Q1 2024 U.S. Physical Therapy Inc Earnings Call
Hello.
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Speaker Change: Good day, and thank you for standing by welcome to the U S. Physical therapy first quarter 2024 earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session in order to ask a question during that session. Please press the star key followed by the number one key on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star.
Star then zero.
Speaker Change: I'd now like to turn the call over to Chris Reading President and CEO. Please go ahead Sir.
Christopher J. Reading: Okay. Thanks, David Good morning, and welcome everyone towards U S. Physical therapy first quarter 'twenty 'twenty four earnings call with me on the line. This morning include Carey Hendrickson, our CFO, Eric Williams, who was our C O O east and Eric will be assuming a larger role in our company as he takes over as president just a few.
Christopher J. Reading: Access to our annual meeting later this month, so we congratulate him on that.
Christopher J. Reading: Graham Reeve, our CLO West Jake Martinez, our senior Vice President of Finance and accounting before we begin our prepared remarks, I'm I'll ask Jay to cover a brief disclosure statement.
Jake Martinez: Thank you Chris. This presentation contains forward looking statements, which involves certain risks and uncertainties. These forward looking statements are based on the company's current views and assumptions the company's actual results may vary materially from those anticipated.
Speaker Change: Please see the company's filings with the Securities and Exchange Commission for more information.
Speaker Change: Thanks Jay.
Jay: Okay, I'm going to keep my remarks reasonably brief but I do want to give you kind of an overview of what I think are some important takeaways for the for the start of the year. So let me begin by saying that while these past few years have not been easy for anybody in our industry I think our team has done some remarkable things in that period, we feel like we are.
Jay: Off to a good start for this year as well for some of you I know that it may feel like this first quarter is a little bit of a disappointment having enjoyed an all time record Q1 in 2023. This quarter was actually ahead of where we expect it to be and that expectation was baked into our original guidance.
Christopher J. Reading: That's what you will see we're updating today.
Christopher J. Reading: While we experienced tough start to the year not based upon demand, which has been very strong, but a rough weather start for sure compared to last year. However, we bounce back very quickly and visits have again.
Christopher J. Reading: Been at or above previous record levels for visits per clinic per day.
Christopher J. Reading: Visits per clinic were all time highs for both February and March of this year and I'm happy to report that April is another all time high for that month.
Christopher J. Reading: Have built slowly, but steadily getting our volume progression. So far this year. So what does that mean well for one it means that our facilities are being recognized and sought out for the great care, we are providing to patients and their families by the physicians who refer to us and.
Christopher J. Reading: So demand has been very high.
Christopher J. Reading: I'll also tell you that staffing while improved its really still the gating factor to be being able to capture even more volume.
Christopher J. Reading: We're working hard on that we have a new leader over that recruiting department and I expect we will continue to make adjustments that will further assist us in meeting the demand we're seeing for services. Our partners are working with the ops team to network differently than maybe we've done in the past to increase the number and the quality of.
Christopher J. Reading: Seeds planted so to speak with respect to talent to clinicians in their markets.
Christopher J. Reading: All hands on deck exercise, but I am buoyed by the fact that demand is really strong and that underpins all of this.
Christopher J. Reading: Coupled with strong demand and record monthly volumes once we get outside of January is the progress. The team has made with respect to net right.
Christopher J. Reading: The impact of a rather large approximately 3.5% Medicare reduction to start the year.
Christopher J. Reading: We were able to produce some uplift in our rate and some improvement in our work comp mix. It created some overall incremental improvement.
Christopher J. Reading: Hope to build upon as the year progresses.
Christopher J. Reading: This first quarter, we saw a non Medicare rate improves.
Christopher J. Reading: 2.8% overall from Q1, 2020, three and up 5% since the same quarter in 2022 and we're not done yet we continue to work to lift reimbursement.
Christopher J. Reading: So the life improving work that we are delivering across the more than 5 million patients.
Christopher J. Reading: Alrighty.
Christopher J. Reading: While demand is also improving.
Christopher J. Reading: Where demand is also improving as in our injury prevention business.
Christopher J. Reading: First you saw a recent acquisition announcement with respect to really terrific company led by Fine team, who recently joined our Briard X partnership.
Christopher J. Reading: That opportunity with further will help us to further broaden our exposure to several additional industry, we call them verticals.
Christopher J. Reading: Essentially industry types, where over time, we expect to gain.
