations to position ATI for the long term, we are reviewing our people processes and technologies and digging deeper to understand costs and investments associated with growing the business operating with excellence and serving our patients we.
We are gaining insight into the past for near and long term earnings and cash potential of this business. This work is in progress and we will be providing updates in the months and quarters ahead.
While I don't have all the answers after three months I can share a few additional near term priorities to drive Ati's performance.
Across our national practice, we are undertaking a comprehensive location review to assess the return on investment and form an action plan at.
At corporate we are evaluating SG&A spend and acting on opportunities to be more efficient.
Regarding care delivery, we have identified specific opportunities, where our ATI connect virtual care can increase access and allow us to treat patients sooner.
We expanded our workers comp program and auto personal injury programs in June this year in Illinois, and Texas, and our Texas pilot, we saw greater than 50% year over year growth in the first half of 2022 and a higher rate per visit in Texas due to the workers comp and API mix.
Moreover, we are capitalizing on pent up demand for our Hei Worksite solutions service and are working to execute numerous contracts in the pipeline before year end.
My first quarter as CEO of Hei has not been without its challenges I remain optimistic.
Domestic about the company's future and want to thank our employees patients and investors for their dedication and sport support.
It is from weathering challenging times that good companies get stronger.
I am proud of our accomplishments through the first half and I'm eager to drive forward with intensity and purpose as we deliver on our commitments in the remainder of the year.
And with that let me turn it over to Ray for a detailed discussion of clinical operations.
Thanks sure.
To provide a review of our operational performance in the second quarter discuss some of our field activities and comment on the labor market, which has created some near term challenges for hei and drove the reduced outlook Joe will expand upon shortly.
As we progress through the first half of the year visits per day. During the second quarter was approximately 22400, which was 1300 visits were 6% higher than the first quarter.
The increase was delivered by essentially the same number of clinical ftes performing at a higher level of productivity.
As Sharon mentioned, we saw the provider productivity metric increased to $9 one from eight five in the first quarter.
We were able to execute this due to the increased support staff added in the clinics over the past year, allowing our providers to focus on patient care.
While we work on optimizing daily operations in the clinics and the scheduling hubs. The priority is adding more providers to the team to increase referral conversion and capture additional demand.
We are not where we want to be with growing our clinical team is a competitive labor market is impacting both the pace of hiring and staff retention.
Annualized clinician adds was 38% in the second quarter of 2022 at the same rate as in the first quarter.
Excluding contractors annualized firing was 27% in the second quarter, a 1% increase compared to the first quarter.
As we work to fill open positions in this labor market, we are continuing to rely on contractors to fill gaps.
On our last call I discussed beauty school graduations in May traditionally our biggest hiring season.
We're excited to welcome new Grads, who are joining hei teams with rolling start dates throughout the third quarter.
Furthermore, we are currently deploying new tools and tactics to accelerate experienced clinician hiring.
Annualized clinician turnover in the second quarter of 2022 was 37% a 9% increase from 28% in the first quarter.
When excluding contractors annualized turnover was 27% in the second quarter compared to 23% in the first quarter.
More than half of the quarter over quarter increase in turnover came from contractors as their engagements ended.
Annualized turnover in the prior year comparative quarter was 44% in total and 43% excluding contractors.
Our employee engagement survey results show that the staffing and programmatic changes made in the past year has been viewed favorably by the field.
We believe the culture in our clinics are special and the Hei platform provides an outstanding place for providers to start build and accelerate their careers. We continued to install and refine talent management programs to enable our providers to perform at their best and elevate the PT profession to the benefit of our patients.
One example, I'm proud to report that the CMS recently awarded Hei and exceptional rating under the Medicare Merit based incentive payment system program for the third consecutive year in a score and the 100th percentile for the second consecutive year.
With this rating we will receive Mips bonus payments next year on top of the 2023 Medicare standard rate.
