Q2 2024 Select Medical Holdings Corp Earnings Call
Operator: Good morning, and thank you for joining us today for Select Medical Holdings Corporation's earnings conference call to discuss the second quarter 2024 results and the company's business outlook. Speaking today are the company's executive chairman and co-founder, Robert Ortenzio, and the company's senior executive vice president of strategic finance and operations, Martin Jackson.
Operator: Good morning, and thank you for joining us today for Select Medical Holdings Corp relations earnings conference call to discuss the second quarter 2024 results and the company's business outlook.
Good morning, and thank you for joining us today for select Medical Holdings Corporation's earnings conference call to discuss the second quarter 2024 results and the company's business outlook.
Operator: Speaking today are the company's Executive Chairman and Co-Founder, Robert Ortenzio, and the company's Senior Executive Vice President of Strategic Finance and Operations, Martin Jackson. Management will give you an overview of the quarter and then open the call for questions.
Speaker Change: Speaking today are the Companys executive Chairman and co founder Robert Ortenzio, and the company's senior Executive Vice President of strategic Finance and operations Martin Jackson.
Operator: Management will give you an overview of the quarter and then open the call for questions. Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company, including, without limitations, statements regarding operating results, growth opportunities, and other statements that refer to Select Medical's plans, expectations, strategies, intentions, and beliefs. These four forward-looking statements are based on the information available to management of Select Medical today, and the company assumes no obligation to update these statements as circumstances change. At this time, I will turn the conference over to Mr. Robert Ortenzio.
Speaker Change: Management will give you an overview of the quarter and then open the call for questions.
Operator: Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company, including, without limitations, statements regarding operating results, growth opportunities, and other statements that refer to Select Medical's plans, expectations, strategies, intentions, and beliefs. These four looking statements are based on the information available to management of Select Medical today, and the company assumes no obligation to update these statements as circumstances change.
Speaker Change: Before we get started we would like to remind you that this conference call may contain forward looking statements regarding future events or the future financial performance of the company, including without limitations statements regarding operating results growth.
Speaker Change: These and other statements that refer to select medical's plans expectations strategies intentions and beliefs.
These forward looking statements are based on the information available to management of select medical today and the company assumes no obligation to update these statements as circumstances change at this time I will turn the conference over to Mr. Robert Ortenzio.
Robert Ortenzio: Thank you, operator. Good morning, everyone.
Robert Ortenzio: At this time, I will turn the conference over to Mr. Robert Ortenzio.
Robert Ortenzio: Welcome to Select Medical's earnings call for second quarter 2024. Before I address our second quarter results, I wanted to highlight a few items. First, we successfully completed Concentra's initial public offering on July 26. The extraordinary efforts of many of our consensual select colleagues throughout the process have been greatly appreciated. Venture issued 22,500,000 shares at an IPO share price of $23.50 and now trades under the symbol CON on the New York Stock Exchange.
Robert Ortenzio: Thank you, operator.
Robert Ortenzio: Thank you operator, good morning, everyone welcome to select Medicals earnings call for second quarter of 2024.
Robert Ortenzio: Good morning, everyone. Welcome to Select Medical's earnings call for second quarter, 2024.
Robert Ortenzio: Before I address our second quarter results, I wanted to highlight a few items. First, we successfully completed an initial public offering on July 26. The extraordinary efforts of many of our consensus select colleagues throughout the process are greatly appreciated. Conventor issued $22,500,000 shares at an IPA share price of $23.50 and now trades under the symbol CON on the New York Stock Exchange. The underwriters of the IPA transactions have a 30-day option to purchase an additional $3,000,375,000 shares of consent or common stock. For like medical, still owns 82.23% of consent for stock, or 80.09% if the underwriters exercise their full allotment.
Robert Ortenzio: Before I address our second quarter results.
Wanted to highlight a few items.
Robert Ortenzio: First.
Robert Ortenzio: The underwriters of the IPO transaction have a 30-day option to purchase an additional 3,375,000 shares of concentric common stock. Select Medical still owns 82.23% of the consent for the stock, or 80.09% if the underwriters exercise their full allotment. Select expects to distribute its remaining interest and concentrates with shareholders within 12 months of the IPO as required by the private letter ruling from the IRS. In connection with the plan separation, Concentra entered into financing arrangements which included a new senior credit facility consisting of $850,000,000 of a seven-year term loan, a $400,000,000 five-year revolving facility which was undrawn at closing, and $650,000,000 of 6.875 senior notes due 2032
Speaker Change: We successfully completed consent curious our initial public offering on July 26, the extraordinary efforts of many of our Concentrix black colleagues throughout the process.
Speaker Change: Greatly appreciate it.
Robert Ortenzio: Debenture issued.
Robert Ortenzio: <unk> 2.500 million shares in an IPO share price of $23.50 and now trades under the symbol C. O N on a New York stock exchange.
Robert Ortenzio: So the IPO transaction have a 30 day option to purchase an additional 3.375 million shares.
Robert Ortenzio: The central common stock.
Speaker Change: It's like medical still owns 82 point to 3% of concentric stock or 80.09% if the underwriters exercised their full allotment.
Robert Ortenzio: Select, expect to distribute its remaining interest in consent for its shareholders within 12 months of the IPO as required by the private letter ruling from the IRS.
Speaker Change: Select expects to distribute its remaining interest in concentric to its shareholders within 12 months of the IPO as required by the private letter ruling from the IRS.
Robert Ortenzio: In connection with the plan separation, consent for entered into financing arrangements which included a new senior credit facility, and justing of $850,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 1,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 have been placed among the top in a nation for 2024-2025. They are at number four Kessler Institute for Rehabilitation, number 14 Banner Rehabilitation Hospital, number 20 Baylor Scott and White Institute for Rehabilitation Dallas, number 23 California Rehabilitation Institute in Los Angeles, number 24 Cleveland Clinic Rehabilitation Hospital, and number 38 Ohio Health Rehabilitation Hospital in Columbus. This marks the 32nd consecutive year the Kessler Institute has been named among the nation's best hospitals for rehabilitation in the fourth year in a row for Baylor Scott and White Dallas at Ohio Health.
Speaker Change: In connection with the planned separation concentric entered into financing arrangements, which included a new senior credit facility consisting of $850 million seven year term loan at 400 million five year revolving facility, which was undrawn at closing.
Speaker Change: 650 million of 6.8 75 senior notes due 2032.
Robert Ortenzio: The majority of the net proceeds from the Concentra IPO and related debt transactions were used by Select to pay down debt; Consensual will be holding, and hosting their first conference call later this morning at 10:30 Eastern Time where they will provide more detailed information regarding their performance and insight into their business. On another positive note, U.S. News & World Report recently issued its annual Best Hospitals list. I'm pleased to share with you that six Select Medical Rehabilitation Hospitals in 12 locations have been placed among the top in the nation for 2024-2025.
Speaker Change: The majority of the net proceeds from the concentric IPO related debt transactions were used by select to pay down debt.
Speaker Change: Okay. Thanks, sure we'll be holding those.
Speaker Change: Sticking their first conference call. Later this morning at 10 30, Eastern time, where they were where they will provide more detailed information regarding their performance and insight into their business.
