Q2 2023 ATI Physical Therapy Inc Earnings Call
Good afternoon, and welcome to ATI physical therapy second quarter 2023 earnings conference call and webcast.
All participants will be in a listen only mode.
After todays presentation, there will be an opportunity to ask questions. If you would like to ask a question. During this time. Please press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again the press Star one please.
Please note this event is being recorded.
On the call today is Sharon Beattie, Chief Executive Officer, Chris Cox, Chief operating Officer.
Joseph Jordan, Chief Financial Officer, and Joanne Fong, Senior Vice President Treasurer, and head of Investor Relations I will now turn the call over to Ms. Bonnie.
Thank you Josh good afternoon, everyone and thank you for joining us today.
Quickly cover we'd like to remind you that certain statements made during this call before looking statements that are subject to various risks and uncertainties and reflect our current expectations based on our beliefs assumptions.
And information currently available to us although we believe these expectations are reasonable we undertake no obligation to revise any statements about chain to effect changes that occur after this call.
Descriptions of some of the factors that could cause actual results to differ materially from these forward looking statements can be found in the risk factors section in the company's filings with the Securities and Exchange Commission.
In addition, please note that the company will be discussing certain non-GAAP financial measures that we believe are important in evaluating performance.
Details on the relationship between these non-GAAP measures to the most comparable GAAP measures.
Reconciliation of historical non-GAAP financial measures can be found in the earnings press release as posted on <unk> website and filed with the FCC.
With that I'd like to turn the call over to Sharon.
Thank you Joanne and welcome everyone.
Earlier today, we reported our second quarter 2023 earnings result, and previewed the growing momentum in our performance.
So during this call today, we will share the details behind our strong operating achievements and our 2023 earnings guidance.
So as I sit here today I am a year plus into my tenure here at ATI.
I am privileged to lead this fantastic national care delivery organization that is paving the way in the musculoskeletal ecosystem.
Myself and the entire team are really proud of the progress to date to recover our business.
This doesn't come with luck. This comes with a very deliberate planning around our key enablers to our success. So the first being our leadership team.
That's at multiple levels in the organization, but putting together a leadership team that has the skills and talents to bring the business where it needs to go.
Also very focused on refreshing our culture.
Focusing in on people and aligning on goals to deliver on our purpose.
And lastly, empowering our teams and supporting their success, giving them the tool the right tool people process technology and data.
Allow them to practice at the top of their license and excel in their roles and execute with excellence.
So we've come a long way in recovering our business and where pick our heads up and looking at what next.
The next chapter as transformation and growth.
While hiring clinical ftes.
We will unlock our growth for sure.
We're utilizing transformation and operational excellence to advance our top and bottom line growth.
So turning to the specifics for the second quarter there are many successes.
Frontline team members continue to advance towards operational excellence nearly all of our key performance metrics are improving sequentially and year over year.
The team has momentum and continues to reach new targets.
Our first half track record gives me confidence they will continue to deliver on our financial goals in 2023 and beyond.
So you've heard me talk about the three piece of our practice our pipeline our provider base and our provider productivity. We continue to focus on disciplined execution of these fundamental building blocks driving growth and profitability in our business. So let's start with pipeline demand for P. T for therapy Sports medicine.
Worksite injury and prevention programs remained strong in 2023.
Our therapy referral volumes have exceeded pre COVID-19 levels.
On the people front clinical ftes are growing quarter over quarter.
As our new talent acquisition team and recruiting tactic tactics hit their stride comb.
Combination of hiring and retention has been very powerful for us, allowing us to retain and grow our provider base.
Lastly, we have productivity our productivity level also steadily group have grown quarter over quarter.
Second quarter marked the highest visits per day since pre COVID-19 levels, allowing us to provide outstanding care to more patients every day with fewer clinical ftes.
Chris will provide more details on our operational metrics are valuable transformation activities and other operational improvements were making.
It's really rewarding to see the teams purposeful actions delivering meaningful improvements for our colleagues patients and our business.
Let's take a look at unit economics, our key metrics are also improving here.
Our rate per visit not only stabilized, but it is trending favorably.
Payers are increasingly recognizing the value of high quality physical therapy, and positive patient outcomes, resulting in higher reimbursements.