While I am pleased by the progress we have made with attrition in our culture over the past year. We have a lot of work ahead of us and I believe this team is up for the challenge.
The leadership team's ability to manage their business and simultaneously oversee outpatient outstanding patient care has been impressive.
Many of the programs, we implemented to engage our workforce take time to see the full impact and initial indicators show that we're on the right track.
I'm really proud of the entire team who continue to work with one goal in mind, which is getting our patients back to their best selves and I look forward to what this team can achieve going forward.
Now I'd like to turn the call over to Joe for a financial review.
Thank you Ray and thanks to everyone for joining the call today.
I will cover our second quarter 2022 financial results and then go into the company's full year outlook.
Net operating revenue in the second quarter of 2022 was $163 3 million essentially flat from $164 million in Q2 of 2021.
Net patient revenue was $148 5 million, increasing 1% year over year driven by higher volumes.
We offset by a lower rate per visit.
Other revenue was $14 8 million decreasing 15% year over year, primarily due to the sale of our home Health service line in the fourth quarter of 2021.
Visits per day per clinic during the quarter were $24 two sequentially, increasing $1 three visits from $22 nine in the first quarter of 2022.
The quarter over quarter increase was driven by higher labor productivity.
As Sharon discussed while referrals continue to be strong in the second quarter, the tight labor market limited our ability to see more visits in our clinics.
Visits per day per clinic decreased <unk>, one from $24 three in the second quarter of 2021, as we integrated new team members, while continuing to optimize the staffing model and clinic operations year over year.
Rate per visit was $103 57.
Sequentially, increasing 5% from 100 to 306 in the first quarter of 2022.
And decreasing 3% year over year from $106 26.
Despite the Medicare sequestration reduction of 1% that began in the second quarter. There was a small increase in rate per visit quarter over quarter.
And an indication that rates may be stabilizing since the onset of COVID-19 and the concurrent Payor state and service mix volatility.
The year over year decrease was due to the lower Medicare rates on account of the 2022, Medicare physician fee schedule changes and sequestration as well as unfavorable mix shifts in payer states in services.
Salaries and related costs in the second quarter of 2022, or <unk> $89 6 million, an 11% increase year over year from $80 9 million in Q2 of the prior year due to more clinical FTE.
Higher level of support staff in the clinics and wage inflation.
PT salaries and related cost per visit during the quarter were $53 64.
A 3% decrease quarter over quarter compared to $55 47 in the first quarter, driven by improved labor productivity and partially offset by continuing wage inflation.
Comparing year over year, we saw an 11% increase from $48 22 in the second quarter of 2021, primarily due to increased support staff per clinician wage inflation and lower productivity.
Rent clinic supplies contract labor and other in the second quarter of 2022 was $50 4 million, a 14% increase year over year from $44 1 million in Q2 of 2021 due to more clinics and a higher cost per clinic, driven by greater contract labor usage.
Pte rent and other costs per clinic during the quarter was 53 sequentially decreasing 3% from 54000 in the first quarter of 2021, primarily due to seasonal spend relates to clinic events.
An increasing 11% year over year from 48000, driven by greater use of contract labor given the continuing tight labor market relative to 2021.
Provision for doubtful accounts during the second quarter was $3 5 million or 2% of net patient revenue consistent with the second quarter of 2021 at $3 6 million and 2% of net patient revenue.
SG&A during the quarter was $31 8 million or 21% increase year over year from $26 4 million in Q2 of 2021, primarily due to higher public company operating costs, non ordinary legal and regulatory costs and a contingency recorded related to a probable settlement arising from a payer dispute on historic.
Claims.
This increase is partially offset by lower transaction costs from the business combination and the prior year.
Impairment charges in the second quarter of 2022 were $87 9 million for goodwill and $40 million for our trade name both noncash charges.
The impairment was primarily due to an increase in market interest rates and revised near term company expectations.
Operating loss in the second quarter was $139 9 million decreasing year over year from $444 3 million.