Robert Ortenzio: They are at number four, Kessler Institute for Rehabilitation. Number 14, Banner Rehabilitation Hospital. Number 20, Baylor Scott and White Institute for Rehabilitation, Dallas. Number 23, California Rehabilitation Institute in Los Angeles. Number 24, Cleveland Clinic Rehabilitation Hospital and No.
Speaker Change: On another positive note U S News and World report recently issued its annual best hospitals list.
Speaker Change: I need to share with you that six black medical rehabilitation hospitals at 12 locations.
Speaker Change: Had been placed among the compensation for 2020 for 2025.
Speaker Change: They are at number four Kessler Institute for rehabilitation.
Speaker Change: 14 banner rehabilitation Hospital number 20, Baylor, Scott and White Institute for rehabilitation Dallas.
Speaker Change: 23, California Rehabilitation Institute in Los Angeles.
Speaker Change: Number 24.
Speaker Change: Clinic rehabilitation.
Robert Ortenzio: 38 Ohio Health Rehabilitation Hospital in Columbus. This marks the 32nd consecutive year the Kessler Institute has been named among the nation's best hospitals for rehabilitation and the fourth year in a row for Baylor, Scott & White, Dallas, and OhioHealth. This recognition spotlights the commitment of each hospital to providing the highest quality of care to patients and their families every day. It also demonstrates the dedication of every team member to our culture of delivering an exceptional patient experience.
Speaker Change: Hospital, and number 38, Boi, Ohio Health rehabilitation hospital in Columbus.
This marks the 30 <unk> consecutive year that Kessler Institute has been named among the nation's best hospitals for rehabilitation in the fourth year in a row.
Speaker Change: For Baylor, Scott and White, Dallas, and Ohio Health.
Robert Ortenzio: This recognition spotlights the commitment of each hospital providing the highest quality of care to patients and their families every day. It also demonstrates the dedication of every team member to our culture of delivering an exceptional patient experience.
Speaker Change: Ignition spotlights the commitment of each hospital, providing the highest quality of care to patients and their families every day.
Speaker Change: Also demonstrates the dedication of every team member to our culture of delivering delivering an exceptional patient experience.
Robert Ortenzio: On the development front, we opened a new critical illness recovery hospital with a distinct rehabilitation unit in Chicago with Rush University System adding 44 critical illness and 56 rehab beds on April 9th. We are on target to open a 48-bed rehab hospital in Jacksonville, Florida, later this year with our partner, UF Health Jacksonville. The joint venture hospital and a hospital branded UF Health Rehabilitation Hospital North will be located in a new tower of UF, UF Health. There are many other exciting development projects we have in the works for 2025 and 2026 in the Inpatient Rehabilitation Division.
Robert Ortenzio: On the development front, we opened a new critical illness recovery hospital with a distinct part rehabilitation unit in Chicago with Rush University Health System, adding 44 critical illness and 56 rehab beds on April 9th. We are on target to open a 48-bed rehab hospital in Jacksonville, Florida, later this year with our partner, UF Health Jacksonville. The Joint Venture Hospital and Hospital, branded UF Health Rehabilitation Hospital North, will be located in a new tower of UF Health. There are many other exciting development projects we have in the works for 2025 and 2026 in the Inpatient Rehabilitation Division. To recap...
Speaker Change: On the development front, we opened a new critical illness recovery hospitals with a distinct rehabilitate distinct part rehabilitation unit in Chicago with Rush University system, adding 44 critical illness, and 56 rehab beds on for Mike.
Speaker Change: We are on target to open 848 bed rehab hospital in Jacksonville, Florida later, this year with our partner UF Health Jacksonville.
Speaker Change: Got your hospital in a hospital branded UF health Rehabilitation Hospital, North will be located in a new tower of U F. You have health.
Speaker Change: There are many other exciting development projects, we have in the works for 2025, and 2026 and the inpatient rehabilitation Division.
Robert Ortenzio: To recap, in 2025, we're opening our fourth rehab hospital with Cleveland Clinic in Fair Hill, our second hospital with UPMC in Central Pennsylvania, and our fourth rehab hospital as part of our joint venture with Banner in Tucson, Arizona.
Speaker Change: To recap.
Robert Ortenzio: In 2025, we're opening our fourth rehab hospital with Cleveland Clinic in Fairhill, our second hospital with UPMC in Central Pennsylvania, and our fourth rehab hospital as part of our joint venture with Banner in Tucson, Arizona. In 2026, we're planning to open a new 60-bed rehab hospital in Southern New Jersey, the Bacharach Institute for Rehab, in partnership with Atlanticare, and are scheduled to open a new freestanding 63-bed rehab hospital in Ozark, Missouri, with Cox Health System.
Speaker Change: In 2025, we're opening our fourth rehab hospital with Cleveland Clinic, and Fair Hill, Our second hospital with U P. M C in Central Pennsylvania, and our fourth rehab hospital is part of our joint venture with banner.
Speaker Change: Tucson, Arizona.
Robert Ortenzio: In 2026, we're playing to open a new 60-bed rehab hospital in Southern New Jersey, the Backrack Institute for Rehab in partnership with Atlantic Air, and our schedule opened a new free standing 63-bed rehab hospital in Ozark, Missouri with COX Health System. Overall, we are very pleased with the development results and the pipeline for our specialty hospital divisions. Between the specific projects you just mentioned, as well as some other smaller expansions and new distinct part units in existing hospitals, we plan to add 449 additional beds to our operations from the remainder of 2024 through 2026. The additional beds consist of 423 rehab hospital beds, which includes 54 non-consolidating beds and 26 LTCH beds.
Speaker Change: 2026, we're planning to open a new 60 bed rehab hospital in Southern New Jersey Bacharach Institute for rehab in partnership with Atlantic Air and are scheduled to open a new freestanding 63 bed rehab hospital when it was dark, Missouri with Cox health system.
Robert Ortenzio: Overall, we are very pleased with the development results in the pipeline for our specialty hospital division. Between the specific projects just mentioned, as well as some other smaller expansions and new distinct part units in existing hospitals, we plan to add 449 additional beds to our operations from the remainder of 2024 through 2026. The additional beds consist of 423 rehab hospital beds, which includes 54 non-consolidating beds and 26 LTCH beds. There are also many other opportunities under evaluation that would further increase our select specialty hospital footprint.
Speaker Change: Overall.
Speaker Change: We are very pleased with the development results in the pipeline for our specialty hospital divisions.
Speaker Change: Between the specific projects just mentioned as well as some other smaller expansions in new distinct part units and existing hospitals.
Speaker Change: Plan to add 449 additional beds to our operations from the remainder of 2024 through 2026.
Speaker Change: The additional beds consist of 423 rehab hospital beds, which includes 54 non consolidating beds and 26 L. Pack that there are so many other opportunities under evaluation. They would further increase our select specialty hospital footprint.
Robert Ortenzio: There are also many other opportunities under evaluation that would further increase our select specialty hospital footprint.
Speaker Change: Okay.
Robert Ortenzio: This quarter, our outpatient rehab division added 15 clinics, the eight de novo's, and three acquisitions, total of seven clinics. This is offset by the closure of 500 performing clinics and the fold-in of seven clinics into existing operations upon lease. The pipeline for future growth remains strong, with 16 executed leases for Genovo clinics scheduled to open later this year, along with one clinic acquisition in North Jersey.