Now even with modest rate increases physical therapy still remains at a lower cost treatment pathway for musculoskeletal issues beyond the alternative.
Alternatives available.
Equally exciting we're starting to see some payers move to more flexible.
Structures for reimbursement terms.
So for an example on this front, we're proud to be partnering with the payer to expand access to a traditionally underserved population, while ensuring the rates make sense for our practice. This is beneficial to our communities our clinics and to the payer members.
So we've had solid operational achievements combined with strong market demand for therapy, and sports Medicine services, and that's all translating into improved financial performance.
We've seen higher sequential and year over year revenue adjusted EBITDA and profit margins.
Second quarter marked ati's highest revenue since the start of the pandemic in early 2020.
Joe will walk through the financials.
In more detail and our 2023 guidance.
Let me be clear.
Our being deliberate in our plans to deliver long term sustainable growth and generate value for our patients employees communities and our shareholders.
So I've mentioned on previous calls that we will be looking to form strategic partnerships that position hei as a leader through leveraging our national single branded standardized care model.
So many many of you may have read most recently, we announced a partnership to elevate our digital telehealth capabilities.
Now what this does this allows us to create options for patients and meet our patients where they are through our hybrid care model.
Our providers work with patients to develop a personalized treatment plan that integrates virtual physical therapy with hands on care.
I sit here very grateful for our incredible ATI teams. They are laser focused on the best way to bring the ATI purpose to life.
To exceed patient expectations by providing the highest quality of care and a friendly encouraging environment.
With impactful outcomes to improve each patients health.
Every day, our teams are making a difference in our local communities and continue to challenge themselves to realize our full potential.
Now I will turn the call over to Chris to talk about clinic operations.
Thank you Sharon I'm thrilled about the strong operational progress in the first half of this year and simultaneously energized by the remaining opportunities ahead as our field teams continue to execute and our central operations team continues to optimize workflows and processes.
With the goal of enhancing our capacity for care and elevating the patient experience.
I want to thank our clinicians field leaders health services teams in central teams for their continued focus and passion on improving the health outcomes of our patients.
Today I wanted to touch on three themes first four wall performance and execution.
Our progress in removing administrative burdens from our clinics and finally improvements in our revenue cycle.
As it relates to four wall performance labor productivity during the quarter.
With that nine five visits per day per clinical FTE.
This exceeds our high of $9 four that was set last quarter.
Also in the second quarter ATI clinician turnover declined to an annualized rate of 19%, which is on par with pre COVID-19 levels.
In this tight labor environment. This level of retention speaks to Ati's unique culture and is the direct result of our efforts to improve clinic operations and tailor our employee value proposition to each person.
Ultimately provider growth is essential to the continued success of our business. While there continues to be an imbalance in the PT labor market, we increased clinical FTE compared to last quarter, and we'll continue prioritizing efforts that advanced retention and recruitment.
One meaningful example of our strong employee engagement and community impact is the ATI Foundation, which recently relaunched.
The Foundation was started in 2003 as a way for ATI employees and patients to give back to the communities in which they live work and serve.
There was a temporary pause and activities with the pandemic and we have once again opened community grant applications to provide funding to children and adults with physical impairments. So they can lead their most fulfilling lives.
You can follow the foundation on social media for exciting updates and developments on this front.
Our second theme, reducing administrative burdens and clinics has helped to support the four wall performance around productivity and retention that I mentioned.
In our last call I talked about some of the activities, we have underway with leveraging technology and tools.
On the front end, we are achieving greater efficiencies and higher customer satisfaction with our call center initiatives referral management centralized patient intake scheduling and focus on access.
We're about 60% of the way through rolling out our modernized and centralized intake support platform across all 900, plus clinics and we are seeing providers in those markets that are already supported by this model able to spend more time operating at the top of their license.
Focusing on patients and delivering high quality evidence based care. This.
This has always been the goal and we're getting closer to realizing it through our transformation work.
We expect the centralized intake rollout to be completed by the end of the year and what's more this effort is only phase one.
We now have a roadmap going into 2024 that will provide us enhanced digital capabilities patient self service tools and reduce additional administrative efforts in our clinics that will continue to unlock value with.
With fewer distractions from administrative duties and a predictable operating rhythm in the clinic employee satisfaction and ability to focus on our patients continues to rise.