The second quarter of 2022 included an impairment charge of approximately $127 8 million, while the second quarter of 2021 included an impairment charge of $453 3 million.
Excluding these noncash charges the remaining $21 1 million increase in operating loss was primarily due to continuing tight labor market, resulting in wage inflation, a greater use of contractors and higher SG&A expenses as previously discussed.
Notable below the line items during the quarter included a decrease in the fair value of certain warrants and contingent common share liabilities totaling $2 7 million.
The mark to market to fair value was based on evaluation and analysis as of June 32022.
Interest.
During the quarter was $11 4 million compared to $15 6 million in the second quarter of the prior year consistent with the reduced outstanding debt pursuant to the business combination in 2021.
And subsequent refinancing of our debt earlier this year.
Income tax benefit for the quarter was $13 million compared to $19 7 million in the second quarter of 2021.
Net loss during the quarter was $135 5 million compared to $439 1 million in the second quarter of 2021.
Adjusted EBITDA during the quarter was $5 4 million or 3% margin decreasing year over year from $24 million or 15% margin.
Similar to the year over year changes in operating loss the year over year decrease in adjusted EBITDA was primarily due to the impact from the continuing tight labor market higher support staff in the clinics and higher SG&A costs.
Cash generated year to date 2022 was $31 million broken down between 33 million used to fund operations 80.
<unk> 18 million used in investing activities and 81 million provided by financing activities.
Cash used in operations included $11 million repaid in connection with the Medicare accelerated and advanced payment program under the cares Act.
As of June 30 available liquidity was approximately $128 million.
Comprised of $80 million in cash and cash equivalents and $48 million and available revolver capacity.
Looking ahead.
Our revised we're revising our full year 2022 guidance revenue guidance is $635 million to $655 million.
Down from $675 million to $705 million.
We are also revising adjusted EBITDA to be in the range of $5 million to $15 million down from 25% to $35 million.
We continue to face labor challenges as provider availability is constrained in the current environment and there is aggressive competition for physical therapists talent.
Ati's provider capacity has limited the number of referrals that we're able to convert in the visit volumes, we're able to see.
While we have been prudent in the face of labor inflation and maintained our head count in the second quarter, Despite a tight labor market.
We need to grow clinician count in order to keep growing the business and improve profitability.
As Sharon mentioned, we are taking targeted actions to aggressively attract talented API.
The revised guidance reflects the anticipated impact of the current labor market and it captures the expected pace of adding clinical FTE in the second half of the year.
We have capacity and demand to see more volume.
Our platform is built to support more clinicians and as a result every 100 clinicians we add in our existing clinics allows ATI to realize approximately $2 million of additional revenue each month.
And approximately $1 million of additional adjusted EBIT each month.
The revised guidance range is driven by the magnitude of the operating leverage each new clinician provides to ATI.
And it reflects the pace at which we foresee growing clinical head count.
Finally regarding new clinics, we opened 22 de novo with year to date in 2022.
We will continue to capitalize on growth opportunities in local markets that provide an attractive return and have labor availability and.
And thus continue to expect to open approximately 35, new clinics for the year.
With that I'd like to turn the call back over to Sharon.
Thank you Joe for the detailed review of financial performance and outlook.
In summary, Hei Hei has and will continue to have a strong commitment to all its stakeholders we.
We are making ati's stronger company operationally and financially.
I continue to look forward to leading this talented team as we write Ati's next chapter.
I have a lot more to learn about the ACI business and physical therapy ecosystem, and we will share with you what I know and Ken today I.
I will also be back to you with more definitive plans and used in the months ahead.
Operator, let's open the call for Q&A.
As a reminder, if you would like to ask a question Press Star then the number one on your telephone keypad.
Your first question today comes from the line of Larry Solow with CJS Securities. Your line is now open.
Hi, Good afternoon. This is stefanos crist, calling in for Larry Thanks for taking our questions.