Robert Ortenzio: This quarter, our outpatient rehab division added 15 clinics via eight de novos and three acquisitions, a total of seven clinics. This is offset by the closure of five underperforming clinics and the fold-in of seven clinics into existing operations upon lease expiration. The pipeline for future growth remains strong, with 16 executed leases for DeNovo clinics scheduled to open later this year, along with one clinic acquisition in North Jersey. Moving on to the second quarter results. We will continue in 2024 with another strong Corps.
Speaker Change: This quarter, our outpatient rehab division added 15 clinics via eight de novo's and three acquisitions totaled seven clinics. This is offset by the closure of five underperforming clinics in the fold in of seven clinics into existing operations upon lease expiration.
Speaker Change: The pipeline for future growth remains strong with 16 executed leases for de Novo clinics scheduled to open later this year along with one clinic acquisition in North Jersey.
Robert Ortenzio: Moving on to the second quarter results, we continue 2024 with another strong quarter. The hospital divisions continue to exceed our expectations, with the impatient rehabilitation division returning double-digit growth in both revenue and adjusted EBITDA for the second straight quarter this year. Overall, our consolidated adjusted EBITDA grew 3% and revenue grew by 5% compared to Q2 of the prior year, with all four divisions exceeding prior year revenue. For the quarter, total company adjusted EBITDA was $226.3 million compared to $219.5 million in the prior year. Our consolidated adjusted EBITDA margin was 12.9% for Q2 compared to 13.1% in the prior year.
Speaker Change: Moving on to the second quarter results.
Speaker Change: We continue to 2024 with another strong quarter.
Robert Ortenzio: The hospital divisions continue to exceed our expectations, with the Inpatient Rehabilitation Division returning double-digit growth in both revenue and adjusted EBITDA for the second straight quarter this year. Overall, our consolidated adjusted EBITDA grew 3% and revenue grew by 5% compared to Q2 of the prior year, with all four divisions exceeding prior year revenue. For the quarter, total company adjusted EBITDA was $226.3 million, compared to $219.5 million in the prior year.
Speaker Change: Hospital Division continued to exceed our expectations with inpatient rehabilitation division returning double digit growth in both revenue and adjusted EBITDA for the second straight quarter. This year.
Speaker Change: Overall, our consolidated adjusted EBITDA grew 3% and revenue grew by 5% compared to Q2 of the prior year with all four divisions.
Speaker Change: Exceeding prior year revenue.
Speaker Change: For the quarter total company adjusted EBITDA was $226 $3 million.
Speaker Change: Third to $219 5 million in the prior year.
Speaker Change: Our consolidated adjusted EBITDA margin was 12, 9% for Q2 compared to 13, 1% in the prior year.
Robert Ortenzio: Our critical illness recovery hospital division continues to perform well, with a 5% increase in revenue and a 10% increase in adjusted EBITDA compared to same quarter prior year. Critical illness incurred 3.6 million of startup losses related to new hospitals this quarter, compared to 5.1 million in the same quarter prior year. Current quarter startup losses primarily relate to the opening of our specialty hospital in April, and while our occupancy was slightly down from same quarter last year at 67%, down from 68%, our average daily census increased 1%, our rate per day increased by 4%. Our adjusted EBITDA margin was 11.9% for the quarter compared to 11.4% in prior year Q2.
Speaker Change: Our critical illness recovery Hospital Division continues to perform well with a 5% increase in revenue and a 10% increase in adjusted EBITDA compared to the same quarter prior year critical illness incurred $3 6 million of startup losses related to new hospitals this quarter compare.
Speaker Change: To $5 1 million in the same quarter prior year.
Robert Ortenzio: Our consolidated adjusted EBITDA margin was 12.9% for Q2 compared to 13.1% in the prior year. Our critical illness recovery hospital division continues to perform well with a 5% increase in revenue and a 10% increase in adjusted EBITDA compared to the same quarter last year. Critical illness incurred $3.6 million of startup losses related to new hospitals this quarter compared to $5.1 million the same quarter last year. Current quarter start-up losses primarily relate to the opening of Rush Specialty Hospital in April.
Speaker Change: Current quarter startup losses, primarily relate to the opening specialty hospital in April.
Robert Ortenzio: And while our occupancy was slightly down from the same quarter last year, at 67% down from 68%, our average daily census increased 1%. Our rate per day increased by 4%. Our adjusted EBITDA margin was 11.9% for the quarter compared to 11.4% in prior year Q2. Critical illness experienced a 1% reduction in their salary, wages, and benefits to revenue ratio compared to prior year Q2 with a 56.1% margin, nursing agency utilization decreased 14%, and agency rates decreased by 4% compared to same quarter last year. Orientation hours decreased 12% from prior year Q2. Nursing sign-on incentive bonuses decreased 18% from prior year Q2.
Speaker Change: While our occupancy was slightly down.
Speaker Change: From the same quarter last year.
Speaker Change: 67% down from 68% our average daily census increased 1%.
Speaker Change: Our rate per day increased by 4% our adjusted EBITDA margin was 11, 9% for the quarter compared to 11, 4% in prior year Q2.
Robert Ortenzio: Critical illness experienced a 1% reduction in their salary wage and benefits to revenue ratio compared to prior year Q2, with a 56.1% margin. Nursing agency utilization decreased 14%, and agency rates decreased by 4% compared to same quarter prior year. Orientation hours decreased 12% to prior year from prior year Q2. Nursing sign-on incentive bonuses decreased 18% from prior year Q2.
Speaker Change: Critical illness experienced a 1% reduction in their salary wage and benefits to revenue ratio compared to prior year Q2, we have 56, 1% margin.
Speaker Change: Nursing agency utilization decreased 14% and agency rates decreased by 4% compared to same quarter prior year.
Speaker Change: Orientation hours decreased 12% to prior year from prior year Q2, nursing sign on incentive bonuses decreased 18% from prior year Q2.
Robert Ortenzio: On the regulatory front, yesterday afternoon, CMS issued the finest LTAC rules for fiscal year 2024, which will be effective October 1st of this year. Final rule includes a 2.6% increase in the federal base rate, which is higher than the proposed rule at 2.4%. The high cost outlier threshold increased by $17,175 from 59,873 to 77,048, which was higher than the increased outlying the proposed rule of 15,524. The MSL LTAC DRG relative weight and expected length of stays were also updated in the final rule. As previously mentioned, our inpatient rehab hospital had a very strong quarter with 11% increase in revenue and 13% increase in adjusted EBITDA compared to Q2 prior year.
Robert Ortenzio: On the regulatory front, yesterday afternoon, CMS issued the final LTACH rules for fiscal year 2024, which will be effective October 1st of this year. The final rule includes a 2.6% increase in the federal base rate, which is higher than the proposed rule at 2.4%. The high-cost outlier threshold increased by $17,175 from $59,873 to $77,048, which was higher than the increase outlined in the proposed rule of $15,524. The MS LTCH DRG relative weight and expected length of stay were also updated in the final rule.
Speaker Change: On the regulatory front yesterday afternoon's CMS issued the final <unk> rules for fiscal year, 2024, which will be effective October one of this year.
Speaker Change: Final rule includes a two 6% increase in the federal base rate, which is higher than the proposed rule at two 4% the high cost outlier threshold increased by $17175 or 59873 to 77000 or <unk> 48, which was higher.
Speaker Change: And the increased outline the proposed rule of 15524 the.