Christopher J. Reading: Additional sales traction as well as cross selling opportunities given that we have a much broader subset of services available now to sell for.
Christopher J. Reading: For the quarter revenue grew nine 8%, which in turn produced a gross profit increase of over 15% I'm very proud of our teams and our partnerships in this area. They continue to attract opportunities for further expansion, while they make a large difference for these companies in terms of the injury stay prudent.
Christopher J. Reading: And the cost that they save as a result of the fine work of our embedded clinical and technical resources.
Christopher J. Reading: We have other highlights to cover so let me turn the call over to Carey to discuss our results in more detail before we open things up for questions.
Carey P. Hendrickson: Thank you, Chris and good morning, everyone.
Carey P. Hendrickson: Our first quarter results as Chris noted were better than we anticipated coming into the quarter driven by strong volumes in February and March and a growing net rate.
Carey P. Hendrickson: As we noted in our release and also on our year end earnings release, we had the significant adverse weather events in January 20th of 'twenty 'twenty four as Chris noted that we knew were going to make comparisons to the first quarter of 2023 challenging since there weren't any significant weather events in the first quarter of last year.
Carey P. Hendrickson: Volumes in January 2024 were light as expected, but finds quickly picked up back up in February and March and we experienced record volumes in each of those two months, our hard work on rate negotiations and our focus on increasing worker's comp as a percentage of overall business continued to take root in the first quarter of 2024 and resulted in a.
Carey P. Hendrickson: That rate increasing year over year, despite the Medicare rate reduction that was in effect for most of the first quarter that Chris noted.
Carey P. Hendrickson: From an EBITDA standpoint, we reported adjusted EBITDA for the first quarter of 2024 of $16 7 million compared to $18 $5 million in the prior year.
Carey P. Hendrickson: We noted in our earnings release at the Medicare rate reduction brought our Q <unk> 2004, EBITDA down by about $1 $7 million and then the adverse weather in January was the negative impact of about $1 $3 million. Our operating results were $7 $7 million in both the first quarter of 'twenty four and the first quarter of 23.
Carey P. Hendrickson: <unk> on a share basis on a per share basis operating results were.
Carey P. Hendrickson: 51 cents in the first quarter of this year versus 59 in the first quarter of last year and that's because of the decrease related to the increase in shares that we had associated with the secondary offering that was completed in may of 'twenty three.
Carey P. Hendrickson: Our average visits per clinic per day in the first quarter was $29 five which is the second highest volume in the company's history and for our first quarter second only to the $29 eight that we had in the first quarter of 2023.
Carey P. Hendrickson: January was at 27, four and that compares to $28 nine in the previous year. So we're down from $28 90, 27, before but then February but the 34 and March was at 38 and <unk>.
Carey P. Hendrickson: Both of those months as Chris noted were higher than the same months in the previous year.
Carey P. Hendrickson: Volumes continued strong in April with our average visits per day, just north of 31 and Thats a record high average visits per day number for the company ever and the first time, we've ever had average visits per day or about 31 per month.
Carey P. Hendrickson: Our net rate was $103.37 in the first quarter of 'twenty, four which was an increase of 25.
Carey P. Hendrickson: Again, despite that Medicare rate reduction that was in fact for most of the first quarter of three 5%. The increase was largely related to our strategic priority of increasing reimbursement rates to your contract negotiations with commercial and other payers and then our focus on growing our workers' comp business, excluding Medicare our net rate was up two 8% versus the.
Carey P. Hendrickson: First quarter of last last year with increases in each of the major categories other than Medicare.
Carey P. Hendrickson: Our workers comp, which is one of our highest rate categories increased nine 3% of our revenue mix in the first quarter of 'twenty, 3% to 10% in the first quarter of 'twenty four and both of those initiatives increasing that rate the rate negotiations and the workers comp business will remain high priorities throughout the year.
Carey P. Hendrickson: Our physical therapy revenues were $134 $4 million in the first quarter of 2024, which was an increase of $5 3 million or four 1% from last year. Despite the setbacks that we hadn't from weather in the Medicare rate reduction.
Carey P. Hendrickson: Increase was driven by having 28 more clinics on average in the first quarter of this year than we had in the first quarter of last year, coupled with the increase in our net rate.
Carey P. Hendrickson: Our physical therapy operating cost were $110 $4 million, which was an increase of eight 1% over the first quarter of the prior year due in part to having 28 more clinics on average in the first quarter than in the first quarter of last year.
