Q2 2024 US Physical Therapy Inc Earnings Call
Hello everyone, I'm Jake Martinez, I'm Christopher Reading, I'm Christopher Reading, I'm Christopher Reading, I'm Christopher Reading, I'm Christopher Reading, I'm Christopher Reading,
Operator: To all sites on hold, we do appreciate your patience, and we ask that you please continue to stand by. [music] Please stand by, we're about to begin. Good day, and thank you for standing by.
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Speaker Change: To all sites on hold, we do appreciate your patience and we ask that you please continue to stand by.
Speaker Change: Please stand by, we're about to begin.
Operator: Welcome to the U.S. Physical Therapy second quarter 2024 earnings conference call. At this time, all participants are in a listen only mode.
Speaker Change: Good day and thank you for standing by. Welcome to the U.S. Physical Therapy second quarter 2024 earnings conference call.
Speaker Change: At this time, all participants are in a listen-only mode.
Operator: After the speaker's presentation, there will be a question and answer session. In order to ask a question during the session, please press the star key followed by the number one on your telephone. Please be advised that today's conference is being recorded. Should you require any further assistance, please press star zero.
Speaker Change: After the speaker's presentation, there will be a question and answer session. In order to ask a question during the session, please press the star key followed by the number 1 on your telephone.
Speaker Change: Please be advised that today's conference is being recorded. Should you require any further assistance, please press star zero. I'd now like to turn the call over to Chris Reading, President and CEO . Please go ahead, sir.
Operator: I'd now like to turn the call over to Chris Redding, President and CEO. Please go ahead, sir. Thanks, Jamie. Good morning and welcome, everyone, to our second quarter 2024 U.S. Physical Therapy Earnings Call. With me on the line this morning, I've got Carey Hendrickson, our Chief Financial Officer, Eric Williams, our President and COO, East, Graham Reeve, our Chief Operating Officer, West, and Rick Binstein, our Executive Vice President and General Counsel. For to make some prepared remarks relating to our quarter and year, I'll ask Jake Martinez to make a brief disclosure. Thank you, Chris.
Jake Martinez: This presentation includes forward-looking statements, which involve 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. Please see the company's filings with the Securities and Exchange Commission for more information. This presentation also contains certain non-GAAP measures as defined in Regulation G. The related reconciliations can be found in the company's earnings release and the company presentations on our website. Chris?
Chris Reading: Thanks, Jamie. Good morning and welcome, everyone, to our second quarter of 2024 U.S. Physical Therapy Earnings Call.
Speaker Change: With me on the line this morning, I've got Carey Hendrickson, our Chief Financial Officer. Eric Williams, our President and COO East.
Speaker Change: Graham Reeve, Chief Operating Officer West, Rick Binstein, Executive Vice President and General Counsel. Before I make some prepared remarks relating to our quarter and year, I'll ask Jake Martinez to cover a brief disclosure.
Christopher Reading: Thanks, Jake. So let's get started. My discussion this morning will cover a variety of highlights. You definitely made some progress in some key areas. It will also touch on one of our primary challenges as well. Let's start with the fact that this was a very solid quarter from a volume perspective, the best visit per clinic per day quarter in our history. April was our highest month at 31.2, marking a high also for the year, followed by May, nicely over 30, and June, just under 30 at 29.8.
Christopher Reading: Kudos to our contracting team. We're starting to see their hard work over the past 18 months really bear fruit. The net rate for the quarter progressed nicely and finished at $105.05 per visit, up a little bit more than $3 per visit over the same quarter in 2023. As you might remember, last year, we renegotiated a large-volume commercial and work-related contract. While those adjustments took a little time to phase in and show up, they're doing so now in a really nice progression that we are seeing and expect to continue as the year goes forward.
Speaker Change: Thank you, Chris.
Jake Martinez: This presentation
Jake Martinez: includes forward-looking statements which involve 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.
Jake Martinez: Please see the company's filings with the Securities and Exchange Commission for more information.
Jake Martinez: This presentation also contains certain non- GAAP measures as defined in Regulation G. The related reconciliations can be found in the company's earnings release and the company presentations on our website. Chris?
Christopher Reading: We have also seen a work-home volume move up, and while the aggregate percentage has changed a little, it really shows up when you see the number and rate of year-over-year change in work-home visits, which I'll have Eric cover as we open it up for discussion after these prepared remarks. The combination of the rate for commercial plans and a faster than average work comp growth is resulting in a very nice uptick in our net rate so far for the year, and we actually expect that to continue as we go forward.
Chris Reading: Thanks Jake.
Christopher Reading: In the injury prevention side of things, we had a very good quarter. Revenues grew by more than 23 percent. We also saw a nice margin improvement of about 70 basis points to 21.4 percent with an increased profitability of more than 27 percent. I was just out in Denver and spent a few days with our Breathalytics partners.