Speaker Change: The MSL Tech DRG relative weight and expect that length of stay were also updated in the final rule.
Robert Ortenzio: As previously mentioned, our inpatient rehab hospital division had a very strong quarter with a 11% increase in revenue and a 13% increase in adjusted EBITDA compared to Q2. Inpatient rehab incurred $3 million in startup losses this quarter, primarily related to the opening of Rush Specialty Hospital Unit in April, compared to no startup losses in the prior year. Average daily census increased 7%, and our rate per patient day increased 5%. However, our occupancy of 84% was consistent with the prior year.
Speaker Change: As previously mentioned, our inpatient rehab Hospital Division had a very strong quarter with 11% increase in revenue and 13% increase in adjusted EBITDA compared to Q2 prior year.
Robert Ortenzio: Inpatient rehab incurred 3 million of startup losses this quarter, primarily related to the opening of Rush Specialty Hospital unit in April, compared to no startup losses in the prior year. Average daily census increased 7% and our rate per patient day increased 5%. Our occupancy of 84% was consistent with prior year. The adjusted EBITDA margin for 23.1% for Q2, which was higher than the prior year margin of 22.7%.
Speaker Change: Inpatient rehab incurred $3 million of startup losses, this quarter, primarily related to the opening of our specialty hospital unit in April compared to no startup losses in the prior year.
Speaker Change: Average daily census, increased 7% and our rate per patient day increased 5%.
Speaker Change: Our occupancy of 84% was consistent with prior year.
Robert Ortenzio: The adjusted EBITDA margin for inpatient rehab was 23.1% for Q2, which was higher than the prior year margin of 22.7%. This week, CMS issued the final inpatient rehab rules for fiscal 2025, which are effective October 1. The final rule includes a 1.97 percent increase in the standard federal payment rate, which is higher than the 1.79 included in the proposed rule. The high-cost outlier threshold was increased to $1,620, which is slightly less than the $1,735 increase in the proposed rule.
Speaker Change: The adjusted EBITDA margin for inpatient rehab was 23, 1% for Q2.
Speaker Change: Which was higher than the prior year margin of 22, 7%.
Robert Ortenzio: This week, CMS issued the final inpatient rehab rules for fiscal 2025, or effective October 1. The final rule includes a 1.97% increase in the standard of federal payment rate, which is higher than the 1.79 included in the proposed rule. The high cost outlier threshold increased $1,620, which is slightly less than the 1,735 increase in the proposed rule. The CMG relative weights and average length of state values were also updated in the final rule. Concentra experienced an increase of 2% in net revenues and 1% adjusted EBITDA for prior year-same quarter. The increase in revenue was driven primarily by a 4% increase in rate, which was attributed to state fee schedule increases, along with a higher mix of workers' comp visits.
Speaker Change: This week CMS issued the two.
Speaker Change: Final inpatient rehab rules for fiscal 2025 water effective October one the final rule includes a 197% increase Ms. Daniel Federle payment rate, which is higher than the $1. Seven nine included in the proposed rule.
Speaker Change: The high cost outlier thresholds increased $1 $620.
Speaker Change: Which is slightly less than the 1735 increase in the proposed rule.
Robert Ortenzio: CMG relative weights and average length of stay values were also updated in the final. Concentra experienced an increase of 2% in net revenues and 1% in adjusted EBITDA over the prior year same quarter. The increase in revenue was driven primarily by a 4% increase in rates, which was attributed to state fee schedule increases, along with a higher mix of workers' comp visits. Consistent with the first quarter, Concentra's work comp volume remained strong with an increase of 2 percent.
Speaker Change: CMG relative weight in average length of stay values were also updated in the final rule.
Speaker Change: Sentra experienced an increased 2% net revenues and 1% adjusted EBITDA below prior year same quarter.
Speaker Change: Increase in revenue was driven primarily by a 4% increase in rate, which was attributed to state fee schedule increases along with a higher mix of workers' comp visit.
Robert Ortenzio: Consistent with the first quarter, Concentra's work comp volume remained strong, with an increase of 2%, which was offset by a 4% decrease in employer-based visits, which are reimbursed at lower rates. Demand for employer-based visits have normalized compared to the COVID years, where we experience a significant churn and labor force. We expect a decrease in employer-based visits to level off in the near future. Concentra's adjusted EBITDA margin was 21.3% for the quarter compared to 21.5% in the same quarter prior year. Our patient rehab division experienced an increase of 4% in revenue, with patient volumes increasing by 4%, and net revenue per visit of $100 consistent with prior year.
Speaker Change: Consistent with the first quarter consensus work comp volume remained strong with an increase of 2%.
Robert Ortenzio: It was offset by a 4 percent decrease in employer-based visits, which are reimbursed at lower rates. Demand for employer-based visits has normalized compared to the COVID years, when we experienced a significant churn in the labor force. We expect a decrease in employer-based visits to level off in the near future.
Speaker Change: Offset by a 4% decrease in employer base visits which are reimbursed at lower rates.
Speaker Change: <unk> for employer base visits have normalized compared to Covid years, where we experienced a significant churn in labor force.
Speaker Change: We expect a decrease in employer based visits to level off in the near future consensus adjusted EBITDA margin was 21, 3% for the quarter compared to 21, 5% in the same quarter prior year.
Robert Ortenzio: Consentra's adjusted EBITDA margin was 21.3% for the quarter compared to 21.5% in the same quarter last year. The Outpatient Rehab Division experienced an increase of 4% in revenue, with patient volumes increasing by 4%, and net revenue per visit of $100 consistent with the prior year. Our volume continues to maintain an upward trend, and net revenue per visit has stabilized with improvements in commercial managed care rates, offset by a decrease in our Medicare rates. The outpatient division's adjusted EBITDA decreased 12% compared to the prior year, and the adjusted EBITDA margin went from 10.8 to 9.1. Our outpatient team is focused on improving patient access, productivity, and staffing.
Speaker Change: Outpatient rehab division experienced an increase of 4% and revenue with patient volumes, increasing by 4% and net revenue per visit of $100 consistent with prior year.
Robert Ortenzio: Our volume continues to maintain an upward trend, and net revenue per visit has stabilized, with improvements in commercial managed care rates, offset by a decrease in our Medicare rates. The outpatient division's adjusted EBITDA decreased 12%, compared to prior year. In the adjusted EBITDA margin, went from 10.8 to 9.1%. Our outpatient team is focused on improving patient access, productivity, and staffing.
Speaker Change: Our volume continues to maintain.
Speaker Change: We maintained an upward trend and net revenue per visit has stabilized with improvements in commercial managed care rates offset by a decrease in our Medicare rate.
Speaker Change: The outpatient division's adjusted EBITDA decreased 12% compared to prior year and the adjusted EBITDA margin went from 10, 8% to 9.1.
Speaker Change: Our outpatient team has focused on improving patient access productivity and staffing thus far in Q3, we have seen positive results when compared to prior year Q3 performance.
Robert Ortenzio: Thus far, in Q3, we have seen positive results when compared to prior year Q3 performance. Merrings per share and adjusted earnings per share were 60 cents per second quarter, compared to 61 cents per share in the same quarter prior year.