Carey P. Hendrickson: Apart visit basis, our total operating costs were $85 50 in the first quarter, which was up from just under $82 in the first quarter of 2023.
Carey P. Hendrickson: Our average cost per visit was high in January because we had less operating leverage due to the lower number of visits and then it returned to more normal levels in February and March which averaged $82.90 per visit.
Carey P. Hendrickson: Salaries and related cost was really the same story there was $61 1.2 cents in the first quarter of 2024 that was up from $59.14 in the first quarter 'twenty three but again the salaries and related costs were high in January but then they returned to more normal levels in February and March which averaged $59 42 per <unk>.
Carey P. Hendrickson: Visit which is comparable to that $59.14 that we saw in the first quarter of 'twenty three.
Carey P. Hendrickson: Our physical therapy margin was 17, 9% in the first quarter 'twenty for that.
Carey P. Hendrickson: Margin was also impacted by January due to having less operating leverage, but then it increased to 26% and fit for February and March on a combined basis, which is back to very close to the first quarter of 2023 margin, which was 21%.
Carey P. Hendrickson: Chris talked about IP, and what a great job. They did in the first quarter revenues were up almost 10% op income was up 15, 1% and that our margin increased 19 eight inch.
Carey P. Hendrickson: Increased from 19, 5% in the first quarter of 23% to 24% in the first quarter of 2024.
Carey P. Hendrickson: Our balance sheet continues to be in an excellent position, we had $143 million of debt on our term loan with a swap agreement in place the places the rate on that debt at four 7%, which as you know is a very favorable rate today's market and it's well below the current.
Carey P. Hendrickson: Tonnes rate and.
Carey P. Hendrickson: In the first quarter of 2024 alone the swap agreement say this $900000 in interest expense with cumulative savings of $4 2 million since we put that in place in the third quarter of 2022.
Carey P. Hendrickson: In addition to the term loan we also have a $175 million revolving credit facility that had nothing drawn on it during the first quarter and we have approximately $105 million of excess cash over and above what we need for working capital ready for deployment into growth initiatives.
Carey P. Hendrickson: <unk>. The April 30 acquisitions that we announced last week, we deployed just over $40 million of cash into acquisitions. So far this year.
Carey P. Hendrickson: Yeah.
Carey P. Hendrickson: As we noted in our release, we're raising our EBITDA guidance range for the full year of 2024% to $82 5 million to $87 5 million, that's an increase of $2 $5 million on both ends of the range. Our guidance previously considered that a three 5% Medicare rate reduction versus last year's rates would be in a play.
Carey P. Hendrickson: <unk> four for all of 2024, however, as we noted in an 8-K that we put out.
Carey P. Hendrickson: And in March Congress address the Medicare reduction and the consolidated Appropriations Act of 2024, and adjusted that reduction from three 5% to one 8%. That's effective March nine through the end of 2024. It was not retro to the beginning of the year, but it will be for that March nine forward at one eight.
Carey P. Hendrickson: Reduction rather than three five.
Carey P. Hendrickson: The outperformance of our internal expectations in the first quarter of 2024 due to our strong volumes in February and March and our continued progress in that rate gives us confidence to raise the range by more than just the $2 million effect that's related to the Medicare rate change, even though it's early in the year.
Carey P. Hendrickson: As a reminder, the expected EBITDA contribution from acquisitions, we've closed so far this year and another one that we expect to close by the end of July are included in our guidance just as they were in our previous guidance.
Carey P. Hendrickson: In closing our first quarter was ahead of our internal expectations February and March were strong month from a volume revenue EBITDA and margin perspective, our net rate grew in the first quarter over the prior year, even with a three 5% Medicare reduction in place for most of that first quarter and we had very good momentum as we start the second quarter.
Carey P. Hendrickson: As evidenced by our average visits per day in April.
Carey P. Hendrickson: And we increased our full year guidance by $205 million to reflect all of those things so with that Chris I'll turn the call back to you.
Christopher J. Reading: Really appreciate it great job. Thank you. So operator, let's go ahead and open up for questions or comments.
Speaker Change: At this time, if you'd like to ask a question early if a comment please press the star and warranties on your telephone keypad.
Christopher J. Reading: Keep in mind, you may remove yourself from the question queue at any time that Christine Star and two.