Hey, Seth.
Yes.
First I just want to start off on the referral pool.
The increase was that predominantly new doctors or perhaps maybe some of the loss referral sources coming back.
And is there a reasonable time period to revamp referrals back to pre COVID-19 levels.
Great Stefanos Hyatt Sharon Thanks for the question.
So.
The first part of the question relates to <unk>.
We've grown the sales team.
Hi.
About 60, BD business development managers, and that's a little that's about 10 less than what we had pre COVID-19.
But we have a combination of going using data to be more sophisticated about where we go in the field and then also we have over 600 clinicians that are actually working in partnership with our BD folks around <unk>.
Developing those referral basis in the community. So a few things specific to your question. One that majority of referrals are from traditional referral sources, our relationships with providers employers and sports medicine, and I'll say, it's a mix of existing and new and we're at about 90%, 96% of pre COVID-19 levels for referrals.
So.
We're moving in that direction I'd say the other big piece here is when I said, the 60 folks that we've brought on.
A good percentage of them have come on in the first in the last six months.
So we're feeling confident that one the team is strong too they're ramping and three were pretty close to our pre COVID-19 levels.
With our referrals right now.
Great. Thanks, so much and.
And then you mentioned.
Visits per day per clinic.
About $24 two.
Is the goal still to get to the high Twenty's versus I think starting in 2019, I guess is that achievable in the next couple of years.
Good afternoon.
As Joe.
Talk to that I think and you heard this on the call I think in the near term the focus is to add clinicians and as Sharon mentioned the referral volume level is pretty high it is getting close to pre COVID-19 levels. So let's say if we had the clinicians today certainly we could get a lot closer to that high <unk>.
But our short term focus has to be on adding people back in and if we do that I think I think the volume will take care of itself, but as we start to add more clinicians I think will hone in on what exactly that target is whether it's high <unk> are getting even back to what a what a 2019 level might've been.
Great. Thanks, so much.
Sure.
Your next question comes from the line of Steph Wissink with Jefferies. Your line is now open.
Thank you good afternoon, everyone I wanted to just.
Second part of the prior question a bit more it sounds like there is no structural reason why you couldnt get back to 2019, if you had the labor pool to support it. So I just wanted to make sure that we're hearing you correctly that nothing has changed in the capacity to see the throughput really just the labor constraint is the only missing piece is.
Is that the case.
Yeah, I think the.
The good news is we know exactly what the issue is and it is it is the adding of Ftes.
So that demand is there the infrastructure to support those ftes are those providers and being productive.
All of those pieces as Ray had spoken we've put in place and so the real key here is having providers to meet that demand.
Alright. Thanks.
Second question, Hey, Steph, maybe just to add on to Sharon's.
We're not we're not quite to the pre COVID-19 referral levels, yet so I mean, I don't want to dismiss we do have a little bit of work to do but it's significantly closer than where we're at from a.
Capacity perspective by having clinicians.
Okay. That's helpful and then I wanted to just.
Breakdown I think Joe you may have talked about the incrementals over 100, clinicians 2 million in revenue $1 million EBITDA per months.
Talk a little bit about the realization of that incremental benefit as you do recruit do you expect it to be relatively linear or are there certain kick points.
And as you hit certain thresholds that you could see the incrementals, even get slightly better.
I would so.
There isn't ramps I guess theres two ways to answer that question, Scott, but I'll approach both of them. There is a ramp time for clinicians and that ramp time is they get pretty close to productivity over the first six weeks to what would be normally full productive clinician as they build up their case loads.
But the other.
The other wildcard in how quickly we realize the throughput is how quickly we're able to tie to hire and grow our clinician base in.
In the first half of the year, we stayed pretty steady from a head count you see it in the Kpis table at the back of the earnings release, that's part of why we revised guidance certainly Sharon mentioned the aggressive actions that we're looking to take and we.
Bank hope that those aggressive actions will pay off but we revised our guidance down to reflect.