Robert Ortenzio: Thus far in Q3, we have seen positive results when compared to prior year Q3 performance. Earnings per share and adjusted earnings per share were $0.60 for the second quarter compared to $0.61 per share in the same quarter last year. Regarding our allocation and deployment of capital, our Board of Directors declared a cash dividend of $0.125, payable on August 30th to stockholders of record as of the close of business on August 14th.
Speaker Change: Earnings per share and adjusted earnings per share were <unk> 60 for the second quarter compared to 61 per share in the same quarter prior year.
Robert Ortenzio: In regards to our allocation to employment of capital, our board of directors declared a cash dividend, dividend of 12.5 cents, payable on August 30th, to the stockholders of record as of the close of business on August 14th. This past quarter, we did not repurchase shares under our board authorized share repurchase program, and we continue to evaluate stock repurchases, reduction of debt, and development opportunities.
Speaker Change: Regards to our allocation of deployment of capital our board of directors declared a cash dividend dividend of $12.05 payable on August 30 <unk>.
Speaker Change: Holders of record as of the close of business of August 14th.
Robert Ortenzio: This past quarter, we did not repurchase shares under our board-authorized share repurchase program, and we continue to evaluate stock repurchases. Reduction of Debt and Development Opportunities. That concludes my prepared remarks. I'll turn it over to Marty Jackson for some additional financial details before we open the call to questions.
Speaker Change: This past quarter, we did not repurchase shares under our board authorized share repurchase program and we continue to evaluate stock repurchases.
Speaker Change: Reduction of debt and development opportunities.
Robert Ortenzio: I conclude my prepared remarks.
Marty Jackson: That concludes my prepared remarks, I will turn it over to Marty Jackson for some additional financial details before we open the call up for questions.
Martin Jackson: I'll turn it over to Marty Jackson for some additional financial details before we open the call up for questions.
Martin Jackson: Thanks, Bob.
Martin Jackson: Thanks, Bob, and good morning, everyone. I'll begin by providing additional detail on the progress we continue to make regarding. Overall, our SW&B as a percentage of revenue ratio was in line with our expectations at 56.1% this quarter, which is a decrease from 56.7% in Q2 of the previous year. In the second quarter of this year, we again saw a decrease in agency costs and utilization from prior year Q2. Compared to Q2 of 23, R&Agency costs decreased by 16%, from 18% down to 16%.
Marty Jackson: Thanks, Bob and good morning, everyone.
Martin Jackson: Good morning, everyone. I'll begin by providing additional detail on the progress we'll continue to make regarding labor costs within the critical illness recovery hospital division. Overall, our SWNB is a percentage of revenue ratio, was in line with our expectations at 56.1% this quarter, which is a decrease from 56.7% in Q2 of the prior year. In the second quarter of this year, we again saw a decrease in agency costs and utilization from prior year Q2. So, compared to Q2, 23 are in agency cost decreased by 16%, and utilization decreased from 18% down to 16%. The agency rate for RNs also decreased by 4% from $77 to $74.
Marty Jackson: I'll begin by providing additional detail on the progress we continue to make regarding labor costs within the critical illness recovery Hospital Division.
Marty Jackson: Overall, our SWM as a percentage of revenue ratio was in line with our expectations at 56, 1% this quarter, which is a decrease from 56, 7% in Q2 of prior year.
Marty Jackson: In the second quarter of this year, we again saw a decrease in agency costs and utilization from prior year Q2.
Speaker Change: Compared to Q2 'twenty three.
Speaker Change: In agency costs decreased by 16%.
Marty Jackson: <unk> decreased.
Marty Jackson: 18% down to 16% the agency rate for our and also decreased by 4% from $77 to $74.
Martin Jackson: Nursing sign-on incentive bonuses decreased, as Bob had mentioned, by 18% from Q2 of the prior year and 16% from the first quarter of this year. Finally, we also saw a decrease of 12% in our orientation hours for new hires. We're very pleased with the continued creative base in regards to our labor costs. Moving on to our financials in Q2, equity and earnings of unconsolidated subsidiaries were $6.3 million. This compared to $10.5 million in the same quarter prior year.
Speaker Change: Nursing sign on incentive bonuses decreased as Bob had mentioned by 18% about 18% from Q2 of prior year.
Speaker Change: 16% from the first quarter.
Speaker Change: This year.
Finally, we also saw a decrease of 12% and our orientation hours for new hires.
Martin Jackson: The agency rate for RNs also decreased by 4% from $77 to $74. Nursing sign-on incentive bonuses decreased, as Bob had mentioned, by 18% from Q2 of the previous year and 16% from the first quarter of this year. Finally, we also saw a decrease of 12% in our orientation hours for new hires. We are very pleased with the continued progress we have made in regards to our workforce.
Speaker Change: We're very pleased with the continued.
Speaker Change: In regards to our labor costs.
Martin Jackson: Moving on to our financials in Q2, equity and earnings of unconsolidated subsidiaries were $6.3 million. This compares to $10.5 million in the same quarter last year. The decline in earnings was largely a result of a write-off of an impaired business we had a minority interest in; that income attributable to non-controlling interest was $17.2 million. This compares to $13.6 million in the same quarter last year. This increase is due to improved performance in our consolidated joint venture.
Speaker Change: Moving on to our financials in Q2 equity and earnings of unconsolidated subsidiaries.
Speaker Change: $6 $3 million as compared to $10 $5 million in the same quarter prior year the.
Martin Jackson: The decline in earnings was largely a result of the write-off of an impaired business we had a minority interest in. Now, income attributable to non-controlling interest was $17.2 million; this compared to $13.6 million in the same quarter prior year. This increases due to improved performance in our consolidated joint ventures. Interest expense was $37.1 million in the second quarter; this compared to $49 million in the same quarter prior year. The reduction in interest expense was principally due to the accelerated recognition of the gain of our interest rate hedge, due to the prepayment of our term loan, which occurred in July as a result of the concentra ideals.
Speaker Change: The decline in earnings was largely it was largely a result of the write off of an impaired business, we had a minority interest in.
Speaker Change: Net income attributable to Noncontrolling interest was $17 2 million. This compares to $13 6 million in the same quarter prior year.
Speaker Change: This increase is due to improved performance in our consolidated joint ventures.
Martin Jackson: Interest expense was $37.1 million in the second quarter. This compares to $49 million in the same quarter of the previous year. The reduction in interest expense was principally due to the accelerated recognition of the gain on our interest rate hedge due to the prepayment of our term loan, which occurred in July as a result of the Concentra IPO.
Speaker Change: Interest expense was $37 1 million in the second quarter. This compares to $49 million in the same quarter prior year.
Speaker Change: The reduction in interest expense was principally due to the accelerated recognition of.
Speaker Change: The gain of our interest rate hedge due to the prepayment of our term loan which occurred in July as a result of the concentric IPO.
Martin Jackson: At the end of the quarter, we had $3.6 billion of debt outstanding and $111.2 million of cash on the balance sheet. Our debt balance at the end of the quarter includes $2 billion in term loans, $345 million in revolving loans, $1.2 billion in the quarter percent senior notes, and $63.4 million of other miscellaneous debt. We ended the quarter with net leverage of our senior secured credit agreement of 4.13 times. As of June 30, we had $367.4 million of availability on our revolving loans. The interest rate on the $2 billion of our term loans is capped in 1% SOFR plus 300 basis points through September 30th, 2024.