Finally, we made strides in revenue cycle management during the quarter.
On our last call I talked about a larger transformation to move our RCM function to best in class performance.
We have since made the decision to consolidate our relationships and work more closely with a single leading vendor partner to drive collection rates.
This effort will both reduce cost and allow us to employ more automation in our collection efforts.
In the second quarter days sales outstanding improved yet again to another record low of 42 days down from 45 days last quarter.
We have also seen a reduction in bad debt expense driven by technology and process enhancements that we've made internally.
As I've discussed my priority is to drive the innovation of our processes and systems to better support our field in clinic teams, while we still have work to do I'm encouraged by the progress we've made thus far and I look forward to providing updates as we continue building on our momentum.
Now I'd like to turn the call over to Joe to discuss financials. Thank.
Thank you, Chris and thanks, everyone for joining the call today.
As Chris said I'll cover our second quarter 2023 financial results and I'll also review, our 2023 guidance, let's start with the financial results. Our net revenue was $172 million in the second quarter, which is a five 5% increase over the prior year second quarter of $163 million and that breaks down as net pay.
<unk> revenue of $157 million, which increased five 7% year over year with other revenue of $15 million, increasing four 1% year over year, which was primarily due to higher management service agreement revenue.
Visits per day per clinic during the quarter was $25 seven which is a 0.7 visit per day increase quarter over quarter from 25 in the first quarter of 2023 and year over year as a one and a half visit per day increase from $24 two in the second quarter of the prior year.
This increase in clinic capacity utilization and the associated leverage of fixed costs was the largest contributor to the companys improved gross margin.
Rate per visit during the quarter was $104 74.
That's a sequential increase of 9% from $103 76 in the first quarter of 2023, and a one 1% increase year over year from $103 57.
As Chris discussed the sequential increase was primarily the result of favorable contract negotiations and the year over year increase was due to the same favorable contract negotiations as well as service mix.
Yeah.
Salaries and related costs in the first quarter of 2023 second quarter of 2023 was $95 million, which is a six 4% increase year over year from $90 million in Q2 of the prior year and that's primarily due to three three things increased support staff, which enabled our clinicians to spend more time on patient care.
Increases in incentives for our frontline members and wage inflation.
Now PT salaries and related cost per visit during the quarter was $54 81, which sequentially increased three 5% from $52 98 in the first quarter and two 2% year over year from $53 60 for the.
The increases in cost per visit were primarily due to the increased support staff and wage inflation that I previously mentioned and they were partially offset by hybrid higher labor productivity as visits per day per clinical FTE improved one quarter over quarter and for year over year.
Rent clinic supplies contract labor and other was $50 million in the second quarter, which was consistent with the prior year.
Those same costs on a per clinic basis were approximately $54000.
Which decreased four 4% quarter over quarter from 56000 in the first quarter and increased one 6% year over year from 53000 in the second quarter of the prior year.
The sequential decrease from Q1 was primarily driven by spending on the annual National leadership event held in the first quarter that we previously disclosed and that was partially offset by higher contract contractor spend when looking at the year over year increase was mostly due to higher contractor spend.
Our provision for doubtful accounts during the quarter was $2 million or one 5% of PT revenue, which is an improvement over the prior year, which was $4 million two 4% of PT revenue.
The improvement in performance in the second quarter of 2023 was the result of the Companys continued focus on driving improvements within revenue cycle management, which Chris mentioned and the resulting improvements in our collections.
SG&A during the quarter was $37 million, which is a 15% increase year over year from $32 million in Q2 of the prior year is primarily driven by higher transaction costs associated with the TSA closing earlier this quarter, our second quarter, it's partially offset by lower legal settlement fees.
Yes.
Operating loss, excluding impairment charges was $12 million, which is consistent with the prior year as higher revenue and higher associated earnings in 2023 were offset by higher G&A due to the previously mentioned transaction costs.
Interest expense during the quarter was $17 million compared to $11 million in the second quarter of 2022, and the increase was primarily driven by higher interest rates as well as interest from the use of the revolving credit facility.
Income tax expense during the quarter was $100000 compared to income tax benefit of $13 million in the second quarter of the prior year and net loss was $22 million compared to $136 million net loss in Q2 of the prior year with the prior year, including $128 million in impairment charges.