What experience we had in the first six months essentially.
Okay. That's very helpful. My last one is just on the contract labor. If you could just help us think through the cost burden, whether it's on a per visit cost per day cough up when you think about it.
Our contract labor versus FTE.
Yeah. So good question.
I made a few things here. So one we're certainly relying on contractors more this year than we have been in the past and a.
Quarter over quarter.
It's still not.
6% of our overall provider base, but it's.
And relative to this year or certainly have more contractors. So the cost of the contractors is.
Is adding it's increased our cost per visit by approximately 15%.
And so and then the obviously the wage difference for the contractor versus that full time PT is about 60%, so and thats grown year over year because of the.
Increase if you will in the in the demand for contractors, which in turn has caused their wages to collaborate.
So did.
Does that answer your question around the increase in the cost per visit.
Yes, I think so I guess the interpretation then would be as you bring on more vertical labor contract labor, we should start to see some benefit both from capacity, but also on the wage differential.
I'll also be a tailwind.
That's very helpful. Thank you so much.
Your next question comes from the line of Peter Chickering with Deutsche Bank. Your line is now open.
Yes. Good afternoon, guys. So a couple of quick questions here I guess looking at the back half of your guidance is just a lot of it.
Parts of our now can you just remind us of what the seasonality should be seamless.
First <unk> and kind of that perspective.
Where should your exit rate for this year.
Hey, Peter This is Joe I can take that.
Exit rate as you can imagine is going to be highly dependent on how successful we are with adding clinicians and maybe if I just even step back for a second and think about our original guidance and forecast as I look across the kpis.
Revenue rate productivity of our clinicians even the expenses in the middle part of the P&L and frankly, our referrals, which don't directly make it into the P&L they've all been pretty in line with the original guidance that we put out to the public.
One item that spin off is the number of clinical Rfps and Thats, what led to the revised guidance.
So as I think through the second half of the year in particular, the exit rate from Q4 is going to be highly dependent upon how successful we are with adding people to the extent that we're able to add 100 hundred 50 people to our overall clinician base that probably puts us closer to the high end of the range and with a in turn higher exit rate, but as you.
You can see the midpoint of the guidance has us doing Q3, and Q4 relatively consistent with Q2 and that would suggest that were relatively flat with with head count. So.
Not a perfect answer there, but I think as we make progress over the next quarter or two with aggressive actions that will start to become clear not only to us but to you and investors Thats here results, Yeah, and I would just add of course, there is always a timing factor here and so I think.
It will also be how quickly through from August and September .
Will we be able to pick up the head count versus India trickle over the course of the next nine months.
Maybe one other thing Peter.
On to the end of that freight rates commented on our attrition rate, which we've seen come.
Come down granted there was a small increase Q1 to Q2, but a couple percent. If we look at it compared to where we were last year. There was a pretty significant improvement in our attrition rate and as I just talked about the Kpis and then you layer attrition on top of that I think it really comes down to hiring and hiring does feel like something that we will be able to solve overtime.
The question is just how much time.
So thats why its hard to predict the Q4 exit rate and Thats why frankly in the in the script, we talked about the flow through.
Incremental margin on <unk>.
Clinicians so that.
We and you could make an assessment on the results of the business moving forward.
Okay, and then so I guess digging on.
The Libre question, the the PT salaries per visit in Q.
Q2 is down versus the second quarter of 2018, so pre COVID-19.
Soon after the temperature whole margins as revenue per visit has decreased.
Is that what is that.
What's leading to the spike of.
Turnover sequentially, because if you exclude contract labor.
<unk> 22 versus 2018 theory, the SCE rate is actually even lower than it was at <unk>. I guess the question is how sustainable is that right and can you guys hire with federate or do you guys need to start increasing those rates <unk>. Let me, let me jump in on that as well the rate is the PT rate is actually higher.
In Q2 of 2022 versus.