Martin Jackson: At the end of the quarter, we had $3.6 billion of debt outstanding and $111.2 million of cash on the balance sheet. Our debt balance at the end of the quarter includes $2 billion in term loans, $345 million in revolving loans, $1.2 billion in six-and-a-quarter percent senior notes, and $63.4 million of other miscellaneous debt. We end the quarter with net leverage for our senior secured credit agreement of 4.13 times. As of June 30th, we had $367.4 million of availability on a revolving loan. The interest rate... on the $2 billion of our term loans is capped at 1% SOFR plus 300 basis points through September 30th, 2024.
Speaker Change: At the end of the quarter, we had $3 $6 billion of debt outstanding and $111 $2 million of cash on the balance sheet, our debt balance at the end of the quarter includes $2 billion in term loans $345 million in revolving loans $1 $2 billion, 6.25% senior notes.
Speaker Change: And $63 $4 million of other miscellaneous debt.
Speaker Change: We ended the quarter with net leverage of our senior secured credit agreement.
Speaker Change: A $4 one three times.
Speaker Change: As of June 30, we had 367 $4 million of availability on our revolving loans.
Speaker Change: The interest rate on the $2 billion of our term loan is capped at 1% sulfur plus 300 basis points through September 32024.
Martin Jackson: At the end of July, we utilized the proceeds from the IPO that Bob had mentioned and related debt transactions to pay off $300 million that was outstanding on our revolver, with the remainder allocated to prepay $1.64 billion of our term loan. At the end of July, our consolidated debt balance, which includes Concentra, is approximately $3.1 billion, with approximately $1.5 billion residing at Concentra, and $1.6 billion at Select. Our consolidated net leverage is now approximately $3.5 times, with select leverage around $3.2 times in Concentra, approximately $3.5. 8 times. We expect to finish this year at approximately 3.2 to 3.3 times leverage on a consolidated basis, with select slightly below 3 times in concentra at 3.5 to 3.6 times leverage.
Martin Jackson: At the end of July, we utilized the proceeds from the IPO that Bob mentioned and related debt transactions to pay off $300 million that was outstanding on our revolver, with the remainder allocated to prepay $1.64 billion. At the end of July, our consolidated debt balance, which includes Concentra, was approximately $3.1 billion, with approximately $1.5 billion residing at Concentra and $1.6 billion at Select. Our consolidated net leverage is now approximately 3.5 times, with Select leverage around 3.2 times, and Concentra approximately 3.8 times.
Bob: At the end of July we utilize the proceeds from the IPO to Bob had mentioned and related debt transactions to pay off.
Speaker Change: $300 million that was outstanding on our revolver with the remainder allocated to prepay 164 billion.
Speaker Change: All of our term loan.
Speaker Change: At the end of July our consolidated debt balance, which includes concentrix approximately $3 1 billion.
Speaker Change: Approximately $1 5 billion residing at <unk> Center, and $1 6 billion.
Speaker Change: At select.
Speaker Change: Our consolidated net leverage is now approximately three five times with select leverage around three two times again sentra approximately three eight times.
Martin Jackson: We expect to finish this year at approximately 3.2 to 3.3 times leverage on a consolidated basis, with Select slightly below three times and Concentra at 3.5 to 3.6 times leverage. For the second quarter, operating activities provided $278.2 million in cash flow. Are Day Sales Outstanding or DSO? was 56 days at June 30, 2024, compared to 52 days at June 30, 2023, and 58 days at March 31st, 2000. The improvement compared to Q1 is attributable to the reduction in claims processing backlog that was impacted by the changed healthcare cyber industry.
Speaker Change: We expect to finish this year at approximately $3 two to three three times leverage on a consolidated basis.
Speaker Change: With select slightly below three times and can center at three 5% to three six times Levered.
Martin Jackson: So the second quarter, operating activities provided 278.2 million dollars in cash flow; our day sales outstanding or DSO, was 56 days at June 30, 2024, compared to 52 days at June 30, 23. And 58 days at March 31, 2024. The improvement, the improvement compared to Q1, is attributable to the reduction in claims processing backlog that was impacted by the Change Healthcare cyber incident. We continue to see a reduction in our DSO and Q3 as we move on from the cyber incident. Investing activities use 54.1 million dollars of cash in the second quarter, primarily due to 55.5 million dollars in purchases of property, equipment, and other assets, slightly offset by a sale of assets.
Speaker Change: Through the second quarter operating activities provided $278 $2 million in cash flow.
Speaker Change: Our days sales outstanding or DSO.
Speaker Change: With 56 days at June 32024, compared to 52 days at June 32003.
Speaker Change: 58 days at March 31.
Speaker Change: 2024.
Speaker Change: The improvement.
Speaker Change: The improvement compared to Q1 is attributable to the reduction in claims processing backlog that was impacted by the change healthcare cyber incident, we continue to see a reduction in our DSO in Q3 as we move on from the cyber incident.
Martin Jackson: We continue to see a reduction in our DSO and Q3 as we move on from the cyber incident. Investing activities used $54.1 million of cash in the second quarter primarily due to $55.5 million in purchases of property, equipment, and other assets, likely offset by a sale of assets. Financing activities used $205.5 million of cash in the second quarter. We had $165 million in net payments on our revolving lines of credit, $16.3 million in dividends on our common stock, and $14.2 million in net payments on other debt.
Speaker Change: Investing activities used $54 $1 million of cash in the second quarter, primarily due to $55 5 million in purchases of property equipment and other assets.
Speaker Change: Slightly offset by a sale of assets financing activities used $205 $5 million of cash in the second quarter, we had $165 million in net payments on our revolving lines of credit $16 3 million in dividends on our common stock and $14 2 million in net payments.
Martin Jackson: Anancing activities use 205.5 million dollars of cash in the second quarter. We had 165 million dollars in net payments on our revolving lines of credit, 16.3 million dollars in dividends on our common stock, and 14.2 million dollars in net payments on other debt. That stated previously, we did not repurchase any shares under our board authorized repurchase program this quarter.
Speaker Change: On other debt.
Martin Jackson: As stated previously, we did not repurchase any shares under our board-authorized repurchase program this quarter. Last year, the board approved a two-year extension of the share repurchase program, which remains in effect until December 31st of 2025, unless further extended or earlier terminated by the Board. We are reaffirming our business outlook for 2024. We expect revenues to be in the range of $6.9 billion to $7.1 billion, adjusted EBITDA to be in the range of $845 million to $885 million, fully diluted earnings per share to be in the range of $1.95 to $2.19, and Adjusted Earnings Per Share to be in the range of $1.96 to $2.25.
Speaker Change: As stated previously we did not repurchase any shares under our board authorized repurchase program. This quarter last year. The board approved a two year extension of the share repurchase program.
Martin Jackson: Last year, the board approved your extension of the 2025, unless further extended or earlier terminated by the floor. We are reaffirming our business outlook for 2024. We expect revenues to be in the range of $6.9 billion to $7.1 billion. Adjusted even done to be in the range of $845 million to $885 million, fully diluted earnings per share to be in the range of $1.95 to $2.19, and adjusted earnings per share to be in the range of $1.96 to $2.20. Capital expenditures are expected to be in the range of $225 to $275 million for 2024, with the majority of those dollars towards development.
Speaker Change: Which remains in effect until December 31, 2025, unless further extended or earlier terminated by the board.