Chris Reading: So, let's get started. My discussion this morning will cover a variety of highlights. We've definitely made some progress in some key areas. It will also touch on one of our primary challenges as well.
Christopher Reading: They're working to integrate our recent Atlas acquisition. That opportunity is going very well, and the integration of our teams is progressing nicely with what I think will be some enhancements that will be beneficial to us in the long run once this combination is fully complete. Both of our injury prevention partnerships, East and West, are doing well and gaining new customers and have a better than expected, better than budget trajectory for the year so far, where we have more work, and frankly, we are behind where we expected to be at this point.
Speaker Change: Let's start with the fact that this was a very solid quarter from a volume perspective. The best visit per clinic per day quarter in our history.
Speaker Change: April was our high month at 31.2, marking a high also for the year, followed by May nicely over 30, June just under 30 at 29.8.
Speaker Change: And all of this follows our normal seasonal progression with school finishing and summer vacations kicking off for a bit before things get back to normal as they've begun to do with school starting up here in Texas this week in many places.
Speaker Change: Speaking a minute to our expectations, our total visits are ahead of where we budgeted them to be the midpoint this year, better by approximately 6,600 visits, and ahead of last year's same period by over 108,000 visits.
Speaker Change: Our partnerships are doing a great job addressing demand and doing a terrific job with patients in what continues to be a rather tight labor market. More on that in a minute.
Speaker Change: Kudos are due to our contracting team. We're starting to see their hard work over the past 18 months really beginning to bear fruit.
Speaker Change: That rate for the quarter progressed nicely and finished at $105.05 per visit, up a little bit more than $3 per visit over the same quarter in 2023.
Speaker Change: As you might remember, last year we renegotiated a large volume of commercial and work comp-related contracts, and while those adjustments took a little time to phase in and show up, they're doing so now in a really nice progression that we are seeing and expect to continue as the year goes forward.
Speaker Change: We have also seen a work on volume move up and while the aggregate percentage has changed a little, it really shows up when you see the number and rate of year-over-year change in work on visits.
Speaker Change: which I'll have Eric cover as we open it up.
Speaker Change: for discussion after these prepared remarks.
Eric Williams: The culmination of rate for commercial plans and our faster than average work comp growth is resulting in a very nice uptick in our net rate so far for the year and actually we expect that to continue as we go forward.
Speaker Change: In the injury prevention side of things, we had a very good quarter. Revenues grew by more than 23%.
Speaker Change: We also saw a nice margin improvement of about 70 basis points to 21.4%, with an increased profitability of more than 27%.
Speaker Change: And I was just out in Denver, spent a few days with our Biotics Partners.
Speaker Change: They're working to integrate our recent Atlas acquisition.
Speaker Change: And that opportunity is going very well, and the integration of our teams is progressing nicely with what I think will be some enhancements that will be beneficial to us in the long run once this combination is fully complete.
Speaker Change: Both of our injury prevention partnerships, East and West, are doing well and gaining new customers and have a better-than-expected, better-than-budget trajectory on the year so far.
Speaker Change: Where we have more work and frankly we are behind where we expected to be at this point and really our primary point of struggle is around our PT related costs for labor.
Christopher Reading: And really, our primary point of struggle is around our PT-related costs for labor. Carey will cover the per visit and percent of revenue costs in detail, but the sum of it all is that the people we have hired this last year, and likely in the period slightly preceding that, are at a higher rate given inflation and employee scarcity than we've experienced in the past. Therapists overall are about 4% more on average before incentives.
Carey: Carey will cover the per visit and percent of revenue costs in detail, but the sum of it all is that the people we have hired this last year
Carey: and likely in the period slightly preceding that are at a higher rate given inflation and employee scarcity than we've experienced in the past.
Carey: Therapists overall are about 4% more on average before incentives, front office personnel are about 5% more.
Christopher Reading: Front office personnel are about 5% more. Additionally, in a handful of markets, we have a greater than expected use of contract and travel-based labor. Matt obviously has heard us and is impacting our performance and our margin.
Carey: Additionally, in a handful of markets, we have greater than expected use of contract and travel-based labor.
Speaker Change: Matt obviously has heard us and impacting our performance and our margin.
Christopher Reading: Despite the strong gains in net rate that we've made, it's a little bit of a two-edged sword in that we have good demand in and across most of our partnerships, and addressing that immediate demand in the current environment has necessitated that we bring on more contract labor than we initially envisioned. Our operations teams are very aware of where we are and where we would like to be and are working hard to ensure that we have the staffing balanced appropriately for the season, and we have sufficient resources to meet the demand but remain highly efficient at the same time.