2021, so maybe if we could and it's probably up 4% year over year on average if we look across kind of our Cds, Pts ptas somewhere above the 4% range.
So maybe we would have to and we could I take it offline work through the math of how youre getting to lower.
And I would just add I mean, we obviously need to be looking at the competitive nature of our.
Our salaries.
From a retention and attraction. So we're hyper focused on that.
And staying up with the market in actually making sure that we're in sync and I suspect the delta between your math in our math is that contractors are included in our clinical FTE number however.
Contract Labor the dollars is in the separate line that's called out on the P&L.
Okay. Yes. So this is just coming from your Kpis, saying that the PT salaries.
It was $53 64 in Q2, 2002, which looks down which was $55 21 and <unk> 19.
Yes.
Yes.
So I guess I guess, just wondering as a follow up here.
A lot of people graduate school I guess.
Are you guys, losing to your peers, our PT going into two other sort of areas within healthcare I guess, just a broad question. So where are these PT going and kind of what.
What changes that that math to get them.
Hey, guys. Thanks, so much.
So if you just Peter I'll jump in with a few pieces. So first of all.
There is a strategy for folks that are coming out of school new grads.
And that period is right now and I think ray can talk to it a little bit we've seen changes in just the whole behaviors as people coming out of school and taking their tests and whatnot. So thats one piece I'd say the second piece is how do we how do we continue to refresh our strategies around attracting existing.
TTS until we actually.
Has in the last three weeks enhanced our tactics and different ways of doing that is continuously looking at had to reach folks and let them know how how great a place ATI is torque.
So Greg why don't you talk a little bit about what you have seen from a PT lens sure.
Sure. So so I think we all know it's a tightening.
Tight competitive market.
As <unk> come out Theres, a subset of those students that want to work in our physical therapy, and that's a subset of folks that we really want to make sure that we're getting out in front of us. So we've used new.
Having the process and procedures Sharon mentioned it to get in front of those people, but ultimately at the end of the day. If you just kind of touched on in terms of making sure. Our salaries are comp is competitive but it's also really around two things, making sure that we have the support that they need to do we didn't want to do which is treat patients.
Not do admin work and things like that but it's also the professional development, making sure that CE use internal development mentoring programs, making sure all of those things are in place. So these candidate and see us as somewhere where they can not only start their career, where they can grow their career over the years. So that's really what we're focusing on.
And making sure were putting our best foot forward for those subset of students that want to work in the outpatient center.
I think the last the last piece that we've touched upon is contractors right <unk>.
Contractors churn.
Quick frequently they're obviously, a higher cost to us and theyre not theyre not the stable team that we need so our ability to move away from contractors over the course of the next months six months is very important.
The only other thing that I'd add is we have been hiring people either we're maintaining our head count we're not we're not losing our head count to build on what Sharon was the same contract labor is definitely different than where it's been in the past, which means that thats a new employer. So when we go when we compete for new hires where not only competing against our peers, but we're competing against contract labor.
Companies that are hiring new grads to be contract labor, which is a little bit different I think holding our own in this market. It feels consistent with at least what we can see from other public companies, but we do need to grow and I talked about that in the script Shannon talked about that in the script.
So we're we need to be more aggressive in that probably involves not just new hires but experienced hires as well and thats a different strategy for US. Okay. And then last question I apologize, but can you get can you go over sort of.
Free cash flow generation for this year.
Our revised guidance.
Any issues with covenants with this new guidance excellent.
Yes, so I'll.
I'll start with this is Joe I'll start with the second part of that question Tito no issues with covenants. Our covenants are pretty light until we get to Q2 of 2024. There is just a minimum liquidity covenant that requires us to have.
30 million of cash slash availability.
So no covenant issues and we don't foresee any in the in the near term from a liquidity perspective, we ended the quarter with roughly $128 million of liquidity do you expect the second half of the year.
Still be a cash burn and.