Adjusted EBITDA during the quarter was $9 million.
Or five 4% margin and that increased over the prior year from $5 million, which was a three 3% margin.
And the year over year increase in adjusted EBITDA was primarily due to higher revenue and the associated earnings that come along with that as well as the impact from improved collections that I talked about earlier.
Cash used year to date 2023 was $45 million and a breakdown breaks down as 5 million used to fund operations.
10 million used in financing activities and $30 million used in fine sorry, 10 million used in investing activities and 30 million used in financing activities.
It's important to note that within financing activities and includes $25 million repayment on our revolving line of credit.
Our liquidity as of June 32023 was approximately $58 million and that consists of cash and cash equivalents of $38 million.
And available revolver capacity of $20 million.
In addition, the company may access $25 million of additional funds through the delayed draw term loan which is outlined in the second lien notes purchase agreement subject to certain limitations.
Looking ahead to the full year 2023, we currently expect revenue to be in the range of $680 million to $695 million, which equates to a 7% to 9% growth over 2022.
Now we've had a strong first half of the year, Sharon talked about in terms of pipeline and productivity.
And we have sustained focus on growing our clinical head count, which will also grow visit volumes, which underpin our outlook for the remainder of the year.
We're balancing our optimism with the recognition that reaching full clinic capacity utilization across our fleet will be a multi year effort.
Okay.
For revenue rates, we're modeling an increase of approximately 1% for the full year 2023, compared to 2022 and as a reminder, that contemplates the Medicare physician fee schedule change.
Which included a rate reduction of approximately 2% in 2023, although for ATI. This reduction is partially offset by Medicare bonus payments, resulting from our excellent rating under the Mips program and that offsets approximately half of the rate reduction so I would take it down to 1%. The rest of the rate increase is a result of some of the.
Bayer negotiations that Sharon and Chris talked about earlier as well as general mix.
Yes.
For adjusted EBITDA, We expect 2023 to be in the range of 30% to $36 million, which represents approximately 4% to 5% profit margin and really reflects the solid progress that we're making.
Now while we're pleased with the operational improvements that we've made 2023 adjusted EBITDA remains muted due to the multi year timeframe to execute against our clinical FTE growth plan and optimize our clinic operations as I mentioned.
And as the business continues to ramp up we expect to better leverage our fixed costs and to further enhance profitability with 2000 23 billion a solid step in the right direction.
Turning to our clinic footprint optimization initiatives, we closed four clinics underperforming clinics during the quarter and we opened six new clinics in higher growth markets during the quarter.
Overall, we anticipate a limited number of new clinics in 2023 and also be in select locations with attractive opportunities.
We're focused on maximizing our fleet by expanding where there is demand.
Pursuing lease savings, where possible and where it makes sense, we're continuously monitoring local markets in clinic performance potential for further expansion opportunities, but on balance we would anticipate a net reduction of approximately 20 clinics for the full year 2023.
I would now like to turn the call back over to Sharon.
Thank you Joe.
Solid second quarter 2023 results demonstrate our strategy is working.
We're aligned on our goals and we have the right teams in place to execute with excellence.
We've now delivered multiple quarters of sequential improvement in various key performance indicators and are continuing those trends in Q3.
With each quarter, we are helping more patients successfully reach their health goals, while positioning our business for sustainable long term growth.
This whole team is excited for the second half of the year and beyond.
I look forward to keeping you updated on our progress.
Thank you for joining us today, we will now open the line for Q&A.
At this time, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.
Your first question comes from the line of Brian Tequila.
With Jefferies. Your line is open.
Good afternoon. Thank you you've got <unk> on for Brian .
So my first question would have to be around your guidance expecting 680, 695 million revenues and then 30% to 30 to 36 million and <unk>.
EBITDA, suggesting a ramp in the back half of the year I know that you touched upon you know I'm expecting improvement in terms of visits and then also that 1% rate bump maybe if you can also talk through any other elements or assumptions embedded in the guidance and.
What gives you confidence in that ramp Cisco, we have all of the moving pieces that are included in those numbers.
Hey, <unk>, it's Joe happy to do that thanks for the question.
So some of the other key.
Kpis to think about there as I think about the business. The two most important our productivity of our clinicians and the number of clinicians we have in both of those as well as referrals end up driving our visits.