Speaker Change: Again, it is star and wanted to ask a question today.
Speaker Change: And we'll take our first question from Brian <unk> from Jefferies. Please go ahead. Your line is open.
Speaker Change: Good morning, Brian Good morning, guys. Good morning, Eric Congrats.
Brian: Chris maybe my first question as we think about your commentary that Q2 or Q1 was essentially in line with internal expectations.
Speaker Change: The salaries cost stands out to us.
Speaker Change: Up.
Brian: Three 5% sequentially. So just curious what are you seeing there and what needs to happen for that to maybe normalized or are these the normalized levels that we should be thinking about for me yes.
Brian: Salaries and related cost as a percentage of revenue perspective going forward.
Brian: Yeah.
Speaker Change: <unk>.
Speaker Change: I'm a full carry back in for part of this certainly I think that the impact in January.
Speaker Change: <unk> light revenue life volume, you know impacted us there.
Speaker Change: On a percentage of revenue basis, when we look at the rest of the quarter. The February March numbers, which I'll get carry to revisit here momentarily.
Speaker Change: Those returned to a more normal level and I think thats, a better indication of where we think this will be going forward. So Kerry you want to hit those again quickly.
Kerry: Yeah, you bet so.
Kerry: So fat salaries and related costs in February March they were $59 42 per visit and that is up only slightly from $59 14 in the first quarter of 2023, which is which is a good comparison because January the januarys were so different in each year January.
Kerry: Last year didn't have any weather and of course, we had the weather event and weather events in January of this year. So.
Kerry: That's the better.
Kerry: A comparison and something you should look at for going forward is something around that $59 42.
Kerry: Kind of per visit from a salary standpoint.
Kerry: And that will actually probably go download it varies because theres a certain amount of your at your salaries related costs that are relatively fixed so.
Speaker Change: Yeah.
Speaker Change: A lot of variance with the cost per visit but you do have just some base level of employees that are.
Speaker Change: On that make that fixed.
Speaker Change: So it will vary and probably come down a little bit in the second quarter from the first is what I would anticipate given that we will have that as one of our it's actually usually our highest volume quarter. So that may be a little less in the second quarter, but then.
Speaker Change: Barry a little bit from that as we go into the third and the fourth so.
Speaker Change: I feel like we're in a when a decent place from salaries and related cost. It's just that that January impacted that number quite a bit.
Speaker Change: Because we didn't have the operating leverage that we did in the in the February March months.
Speaker Change: Thanks, Brian.
Brian: Yes that makes a lot of sense.
Brian: Okay.
Brian: And then maybe my follow up question, Gary as I think about it.
Brian: I appreciate your comment that.
Gary: Q1 was within your internal range and you're obviously raising guidance for the year.
Brian: Any color you can share with us to help us think about how you are what your internal.
Speaker Change: Expectations are for Q2 understanding that youre off to a really strong start in April.
Speaker Change: Yeah I mean.
Speaker Change: Gosh.
Brian: You, usually give guidance by quarter, but I would just say.
Brian: We expect it to be at.
Brian: At a level that is.
Brian: That is up from last year's first quarter, the second quarter excuse me and certainly up from where we were in the first quarter of this year.
Brian: It's a lot of it honestly a lot of it is going to depend on what net rate. Obviously and then just how strong those volumes are in April may and June, but thats certainly my expectation I mean, we have we've added acquisitions since the second quarter of last year, we improved our net rate since the second quarter of last year. It certainly should be up.
Speaker Change: Yes, Brian I mean.
Speaker Change: We're not going to get to the point and I know you are not asking us to do this where we're going to guide by quarter.
Speaker Change: I just did that.
Speaker Change: I think that's the right move for us.
Speaker Change: But we're comfortable in the guidance that we updated for for the year and you guys have the hard job of trying to parse that out between quarters.
Speaker Change: No totally understand Chris Thank you for the comments.
Speaker Change: Thank you.
Speaker Change: We will take our next question from Joanna <unk> with Bank of America. Please go ahead. Your line is open.
Joanna: Good morning, and thank you. Thanks for taking the questions here, So I guess coming back to volumes and the comments around the.
Joanna: February and March.
Joanna: We're pretty good months, and then I guess April in particular looks like it's pretty good.
Joanna: So you know the question is what is driving this better volume here and also what do you assume I guess for the rest of the year.
Joanna: So.