Speaker Change: We are reaffirming our business outlook for 2024, we expect revenues to be in the range of $6 9 billion to $7 1 billion adjusted EBITDA to be in the range of 80 $845 million to $885 million.
Speaker Change: Fully diluted earnings per share to be in the range of $1 95 to $2 19.
Speaker Change: And adjusted earnings per share to be in the range.
Speaker Change: Of $1 96 to.
Speaker Change: To $2 20.
Speaker Change: Capital expenditures are expected to be in the range of $225 million to $275 million for 2024 with the majority of those dollars towards development.
Martin Jackson: This concludes our prepared remarks, and at this time, we would like to turn it back over to the operator to open the call up for questions.
Martin Jackson: Capital expenditures are expected to be in the range of $225 to $275 million for 2024, with the majority of those dollars going towards development. This concludes our prepared remarks, and at this time, we would like to turn it back over to the operator to open the call to questions.
Speaker Change: This concludes our prepared remarks and at this time, we would like to turn it back over to the operator to open the call up for questions.
Operator: Certainly. To ask a question, please press Star-1-1 on your telephone and wait for your name to be announced. To absorb your question, please press Star-1-1 again.
Speaker Change: Certainly.
Operator: To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. And our first question comes from the line of Ben Hendrix with RBC Capital Markets.
Speaker Change: Ask a question. Please press star one one on your telephone and wait for your needs will be announced to withdraw your question. Please press star one again.
Ben Hendrix: Our first question comes from the line of Ben Hendrix with RBC Capital Markets. Thank you very much. You just wanted to get a little more information on the LTAC margin. I appreciate the comments about the startup cost in the quarter.
Speaker Change: And our first question comes from the line of Ben Hendrix with RBC capital markets.
Benjamin Hendrix: Thank you very much. I appreciate the comments about the startup costs in the quarter, but just if there's any other one-timers that would create that would explain that sequential phasing from from 1Q to 2Q, whether they're seasonal aspects or anything one-time, you know, in that sequential decline. Thank you.
Ben Hendrix: Thank you very much just wanted to get a little more information on the <unk>.
Speaker Change: Margin I appreciate your comments about the about the startup costs in the quarter if.
Robert Ortenzio: But just if there's any other one-timers that would explain that sequential phasing from one Q to Q, whether there's seasonal aspects or anything one-time in that sequential decline. Thanks. Thank you. Yeah, Ben, there was just, I think we're only talking about a 1% drop of occupancy on a year-over-year basis, so it's relatively the same for us. I mean, the seasonality, we didn't really see too much seasonality in there. If you're saying compared to Q1 versus Q2, we think it's really, that's what we've been seeing during normal times. I mean, Q1 is always our highest quarter. Q2, we see a drop in census.
Speaker Change: If there is any other one timers that would create that would explain that sequential phasing from from <unk>, whether they're seasonal aspects or anything one one time.
Speaker Change: In that sequential decline thank you.
Robert Ortenzio: Yeah, Ben, there was just a 1% drop in occupancy on a year-over-year basis, so it's relatively the same for us. I mean, the seasonality, we didn't really see too much seasonality there. If you're saying compared to Q1 versus Q2, we think it's really... That's what we've been seeing during normal time. Q1 is always our highest priority. In Q2, we see a drop in the census, and they got
Speaker Change: Yes, Ben there was just.
Speaker Change: I think we're only talking about a 1% drop.
Speaker Change: Occupancy on a year over year basis. So it's relatively the same for us I mean, the seasonality we didn't really see too much seasonality in there. If you are seeing compared to Q1 versus Q2.
Speaker Change: We think it's really.
Ben Hendrix: That's what we've been seeing.
Speaker Change: During normal times I mean, Q1 is always our highest quarter Q2, we see a drop in Santos and <unk>.
Robert Ortenzio: And the other thing I would add is Q1 of this year was an extraordinary year in terms of volume. We saw ICUs at our acute care hospital referral sources to be really exceptionally high in Q1. So that explains the sequential, your question on the sequential differences. We expect the second quarter to be less so in terms of pulmonary volume.
Robert Ortenzio: And the other thing I would add is Q1 of this year was an extraordinary year in terms of volume. We did solve ICUs at our two-care hospital referral sources to be really just exceptionally high in Q1, so that explains the sequential; your question on the sequential differences. We expect the second quarter to be last just in terms of pulmonary volumes. Great, thanks, guys. Appreciate it. Thanks, Ben. Thank you.
Speaker Change: I think I would add is Q1 of this year was that.
Speaker Change: Extraordinary year in terms of volume we get solved.
Speaker Change: ICU that our acute care hospital referral.
Speaker Change: Sources to be really just exceptionally high in Q1 so.
Speaker Change: That explains the sequential your question on the sequential.
Speaker Change: Differences, we expect the second quarter to be less just in terms of the pulmonary volumes.
Robert Ortenzio: Great. Thanks, guys. I appreciate it.
Speaker Change: Great. Thanks, guys I appreciate it.
Pat: Thanks Pat.
Operator: Thank you. One moment, please, for our next question. Our next question comes from the line of A.J. Rice with UBS.
Speaker Change: Thank you.
AJ Rice: One moment, please, for our next question. Our next question comes from the line of AJ Rice with UBS.
Speaker Change: Please for our next question.
Speaker Change: And our next question comes from the line of a J rice with UBS.
Albert Rice: Hi everybody. Maybe just a couple questions.
AJ Rice: Hi, everybody. Maybe just a couple of questions. On the outpatient rehab business, obviously the revenue, the visits seem pretty standard, normal trend. I just wonder on the margin side of that; it sounds like you're looking at efficiencies, looking at things there.
Speaker Change: Hi, everybody, maybe just a couple questions.
J Rice: On the outpatient rehab business.
J Rice: You see the revenue visit seem pretty standard normal trend.
Speaker Change: Trend I, just wonder on the margin side of that it sounds like Youre looking at some efficiencies looking at things. There is is it really you need.
Martin Jackson: Is it really, you need rate a little bit of rate lift to get back on a track where it's stable to improving margins, or are there opportunities within the business to make adjustments that will drive that potential for margin stability and improvement over time?
Albert Rice: On the outpatient rehab business, obviously, the revenue, and the visits seem pretty standard, a normal trend. I just wonder on the margin side of that; it sounds like you're looking at some efficiencies, looking at things there. Is that really all you need, great? A little bit of rate lift to get back on a track where it's stable to improving margins, or are there opportunities within the business to make adjustments that will drive that margin, and the potential for margin stability and improvement over time?
Speaker Change: Right, a little bit of rate lift to get back on track, where it's stable to improving margins or are there opportunities within the business to make adjustments that will drive that margin potential for margin stability and improvement overtime.
Martin Jackson: Yeah, AJ, this is Marty. Certainly, rate would have a positive impact on margin, but that's not really the only thing. I mean, we've got to; we've really kind of focused on a couple of areas. One is clinical efficiencies, meaning seeing the efficacy, the number of patients that a therapist sees in a day, and then also we are really focused on scheduling, making sure the scheduling is efficient. We think that that will probably take us. We've been working on this; we think that over the next two quarters, in particular, starting off into the new year, we anticipate that some things that we're doing will help, such as some, we're looking at scheduling modules that should help us improve our scheduling efficiency.