We've seen a steady ramp Sharon talked about and referrals.
You've seen productivity hitting near all time highs are at all time highs in in the first half of 2023 as we built the forecast for the full year of 2023 were assuming generally a continuation of the productivity we've seen all year and based on what we've seen in the first half plus July there's no reason to.
Think that that would slow down.
And thoughtful on how we.
Provided support to the clinicians to enable them to hit those types of productivity levels and then we assume a steady growth in clinical FTE consistent with what we've seen in the first half of the year beyond that I did touch upon during the script. The revenue rates. So you have that and then within SG&A, maybe the only other thing to think about.
As we did mentioned we had the transaction happened in the first half of the year I think SG&A is assumed to be relatively steady state from an adjusted pro forma it out the transaction.
Joe I think the other would be.
Incremental improvement in our bad debt expense.
Well, it's kind of a secondary factor, but we've seen good performance there.
And then as far as confidence goes Tasha and we built momentum throughout the first half of the year you can see the Q2 results were up relative to Q1. There was in our performance improvement that was pretty significant some of that has a seasonality component to it. There is obviously a seasonality component of the business, but we've continued to see momentum and.
And feel good about about where the business is heading as a result of some of the referral stuff Sharon talked about you can see in the back part of our earnings release. The attrition is really low in the second quarter.
Combination where those trends are going it makes us feel good about the guidance that we put out and when we look at as we created our $6 six for the rest of the year. We looked at they are an out of the risks and opportunities of their balanced. So I think we're pushing that we also are.
We are continuing to make sure we don't get ahead of ourselves.
That's really helpful. Joe and Sharon and then just one follow up looking at rates I know that you had talked about how some of the stronger rate growth due to more favorable contracting just curious how much more of your contracting do you have to do for the year I'm just trying to gauge how much more runway. There is in terms of securing pumps from payors and.
Then.
<unk> point as well on the value based arrangements can you maybe talk to the structure of those agreements and your penetration across.
All of your payer agreements.
What percentage includes value based incentives.
So.
The payer stuff is hard to <unk>, because it's so variable it depends on when we signed the contract with the anniversary is so it's an ongoing throughout the year.
I would say, we've probably touched half of our payers.
And it just it kind of is how the year rolls out and how we put the campaign out so.
I don't I can't give you anything concrete around that percentage of payers that.
Well, possibly.
We will be speaking to a rounder.
And up.
And anniversary increase in rate.
The BBC or the value based care or easier as a creative arrangements that is a very small percentage of our current business.
We certainly are venturing into that space to get more experience and to also.
Capitalize on the benefits of our really our quality care and our great outcomes.
Our Mips is only upside, but it's probably one of the best examples of that.
Our performance in that kind of an arrangement. So I don't think theres anything to share at this point around the DC other than pilots that were.
<unk> engaged in and using those as <unk>.
As learning situations to be able to look at is there a broader offering for the payer market.
Great. Thank you.
Thank you.
As a reminder, if you would like to ask a question at this time. Please press star followed by the number one on your telephone keypad.
Pause for just a moment to compile any remaining questions.
Yes.
Our next question comes from the line of Mike Buskey with Barrington. Your line is open.
Hey, guys.
Thanks for the questions.
Joe is there any sort of guide or or anything additional talk about in terms of expectations for cash flow from ops and capex for the rest of the year.
Hum.
So we didn't guide the cash flow from ops or Capex, but I think you could expect second half capex to be pretty similar to the first half.
And.
I would say overall cash flow probably somewhere in the mid single digit cash usage, which would include.
The investing activities I just talked about.
What about the expectations for it in sort of cash interest in the second half.
Okay.
Cash, it's obviously dependent on the interest rate environment, Mike, but I would suspect it would be similar to Q2.
All things being equal on interest rates the transaction took effect in Q2 and the interest piece of it really took effect back to I believe April even though assigned and in June . So most of Q2 reflects the new.
We use that as a proxy for the second half of the year.
Okay Alright.
As far as.
I suspect this is ongoing but.
You guys have talked about.
Assessing facilities and sort of.
Kind of ranking in the buckets I'm trying to figure out what's going on what's gonna make sense did you guys sell any of our facilities and in the quarter or did I Miss that or can you just sort of update where you are in that assessment.