Likely gets us to somewhere around $90 million of liquidity as we exit the year.
Right now as you can imagine we're focused on not only our near term actions, but we're thinking about 2023 and that planning process for 2023.
Ultimately want to work back to being a cash flow breakeven company, yet I don't think that thats going to be the answer for 2023, but making progress against where we were in 2022 will be important and adding clinicians to our business to see demand will help us take care of that.
Great. Thanks, guys.
Yes.
Your next question comes from the line of Mike Kotecki with Barrington Research. Your line is now open.
Yes, Hi, Mike Hi, Mike Hi.
Joe I, just want to make sure I caught the end at the end of that last answer did you say in two.
2023 that you didn't see a possibility of being cash flow neutral is that what you said.
I said, we're still working through 2023, I don't expected possibilities.
That feels pretty strong word, but we got to we start to work through it as you can imagine Mike.
Expectations are we're going to improve from where we are this year, which is a pretty significant cash burn.
And then go from there beyond 2023.
Okay.
Sharon I think at the at the top of the call you mentioned a location review and I guess I guess, what I'm wondering is what specifically is being reviewed and to what end is there a possibility that at the end of this year there are less facilities, even with the de Novo plans you have but lesson.
Facilities on a net basis and where we are today I mean does that is that possible you conduct this review.
So good question Mike.
It's a comprehensive review at the clinic level looking at all aspects Fred is looking at the market the profitability the future potential dis synergies within the market and other relationships that we have.
And that will you know.
That will be.
That assessment will allow us to think about.
Investment decisions and what we may be doing in particular markets I don't see that playing out and the net between now and the end of the year and from an action perspective, but certainly the assessment and then the ability to look at that.
But there are no significant plans for decreasing the footprint and then obviously, we will look at that as it relates to 2023, our capital framework and where we'll be going with additions.
So it's a work in progress Mike, but it's something we take very seriously and the work is going on to help us take a look at it.
And Sharon I think on the last call you said, hey, I'm going to I'm going to take the next 100 days I'm going to really do a deep dive I'm going to learn as much as the candidates next 100 days.
I guess understanding that there's still more to dig into here what have what do you feel like you've learned in the last hundred Dave.
Okay.
Great Great question I've learned a lot.
In the past 100 days I.
I would say first of all that.
<unk> has a very very strong culture.
And it's something that has carried them through many years.
And it's something that we think is most important to the foundation of the organization.
The national footprint, and just having that geography 900 clinics over 25 states is very valuable in fact that we have a standard platform.
Evidence based guidelines that standard EHR is great.
It's a great asset to the organization.
I would say that.
The demand is here.
The demand is here for ATI.
And we've shown that through the referrals.
And our ability to get back to.
Our almost pre COVID-19 levels.
And then I would say people are really proud to be working for ATI.
They either are recently joined <unk> been here for a little while and they're really proud of what we have to offer here and just being part of a leading organization and then I'd say the last is our patients.
Appreciate us.
We started digging into our NPS and what we're hearing from our patients and they very much value the care they receive.
And I think that the clinical reputation is enhanced store or a fine point is put on it by our recent announcement of having our Mips.
Award at a 100% excellent.
So I'd say and then the last I've said before.
In my in my comments the chassis right. We have a chassis that is allowing us not only to support the clinics. We have now, but it's been developed to grow too.
To grow the organization and to scale and so I think all of those pieces.
<unk> been really both informative for me and <unk>.
Creator.
A situation where.
I'm excited to be here and I can see a lot of potential going forward as we move past this provider challenge.
Gotcha, Okay can I throw in one last one it's.
Not an easy one.
In terms of as you sort of are out there.
Seth.
<unk>.
The big issue in terms of hiring.
Is there any way for you guys to SaaS, how much sort of lasting damage was done by sort of the change in benefits and sort of what kicked this whole thing off in terms of your.
Your clinician attrition issue I mean is there any way to sort of a SaaS.