Speaker Change: You know I got to tip, my hat to our clinicians and our partners.
Joanna: 95% of whom are clinicians.
Joanna: Theyre doing a great job with patients we're doing I think are better than ever job then outreach not just the physician referral sources, but to communities.
Joanna: Social media other things driving patient frankly, our demand is high enough.
Joanna: If we could.
Joanna: Magically imports staffing on an incremental basis, where and when we need it.
Joanna: Could drive volumes, even higher and so the gating factor for us right now staffing.
Joanna: Teams worked very hard turnover for this quarter. So at the lowest level that I can remember since I've.
Joanna: Looked at turnover going back many many years, so our partners who largely influence that are doing a very good job, we're continuing to work to try to get it down even further.
Joanna: Staffing is really the gating factor demand is high.
Speaker Change: Oh, that's great to hear so essentially I'm at the amount there so forth for the turnover or are you willing to share.
Joanna: The actual percentage of turnover you're seeing among your clinicians.
Speaker Change: It's nicely below 20, I don't want to get into a pattern, where we've got to put it out every single quarter, because it's going to move around a little bit but.
Speaker Change: It's lower than it was last year, and it's well below <unk> at this point.
Speaker Change: Oh, that's great. Thanks, that's helpful. Just to have a multitude of things I was it was good.
Speaker Change: And I guess your other segment.
Speaker Change: And your.
Speaker Change: Industrial injury prevention revenue is up nicely and profits up 15%.
Speaker Change: So that Ah I just want to clarify that this is all organic there is not really the deal that you announced that they didn't even close that in the call.
Speaker Change: Water and Thats right, yes.
Speaker Change: Yeah. Thank you and then what is really driving that I know you'd like Oh.
Speaker Change: With your existing.
Speaker Change: Partners.
Speaker Change: In new clients like I guess, what what's driving that 10% revenue growth and mosquito wisneski translating into profit, but I guess it starts with the top line.
Speaker Change: Yes. Thank you so Eric if you if you. If you can you are you guys are both Eric and Graham doing a great job at.
Speaker Change: Working with these two partnerships partnerships and track.
Speaker Change: Doing a very good job in periodic says has come out really strong. So Eric do you want to you want to speak to that.
Eric Joseph Williams: Yeah, absolutely. It's both of those I mean, we are we are adding new clients, we're adding new verticals. We are heavy in distribution retail heavy in automotive of adding additional manufacturing and distribution.
Eric Joseph Williams: Clients as well I know, we're expanding product lines within existing clients. So it's a combination of both the business development pipeline for both of our NGL prevention businesses Progressive antibiotics are very very deep right now so terrific same store growth terrific new client growth.
Eric Williams: We're really bullish in terms of the direction, we're headed and really excited about.
Eric Williams: The acquisition that we just announced here.
Eric Williams: April 1st.
Eric Williams: <unk> continues to go really really well and we expect good things out of our injury prevention business as we move forward through the year.
Eric Williams: It sounds like is that business staffing maybe is.
Eric Williams: Not a gating factor or would you say you know is it that much.
Eric Williams: Is that alright, or maybe not that much better, but it sounds like maybe better.
Speaker Change: It's different.
Eric Williams: So when you take a look at the big gating factor that we deal within the physical therapy side here, we are predominantly hiring PT and big shortages, those and you really got to be good at recruiting and retention in order to make an impact on your business and as Chris mentioned.
Speaker Change: We're doing well on both fronts there with the best.
Speaker Change: Retention rates, we've had in a long long time when you look at the injury prevention side, we have the luxury of flexibility of going in a different direction from a staffing perspective, so you're looking at athletic trainers in those businesses. So it's a slightly different hiring requirement.
Speaker Change: <unk>, John and Andrew Prevention side, really and we have them.
Speaker Change: Now, they're not all full time positions so a lot of the various accounts.
Speaker Change: Clients that we staff for arent looking for 40 hours a week they could be looking for six hours a week eight hours a week. So it's a challenge for those injury prevention businesses to be able to bundle those positions to have an easier time, finding selling because it's always easier to find somebody full time as part time, so slightly different type of clinical need which makes it a tad.
Speaker Change: Made easy around the injury prevention business as opposed to P. J.
Speaker Change: I would say this and Eric I think Eric did a great job outlining that our turnover rate and injury prevention is really low.
Speaker Change: Job.