So Mike you are 100% right. This is ongoing and interestingly when we came out with the information last year as we look at it on a quarterly basis, our watch list and our clothes less does move a little bit, but we did not sell any clinics in Q2.
And I think the the.
Work that we've done really is to take a look at a few things so one.
We as Joe mentioned have closed some clinics and we have a few more that will be closing over the course of the year number two we're really looking at how do we maximize our footprint. So there are some opportunities where we have more demand than the competitive capacity of the clinics. So its not held up by the end of the.
It worked for us.
There is opportunities to look at expansion silica renovations and remodels. So that's kind of the work we're doing right now how do we maximize our current footprint and then I'd say third is we're looking at where the strategic pocket Todd.
For growth and it's just a little bit of a different look than before we're really looking at where we were we absolutely have the demand.
And we have the resources to be able to grow in a market and that will be something that we will be really working on in 2024.
Okay.
I had a sense, maybe maybe three six months ago that there was a little bit more likelihood or urgency around the idea of potentially divesting.
Clinics.
Sounds like maybe with the refinancing that you guys have backed off of that or or am I reading too much into this are you still actively potentially looking at divesting meaningful numbers of clinics or can you just speak to that.
Let me say it again.
Sorry did I break did I breakup.
I was trying to get the numbers quickly for him.
So I don't think I can't say, we haven't slowed down the discipline is still there things have changed a little bit and yes. There is I would say as our as our key operating metrics move up that has also allowed some of our underperforming watch list clinics to start.
Breaking even and getting to profitability, but I would say we have.
<unk> has.
We closed 22 in the first half of the year and.
And those were definitely on the closed list we divested four.
Clinics.
There was another group of clinics that we were looking at divesting and ended up not doing that because of some changes in that marketplace. So I would say, it's I would say the attention hasnt changed but where.
The conclusions from the data have caused us to either continue to close some clinics or.
Move forward and keep some clinics I mean, that's our whole goal is not to be closing clinics dirt.
Getting them to the performance level that allows us to have profitability per clinic. So I think there is a combination of a little dynamicism in the in the marketplace and then also as we improve our performance overall it is helping some of these clinics get to where they need to be with.
We've also changed some of our strategies around referrals and around our talent and so many times when there are clinics that haven't performed it some of it relates to not having.
The rate and attention around either our referrals or having enough talent. If you will to be staffing the clinics and so I would say with the new with some of the changes in our strategy over the last six months instead of peanut butter, we've really focused in on very specific marketplace strategies with <unk>, which in turn have paid off.
Okay Alright.
One more question it sounds like there's not a ton of people in the queue.
I'll ask one more if that's okay.
Thanks.
So last quarter, you guys said, Hey look we're seeing a lot of demand we don't necessarily have the clinical staff in place to sort.
Take care of all the demand we have and I think I asked the question well what type of clinical workforce would you need and I think you guys guess somewhere around 2029 2900, something like that relative to the 2700 Youll have at the end of June .
I understand that a number of these things are sort of multi year, but how long you know given the low unemployment rate I mean, it feels like it may take a while for you guys to get sort of fully what you would consider fully staffed up I mean have you guys thought about that in terms of is that a three year.
Goal or how do you all think about that particular item.
It's a great question Mike.
<unk>.
I think theres two ways to think about it one is what does <unk> and I. Thank you.
You are right those are the numbers, we said we.
We might have been pushed them up a little bit given that.
The continued demand Sir.
So and I have great confidence in our team.
Ta our talent acquisition team really was recreated and fully.
Up to speed or.
In action.
At the end of Q1, and so we're starting to see that traction.
The bigger issue. So I think we're going to be able to keep moving in regards to both retaining our staff and creating a great value proposition for new recruits, but I got to tell you I do not see and yes, there may be high unemployment low unemployment, but on the PD front. This is a macro level issue.
And I think until we start the <unk>.
We start looking at opening up the top of the funnel and getting more PT students into the into the programs and kind of breaking that cycle like other sectors have done. It I think it's going to it's going to take a little bit.
So I think I think ATI is going to do the job they need to do but I also think the macro level trends are going to continue to be headwinds.
Yes.
I'd assume it's at least a three year sort of.
Okay.