Carey: Despite the strong gains in net rate that we've made.
Speaker Change: It's a little bit of a two-edged sword in that we have good demand in and across most of our partnerships, and addressing that immediate demand in the current environment has necessitated that we bring on more contract labor than we initially envisioned.
Speaker Change: Our ops teams are very aware of where we are and where we would like to be and are working hard to ensure that we have the staffing balanced appropriately for the season.
Speaker Change: and we have sufficient resources to meet the demand, but remain highly efficient at the same time.
Christopher Reading: Additionally, we have made numerous investments in the areas of recruiting that we expect to bear fruit and some longer-term initiatives with respect to school relationships, partnerships, and affiliations. These are all things you should expect us to be doing over the coming months and quarters, as we look to readjust to the market factors that are currently affecting our outlook for the remainder of the year.
Speaker Change: Additionally, we have made numerous investments in the areas of recruiting that we expect to bear fruit, and some longer-term initiatives with respect to school relationships, partnerships and affiliations.
Speaker Change: These are all things you should expect us to be doing over the coming months and quarters as we look to readjust to the market factors that are currently influencing our outlook for the remainder of the year.
Christopher Reading: Well, I know our cost issue is an unfavorable development we have to overcome. But when you look at our key focus areas over time, we have a very good history of overcoming obstacles. We have a dedicated and capable group of partners, a great operations team, all of whom are working to get this dialed in over the coming period. One final note.
Speaker Change: Let me say this.
Speaker Change: Well, I know our cost issue is an unfavorable development we have to overcome.
Speaker Change: When you look at our key focus areas over time, we have a very good history of overcoming obstacles. We have a dedicated and capable group of partners, a great ops team, all of whom are working to get this dialed in over the coming period.
Speaker Change: One final note, we're busy and remain committed on the development side of things.
Speaker Change: A few of our deals have pushed out a little bit due to factors that we don't control on the seller side of the equation, but rest assured, we're working hard and we expect a strong finish to the year for our development efforts.
Speaker Change: With some exciting markets and partners who we are anxious to make part of our family as we look ahead.
Speaker Change: That concludes my overview and prepared remarks. Carey, as he always does so well, will cover the detail behind these themes. Go ahead, Carey.
Carey Hendrickson: Go ahead, Carey. Great. Thank you, Chris, and good morning, everyone. We saw some really good things in our numbers for the second quarter, things that we expect to continue to benefit us through the remainder of the year and beyond. Chris mentioned some of them in his remarks, but they're particularly notable and worth repeating a few of them.
Carey: Great. Thank you, Chris, and good morning, everyone.
Speaker Change: We saw some really good things inside of our numbers for the second quarter, things that we expect to continue to benefit us through the remainder of the year and beyond.
Speaker Change: Chris mentioned some of them in his remarks, but they're particularly notable and worth repeating a few of them. Our hard work on rate negotiations and our focus on increasing workers' comp as a percentage of our overall business continue to take root in the second quarter, resulting in a substantial year-over-year increase in our net rate.
Carey Hendrickson: Our hard work on rate negotiations and our focus on increasing workers' comp as a percentage of our overall business continue to take root in the second quarter, resulting in a substantial year-over-year increase in our net rate. Also, our average visits per day in the second quarter were a record high for the company. And our IIP business grew at a mid-teens rate in the second quarter, even before adding the acquisition that we made on April 30.
Speaker Change: Also, our average visits per day in the second quarter are record high for the company and our IIP business through the mid-teens rate in the second quarter, even before adding the acquisition that we made on April 30.
Carey Hendrickson: The salaries and contract labor were higher than we would have liked in the quarter, but the business itself is strong as we continue to see meaningful growth in these key indicators. We reported adjusted EBITDA for the second quarter of 2024 of $22.1 million compared to $23.6 million in the prior year. Our adjusted EBITDA margin was 16.4% in the second quarter of this year compared to 17.7% in the second quarter of the prior year. Traditionally, most companies calculate our EBITDA margin without the benefit of knowing what our adjusted revenue for minority interest is, which makes it appear that our margin is lower than it actually is.
Speaker Change: Our salaries and contract labor were higher than we would have liked in the quarter, but the business itself is strong as we continue to see meaningful growth in these key indicators.
Speaker Change: We reported adjusted EBITDA for the second quarter of 2024 of $22.1 million compared to $23.6 million in the prior year. Our adjusted EBITDA margin was 16.4% in the second quarter of this year compared to 17.7% in the second quarter of the prior year.
Speaker Change: Traditionally, most calculate our EBITDA margin without the benefit of knowing what our adjusted revenue per minority interest is, which makes it appear that our margin is lower than it actually is.