Speaker Change: It's lower even than at our facilities.
Speaker Change: And.
Speaker Change: Okay.
Speaker Change: And they've been very creative in.
Speaker Change: So I think that combination.
Speaker Change: Now again, we have more demand at any given point in time and this will always be the case, then we can staff too.
Speaker Change: There's always a bit of a lag but.
Speaker Change: They're doing a really good job right now and I'm proud of proud of that group.
Speaker Change: Oh, great I am talking about D. S. I'd just also clarified.
Speaker Change: Clarification confirmation of when it comes to what's including your guidance. So there was no change in there right.
Speaker Change: Got it.
Speaker Change: The Medicare rate and half a million I guess, it's Q1 I just want to make sure. There's nothing about moving around the deals like I guess, the DSO tracking in line with your initial expectations in terms of the contribution in the in the guidance.
Speaker Change: Yes, I would say this one of the deals that we had.
Speaker Change: We had factored into our original guidance it didn't happen isn't going to happen.
Speaker Change: But we've got other activity and all of that has been.
Speaker Change: As has been included in our guidance for the remaining part of the year and so we had.
Speaker Change: We have.
Speaker Change: Had a little and net net you know.
Speaker Change: We're comfortable where we are for the year at this point.
Speaker Change: Great. Thank you so much.
Speaker Change: Thanks sure. Thank you Joanna.
Speaker Change: We will take our next question for Larry Solow with CJS Securities. Please go ahead. Your line is open.
Speaker Change: Okay.
Lawrence Scott Solow: Great Hey, good morning, guys. Thanks for Hi, good morning.
Speaker Change: Yes.
Speaker Change: Priced.
Speaker Change: Well my thumb it sounds like Medicare.
Speaker Change: No.
Speaker Change: Contracting, but I can tell I think I'll, let me go a little bit.
Speaker Change: Better than expected.
Speaker Change: Good to see.
Speaker Change: Workers' comp I know picking up a little bit.
Speaker Change: On a lag.
Speaker Change: So maybe a little more color on the on the workers comp side and then just overall progression.
Speaker Change: Yeah.
Speaker Change: Eric Why don't you go ahead, and then carry if you have anything to add you can jump in.
Eric Joseph Williams: You bet, yes sure Ron.
Eric Joseph Williams: The work comp side, so we've talked about this on.
Eric Joseph Williams: Number of quarterly calls here over the course of the past year and a half theres been a tremendous amount of effort to really drive both volume and rate.
Eric Joseph Williams: And it's not an overnight turn unfortunately, and we're really starting to see the fruits of the efforts that we've put in here over the course of that timeframe. What are the really key drivers for US here is the fact that since second quarter of last year. We signed 10, new work time Payor contracts four of which came online.
Eric Joseph Williams: Mid Q1, so and we have a number of additional contracts in process just as Karen has a number of different contracts that he is looking to renegotiate rates on so a lot of effort to beef up in this area and we expect this trend to continue as we move forward through the year.
Speaker Change: Yes, Larry I would say that this mix of growing from nine 3% to 10%.
Speaker Change: It's.
Speaker Change: It's both it's both volume and rate so volume picked up.
Speaker Change: Volume outpaced the growth of the other categories. So there have been increase as a percent of the mix and then also net rate increase as well so.
Speaker Change: Good on both fronts and that resulted in that overall mix of revenue increasing.
Speaker Change: Great what about just no no no it's uncertain, but just Medicare outlook, obviously, they reduced their rates.
Speaker Change: A little bit maybe a little bit of relief on that.
Speaker Change: <unk> got some this year I think physician fee schedule and all of that balancing.
Speaker Change: Should be done by next year is that kind of the what.
Speaker Change: Industry pundits believe or not holding you to this but what is sort of that.
Speaker Change: Carl I believe going forward.
Speaker Change: Yeah.
Speaker Change: If I was in the predict what Medicare CMS is going to do business.
Speaker Change: Probably need a couple more jobs.
Speaker Change: So I'm much.
Speaker Change: Im not sure exactly I think we get out of this system that we're in completely in 2026.
Speaker Change: We were actually just a big group of Us in D. C. Now it's been three weeks ago, we had a meeting at the White House.
Speaker Change: Being at HHS.
Speaker Change: We met with.
Speaker Change: The head of.
Speaker Change: They are P. You know the regulatory had we met with a couple of consumer facing groups. We have a bill right now on fall prevention.