Yes.
It's not going to be in my in my when I first started that as I go give it a year and it'll it'll loosen up like many other situations but.
I would I'd be confident to say this isn't going to breakdown.
Before the end of the year and I think 24 is going to be another hard year.
Alright fair enough. Thank you so much guys I appreciate it thanks, Mike.
Okay.
Your next question comes from the line of Bill Sutherland with Benchmark Company. Your line is open.
Thanks, and Hello, everybody.
I was going to talk about the labor issue to.
The one remaining part of that.
Oh sort of questions that I was thinking about is the contractors.
We're.
Can you just talk about the level that you are at.
The percent of your workforce, and where you want to give that to them yet.
Yes, Bill it's Joe the roughly 6% of our workforce right now 185 contractors at the end of Q2.
I think the contractor will be with us for a little while just given the overall labor dynamics, but at.
Some point they are more expensive than.
Sure.
Hei fulltime, Pts or ppas, we'd obviously like to bring the contract or zone. It won't it will never get to zero, but if it gets down to 1% and 2% of our workforce in the long run I think that's where we'd like to be but in the short term because we have so much demand for that.
Therapy at ATI, I think we'll we'll be living with the contract is for a bit.
So we're.
We're using them selectively I know, where you're seeing more than we would normally that using them selectively and markets that are just.
They're they're deserts for recruits so again that is playing into the fact that to Joe's comment that we're going to probably need them.
For the foreseeable future.
I'm not remembering.
A couple of years ago.
Maybe during the road show.
The affiliation you had with a couple of programs I think one was too.
Do you is this.
Is that something that you can.
Where do you still have room to grow can you tool it up.
Yes, great question, though.
So our University relations if you will.
As with any organization kind of fell by the wayside during COVID-19, but we have been multi.
Channel approach and I think I'm really excited about what we're doing on the other side of it it takes a little bit for it to bear.
Bear fruit and so I would say everything from the usual right so bringing in student precept ing, having alumni relationships.
But I would say the other thing that we're focusing on is a little bit of where you're going how do we start working differently with the universities, especially as it relates to both the top of the funnel the number of subs coming in the diversity of candidates and then the ability to prepare them to be.
The successful both in the exam and when they graduate and so that is a more comprehensive approach than just bringing in folks from for their for their clinical and so I think that's the way we have to go and I think it's a comment it's a partnership and I think I don't think ATI is the only one doing this I think it's a partnership with the University.
As to to really.
I would say modernize.
The way.
The whole PT University piece starts and then how we transition those folks into being successful therapists in the in the marketplace.
Got it.
Last one I wanted to ask was on the reduction of the administrative burden.
We have centralized intake.
Sure.
Will we see this.
Mostly in PT productivity or is there a.
Overheads factor that will show up as well.
You'll see it mostly in the productivity.
If you think about the model that were transitioning from.
It was some model some markets for already centralized, but others were running a hub and spoke type of model, where they might have one front desk individuals' supporting five or six clinics. So largely those folks are moving into the centralized model and it gives us the capacity to be able to support their clinics for and for example, when there is a call out.
Theres a resignation, we have the redundancy and the capabilities to be able to cover for that the other thing. It does that we're seeing some leading indicators of is it just helps us to capture 100% of the referrals that are coming in.
You have for example, a clinic where.
The administrative person has been out and the clinicians are all seeing patients in the phone rings and no one answers.
Are we going to happen.
And then finally, we do expect that it will also aid in our retention because it takes things like answering phone calls out of the clinics and really makes that a better environment for our clinicians.
And then and then our patient experience is more it's kind of their first in many cases their first time interacting with ATI in it.
They can expect a standardized experience all data on call handling times.
Service levels as it relates to that initial call. So I think that other that's a key.
Qualitative piece, but certainly an important piece.
Great. That's good color I appreciate it thanks, everybody. Thanks.
Thanks Bill.
Okay.
There are no further questions at this time I will turn the call back to CEO , Sean <unk> for closing remarks.
So I want to thank everyone for joining us today.
And we look forward to coming back together in Q3 and sharing our results in Q3.
Yes.
Thank you and at the end of the call.
This concludes today's conference call. Thank you for joining you may now disconnect.
Yeah.
Okay.
Yeah.
Okay.