Martin Jackson: Yeah, AJ, this is Marty. Certainly, interest rates would have a positive impact on margin, but that's not really the only thing. I mean, we've got to, we've really kind of focused on a couple of areas. One is clinical efficiencies, meeting, you know, seeing therapy, the number of patients that a therapist sees in a day. And we are also really focused on scheduling, making sure the scheduling is appropriate.
Speaker Change: Yes, a J this is Marty.
Marty Jackson: Certainly rate would have a positive impact on margin, but that's not really the only thing I mean, we've got two we've really kind of focused on a couple of areas one is clinical efficiencies.
J Rice: <unk> seeing there.
J Rice: Eric.
Speaker Change: The number of patients that are surface season, a day and then also we are really focused on scheduling making sure the scheduling as it is.
J Rice: As efficient.
Martin Jackson: Idiot. Call it quits.
J Rice: Yes.
Speaker Change: But go ahead I'm sorry.
Martin Jackson: You know, we think that that will probably take us, you know, we've been working on this, and we think that over the next two quarters, you know, in particular, starting off the new year, we anticipate that some things that we're doing will help, such as some, um... We're looking at scheduling modules that should help us improve our scheduling efficiency. And I think when you take a look at the new year, we expect to see some real benefits.
Speaker Change: We think that that will probably take us we've been working on this we think that over the next two quarters in particular, it's starting off into the new year, we anticipate that.
Speaker Change: Some things that were doing will help such as some.
Speaker Change: We're looking at.
J Rice: Scheduling modules.
J Rice: That should help us improve our scheduling efficiency.
Martin Jackson: And I think, really, when you take a look at the new year, we expect to see some real benefit.
J Rice: And I think really when you take a look at the new year, we expect to see some real benefit.
AJ Rice: Okay.
J Rice: Okay.
Martin Jackson: I appreciate all the comments about contract labor and bonus payments, and everything. I guess when you peel all that back, maybe you said this, but I didn't hear it. The underlying wage rates you're seeing with your permanent or labor costs, however you want to describe it, with your permanent staff in the critical illness hospitals, I guess, is the main focus. What is that trending at? Yeah, right now, AJ, we're seeing that in the three to three-and-a-half percent rate. Okay, so that's sort of back to three pandemic levels that are right here. It really is.
Albert Rice: Okay, I appreciate all the comments about contract labor and bonus payments and everything. I guess when you peel all that back, maybe you said this, but I didn't hear it, the underlying wage rates you're seeing with your permanent or labor costs, however you want to describe it, with your permanent staff in the critical illness hospitals, I guess, is the main focus. What is that trending at now?
Speaker Change: I appreciate all the comments about contract labor in our bonus payments and everything I guess when you Peel all that back maybe you said this but I didn't hear it.
J Rice: The underlying wage rates youre seeing with your permanent.
J Rice: Labor cost however, you want to describe it with your permanent staff.
J Rice: Critical illness hospitals, I guess is the main focus.
Speaker Change: What is that trending and now.
Martin Jackson: Yeah, right now, A.J., we're seeing that at the three to three and a half percent rate.
Speaker Change: Yes, right now we're seeing that in the three to three 5% range.
Martin Jackson: Okay, so that's sort of back to pre-pandemic levels. It really is.
Speaker Change: Okay.
Speaker Change: That's sort of back to pre pandemic levels.
Speaker Change: It really is.
AJ Rice: Yeah, just the last question, trying to think through what's embedded in the guidance down the EPS line. You mentioned that you've got a sort of reset on some of the protections you had on interest rates. Starting going into the fourth quarter, are you assuming in that guidance a step up in borrowing costs? Well, I guess what are you assuming for borrowing costs or interest expense in Q3 and Q4 in that guidance that you're sharing today? Yes, we are. We have included in particular in the fourth quarter. In essence, borrowing costs will go from the 300 basis point spread plus 1% so far, 4%; today so far is running in that 5.3% rate.
Albert Rice: Yeah, just the last question. Trying to think through what's embedded in the guidance down at the UPS line. You mentioned that you've got a sort of reset on some of the protections you had on interest rates starting going into the fourth quarter. Are you assuming in that guidance a step up in borrowing costs? I guess, what are you assuming for borrowing costs or interest expense in Q3 and Q4 in the guidance that you shared today?
Speaker Change: Yes.
Speaker Change: The last question.
Speaker Change: Trying to think through whats embedded in the guidance.
Speaker Change: Down to the EPS line.
Speaker Change: You mentioned that you've got sort of a reset on some of the protections you had on interest rates.
Speaker Change: Starting going into the fourth quarter.
Speaker Change: Are you assuming in that guidance a step up in <unk>.
Speaker Change: Borrowing costs I guess, what what are you assuming for borrowing cost or interest expense in Q3, and Q4 and the guidance that you shared today.
Martin Jackson: Yes, we are. We have included, in particular, in the fourth quarter. You know, in essence, borrowing costs will go from, you know, the 300 basis points spread plus 1% SOFR, 4% Today, SOFR is running in that 5.3% range, so that will certainly have a negative impact on the fourth quarter.
Speaker Change: Yes, we are we have included in particular in the fourth quarter.
Speaker Change: <unk>.
Speaker Change: In essence borrowing costs will go from.
Speaker Change: The 300 basis points spread plus 1% so four 4%.
Speaker Change: Today <unk> is running at five 3% range. So that will certainly have a negative impact in the fourth quarter.
Martin Jackson: So that will certainly have a negative impact in the fourth quarter. Okay, all right, so that's roughly the order magnitude of the impact on that particular trance of debt. That makes sense.
Albert Rice: Okay. All right. So that's roughly the order of magnitude of the impact on that particular tranche of debt. That makes sense. All right. Thanks a lot.
Albert Rice: Okay, all right.
Speaker Change: Okay, Alright, so thats roughly the order of magnitude of.
Speaker Change: The impact on that particular tranche of debt.
AJ Rice: All right, thanks a lot. Thank you, AJ. Thank you.
Speaker Change: Makes sense all right. Thanks a lot.
AJ: Thank you AJ.
Speaker Change: Thank you I'm showing no further questions so with that I'll hand, the call back over to management for any closing remarks.
Operator: I am showing no further questions, so with that, I hand the call back over to management for any closing remarks.
Operator: I am showing no further questions, so with that, I hand the call back over to management for any closing remarks.
Robert Ortenzio: Thanks, Operator, and just to remind you that there is a consensual call that'll be at 10: 30 Eastern today, so you'll get a lot more granularity on our consensual division. With that, I'll end the call. Thank you.
Robert Ortenzio: Thanks, operator, and just to remind that there is a concentric call that will be at 10:30 Eastern today, so you'll get a lot more granularity on our concentric division.
Speaker Change: Thanks, operator, and just to.
Speaker Change: Remind.
Speaker Change: That there is a concentric call that'll be at 10 30 eastern today, so you'll get a lot more granularity on.
Speaker Change: The arc.
Speaker Change: Art concentric division.
Operator: With that, I'll end the call. Thank you. Ladies and gentlemen, thank you for participating.
Speaker Change: I'll hand, the call. Thank you.
Operator: Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.
Speaker Change: Ladies and gentlemen, thank you for participating this does conclude today's program and you may now disconnect.
Operator: This does conclude today's program, and you may now disconnect. Thank you.
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Operator: Thank you for your time, and I'll see you in the next video.
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