Speaker Change: Could be some additional directed volume for us and we met with Medpac and I would say the manpack meeting was was the meeting where we've got more opportunity to help educate them there.
Speaker Change: Regional calculations with respect to the physician fee schedule as it impacted us was based on.
Speaker Change: And a misunderstanding of the code set under which we bill and short they were trying to cut.
Speaker Change: The reimbursement to what they thought were the highest income level of physicians.
Speaker Change: Across their fee schedule physician fee schedule. So included preside tris pain management doctors and in some cases orthopedic surgeons.
Speaker Change: Portions of our code set.
Speaker Change: But we make physical therapy makes up 85% of that code set again, physical therapists, making somewhere in the <unk>.
Speaker Change: <unk> and $90000 a year range and they had no idea of that.
Speaker Change: Yet you know their recommendation to CMS was to cut because they thought they were knocking these highly compensated physicians back in.
Speaker Change: And we ended up being what they called collateral damage.
Speaker Change: Straightening that mistakes don't get fixed quickly in Washington, but we've we've got good line of communication, we've got better data over a period of years with studies and other things that we've done on how much physical therapy saves the system when entered and accessed on a prime.
Speaker Change: Larry Kerr basis, really physical therapy first for muscular skeletal problems and so.
Speaker Change: Well this isn't an easy fight I think it's a fight where facts matter.
Speaker Change: Facts.
Speaker Change: And reasonableness are on our side, we've just got to continue to drive home the message in and be more effective and more diligent.
Speaker Change: Going in Washington, It's a little frustrating, but we're committed to.
Speaker Change: The whole industry with <unk> kind of in a leadership role now alongside the Apta, where we're very focused on making progress.
Speaker Change: Got it no I appreciate that color.
Speaker Change: Just last question where are the points I just noted.
Speaker Change: Net close or close facilities.
Speaker Change: Is that.
Speaker Change: Well. Thank you haven't happened to accelerate on some underperforming facility closures are.
Speaker Change: What's sort of the outlook for net openings.
Speaker Change: Slide 24.
Speaker Change: Yes, I think youll see us was strong openings.
Speaker Change: Similar to what we've done in the last couple of years, we're having a good organic de novo opening schedule.
Speaker Change: For the remaining part of the year.
Speaker Change: We're in good shape through the end of April.
Speaker Change: And then we're finding tuck in very very reasonable prices, where we can we can fold those into strong existing partnerships. So we expect that to go well.
Speaker Change: The closures is really a result.
Speaker Change: Just what we believe is a healthy pairing of facilities that have been around some of those for multiple decades.
Speaker Change: And it's.
Speaker Change: At the end of their useful life and the leases just happened to be up and so they don't carry with them a lot of closure cost. It allows us to focus efforts on where we can get the greatest return it's kind of like.
Speaker Change: Trimming of fruit tree pruning some branches.
Speaker Change: More fruit at the end of the day, so that's what we do.
Speaker Change: Timing is kind of.
Speaker Change: No message there.
Speaker Change: Got it I appreciate that analogy that thanks a lot.
Speaker Change: Yeah.
Speaker Change: Thanks, Laura.
Speaker Change: And as a reminder, if you'd like to ask a question. Please press the star and one key on your telephone keypad.
Speaker Change: We'll take our next question from Mike <unk> with Barrington Research. Please go ahead. Your line is open.
Speaker Change: Hey, Mike Hey, good morning, Mike.
Mike: And so on.
Mike: On the injury prevention, you know, Chris I think maybe a year and a half two years ago or so you know you sort of expressed some caution hey, some companies are pulling back on these types of services concerned about recession and all the rest I mean do you feel like you know in light of the.
Mike: Comment you made about demand improving I mean do you feel like most of these executives has sort of somehow piece with the economic backdrop or can you just speak to.
Mike: You know your sense of that.
Speaker Change: Sure sure. Thanks, Mike Mike you know us you've known us for.
Speaker Change: The entirety of the time I've been here 21 years, now and we tell everybody, what we think and what we're what we're seeing and feeling in hearing.
Speaker Change: Sure.
Speaker Change: Going into last year, we felt like we were seeing from the Ceos and Cfos, who make these decisions in some sectors that they were you know.
Speaker Change: Anxious and they were they were pulling back not just with us, but with a lot of vendors.
Speaker Change: And a lot of areas we're.