That's sort of reputation damage sort of hurt you guys.
Sort of on an ongoing basis of dissipating is there any way for you guys to actually assess how how much that's affecting you in terms of hiring people.
Yes, so I'll start Mike and then I'll look to my colleagues, who have been here a little longer than I have.
But I would say the biggest challenge we have right now.
That is a result of some of the previous.
Some of the previous challenges is.
Not just trying to maintain our ftes, we have aggressive targets to grow our ftes and so coming out of Covid and some of the actions that we took that may have increased the attrition levels.
That kind of the macro level situation of of the workforce tightening up post Covid and then R gap that we wanted to sell.
Is is very.
It's really what's making it challenging for us so I would say clearly our patients and providers want to use ATI and send us patients and then I would say the strength of our culture and our attrition numbers are really confirming that ATI is a great place to be and.
I think as.
He gets less about I don't think we damage our reputation to the extent that people don't want to come here, whether it be patients providers or in place.
I think the challenges we just had is a bigger gap than other organizations.
To be able to grow versus just maintain and make sure that our workforce is steady.
I look to my colleagues, who have been here a little longer than they want to add anything.
Highlight you mentioned share in terms of when I think about.
As a brand.
And what it means to our referral sources.
Referral accounts kind of reflect that we have work to do but referrals have been positive. They continue to grow so that makes me feel good about with the outside referral community thinks about ATI and then internally what can be employees, which is the PC industry think about ATI. Our attrition continues to get better continues to improve.
We're not there yet so work to do but also we've done some employee surveys.
Yes.
Last few months.
And again, indicating that we're focusing on the right things that we're engaging with our people in the right way things are slowly getting better we still have work to do there are still things that we want to rollout improve upon but I think overall it tells a good story about what we've been focusing on and Thats the right things over the past.
Several months and years so so.
That's how I think about.
What our brand is all about these days.
There's a lot to work from here I am not concerned that we are damaged and cannot move forward.
Gotcha. Thank you so much.
Your next question comes from the line of Steph Wissink with Jefferies. Your line is now open.
Thank you I had a follow up question on your hiring to date I'm wondering if you can talk a little bit about the trend line I can see quarter to quarter that it looks pretty stable. The turnover has stepped up a bit but just can you talk about the inbound hiring has it improved at all as we've entered the back half or has it gotten moderately worse.
Thank you.
Yes.
Yes, thanks for the question.
So we were looking at using back half of the year. So I'm sorry, So you can run it.
For Q1 Q2.
Yes, Q1 to Q2 and I don't know if you want to possibly talk about quarter to date into the third quarter I'm, just trying to get a timeline assessment.
Year to date.
Yes.
Great Hey, guys from Q1 to Q2 the.
Hiring has stepped up modestly as well.
As Ray talked about and in his part of the call. Our turnover has gone up slightly from Q1 to Q2, our head count has stayed relatively stable, which means that the hiring has also improved or increased slightly to offset the minor increase in turnover.
As we look ahead to Q3, we have pretty limited data at this point.
If I combine July and August , which is really where we have some insight into the net of those two is adding.
People, but it's not enough to talk about a trend for the second half at this point.
Okay.
Yes.
Thank you thanks very helpful.
Steph I was just going to add we have more of a focus on hiring <unk> versus PTA, which we've had in the past since of the Pts.
Or a little bit.
<unk>.
Tighter right now to higher so that's the other kind of the focus we've had over the course of the last few months and quarters excuse me.
Okay. Thank you so much.
Okay.
There are no further questions. This concludes today's Q&A session I'll turn the call back over to the speakers.
Great. Thank.
Thank you everyone for your time today.
I certainly appreciate everyone's participation.
And all the question.
And I also am grateful to everyone's support for my first quarterly earnings call at ATI.
Look forward to future opportunities to connect and thank you for your time today.
This concludes today's conference call. Thank you for attending you may now disconnect.
[music].
Uh huh.