Speaker Change: We're not feeling that right now.
Speaker Change: While there may be individual sectors or companies that are still a little tepid relative to the interest rate environment.
Speaker Change: Look I think people demand consumer demand continues to.
Speaker Change: Hi.
Speaker Change: And.
Speaker Change: In part driving some of the inflation that we're seeing.
Speaker Change: Employment is still pretty good.
Speaker Change: And I think there is a sense that deferred.
Speaker Change: It isn't going to run to the rescue anytime soon and this is going to be the state of the state for a while and we're just feeling really good about what we're onboarding, we're seeing good opportunities, we're winning some good fights and.
Speaker Change: I think youre hearing what we think the year is going to look like just like you heard last year that we thought things were going to be a little slower. So, let's just kind of where we are.
Speaker Change: And then.
Carry: This may be for carry or anybody who should take this in terms of the play.
Carry: Place you arent.
Carry: Multi year effort to sort of get better.
Carry: Yeah, more appropriate reimbursement from commercial payers I mean, how how how much work. There do you feel like is is as I understand it will be ongoing for <unk>.
Carry: Yes.
Carry: Awhile, but in terms of the heavy lift what you really wanted accomplished how far into this do you feel like you are at this point.
Carry: Yeah, I'd say, we're through about two thirds of the initial heavy lift if you will.
Speaker Change: As Jim noted, it's an ongoing effort. So when we get done with this we're just start right back over again and go through it there's always opportunities and where.
Speaker Change: So it's a never ending process, but I would say from the initial lift for probably two thirds of the way through.
Speaker Change: And then.
Speaker Change: Just I.
Speaker Change: I guess the last question on just M&A and Chris I heard you say, hey, we're thinking some some.
Speaker Change: Really reasonable prices for some tuck ins and I'm just curious.
Speaker Change: In terms of the conversations you're having are there bigger sort of needle moving deals out there where you would say hey, there's active discussions with the <unk>.
Christopher J. Reading: No it it could come in six months it could come in two years, but are there are there larger deals out there or larger partnerships out there that are looking for exit.
Christopher J. Reading: Exit strategies, and you know, where where you guys could be a reasonable.
Christopher J. Reading: Option.
Speaker Change: Yes for sure and Mike <unk>.
Christopher J. Reading: Interesting time right now.
Christopher J. Reading: I know that from time to time over a period of many years, sometimes Scott criticized a little bit for having a conservative balance sheet.
Speaker Change: Interesting.
Speaker Change: Many of our competitors are really balance sheet constrained.
Speaker Change: So we're able to continue.
Speaker Change: To grow and have discussions and really to create meaningful points of differentiation.
Speaker Change: Not just culturally and in normal life after but really you know predictable stability.
Speaker Change: Cause we're so well capitalized and so youre going to continue to see us grow we're talking to some large and long.
Speaker Change: Our companies I'm, not going to promise timing around that which I know you're not asking for.
Speaker Change: But we're not afraid to grow.
Speaker Change: We want to do it the right way.
Speaker Change: At the same time, we need to meet people, where they are in that.
Speaker Change: <unk> their own personal timing and circumstance and so I think I think we're seeing really good like the deals that we've won recently.
Speaker Change: We haven't been the highest bidder on.
Speaker Change: And yet.
Speaker Change: Not that we've gotten them cheaply the larger ones that we've announced but.
Speaker Change: I think in part, it's because people see us being able to execute on our strategy over a long period of time, where others are beginning to feel the effects of the capital market, which is not in our favor right now.
Speaker Change: Hey, nice start to the year. Thank you.
Speaker Change: Thanks, Mike.
Speaker Change: And once again to ask a question today. Please press the star and one key so on your telephone keypad.
Speaker Change: We can pause for a moment to allow any further questions to queue.
Speaker Change: Yeah.
Speaker Change: And there are no further questions on the line at this time I will turn the program back to our speakers for any closing comments.
Speaker Change: Sure Alright. Thank you. Thanks, everybody. We appreciate your time today.
Speaker Change: Ari.
Speaker Change: Our available later.
Speaker Change: And again as always you know you have questions you want things you want to bounce around we're happy to speak to those thank you for your time today and have a great rescue we buy.
Speaker Change: Bye now.
Speaker Change: This does conclude today's program. Thank you for your participation and you may now disconnect.
Speaker Change: Yeah.
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