Carey Hendrickson: This adjusted EBIT margin that I just quoted, the 16.4 percent for the second quarter, is calculated on an apples-to-apples basis with both revenue and EBITDA adjusted for minority interest. Our operating results were $11 million in the second quarter of 2024, which is an increase of $600,000 over the second quarter of 2023. On a share basis, operating results were slightly lower than 24, then 23. It was 73 cents this quarter; it was 76 cents in the second quarter of last year.
Speaker Change: This adjusted EBIT margin that I just quoted, the 16.4 percent for the second quarter, is calculated on an apples-to-apples basis with both revenue and EBITDA adjusted for minority interest.
Speaker Change: Our operating results were $11 million in the second quarter of 2024, which is an increase of $600,000 over the second quarter of 2023.
Speaker Change: On a per share basis, operating results were slightly lower than $.24, $.23. It was $.73 this quarter. It was $.76 in the second quarter of last year. That small decrease is related to the increase in shares that were associated with the secondary offering that we completed in May of last year.
Carey Hendrickson: That small decrease is related to the increase in shares that were associated with the secondary offering that we completed in May of last year. Our average visits per clinic per day in the first quarter were 30,6, which was the highest volume for a quarter in the company's history. Chris noted what the progression was throughout the month. The lower number in June, as he mentioned, is our typical seasonal pattern, as both patients and our clinicians take vacations. The schedule just changes a little bit in the summer for families.
Speaker Change: Our average visits per clinic per day in the first quarter was 30.6.
Speaker Change: which was the highest volume for a quarter in the company's history.
Speaker Change: Chris noted what the progression was throughout the month. The lower number in June, as he mentioned, is our typical seasonal pattern.
Speaker Change: As both patients and our clinicians take vacations, and the schedule just changes a little bit in the summer there for families.
Carey Hendrickson: In July, our average number of visits per day was 29.8, which is consistent with July of last year, and it's in sync with our seasonal expectations. Our net rate was $105.05 in the second quarter of 2024, which was $3.02 per visit, or 3 percent higher than the second quarter of last year, even with another 1.8 percent Medicare reduction by CMS that was in effect in the second quarter of 2024. This was the highest quarterly net rate we've had since 2020, while enduring four Medicare rate reductions by CMS since that time. Excluding Medicare, our rate was up $4.80 per visit or 4.5 percent over the second quarter of last year.
Speaker Change: In July, our average visits per day was 29.8, which is consistent with July of last year, and it's in sync with our seasonal expectations.
Speaker Change: Our net rate was $105.05 in the second quarter of 2024, which was $3.02 per visit, or 3% higher than the second quarter of last year, even with another 1.8% Medicare reduction by CMS that was in effect in the second quarter of 2024.
Speaker Change: This was the highest quarterly net rate we've had since 2020, while enduring four Medicare rate reductions by CMS since that time.
Speaker Change: Excluding Medicare, our rate was up $4.80 per visit, or 4.5 percent over the second quarter of last year.
Carey Hendrickson: The increase was largely related to our strategic priority of increasing reimbursement rates through contract negotiations with commercial and other payers and our focus on growing our workers' comp business. We're also focused on maximizing our cash collections through improvements in our revenue cycle management. Each of our major categories of payers increased year over year. Workers' Comp, which is one of our highest-rate categories, increased from 9.6 percent of our revenue mix in the second quarter of 2023 to 10.1 percent in the second quarter of 2024.
Speaker Change: The increase was largely related to our strategic priority of increasing reimbursement rates through contract negotiations with commercial and other payers and our focus on growing our workers' comp business. We're also focused on maximizing our cash collections through improvements in our revenue cycle management.
Speaker Change: Each of our major category of payers increased year over year.
Speaker Change: Workers' Comp, which is one of our highest-rate categories, increased from 9.6 percent of our revenue mix in the second quarter of 2023 to 10.1 percent in the second quarter of 2024.
Carey Hendrickson: These rate-enhancing initiatives will remain high priorities throughout 2024 and beyond. Physical therapy revenues were $143.5 million in the second quarter of 2024, which was an increase of $11.2 million, or 8.5%, from the second quarter of 2023. This increase was driven by having 25 more clinics on average in the second quarter of 2024 than in the second quarter of last year, as well as an increase in our visits at mature clinics and, of course, an increase in our net rate. The Physical Therapy Operating Cost was $114.7 million, which was an increase of 10.3% over the second quarter of last year.
Speaker Change: These rate-enhancing initiatives will remain high priorities throughout 2024 and beyond.
Speaker Change: Physical therapy revenues were $143.5 million in the second quarter of 2024, which was an increase of $11.2 million, or 8.5% from the second quarter of 2023.
Speaker Change: This increase was driven by having 25 more clinics on average in the second quarter of 2024 than in the second quarter of last year, as well as an increase in our visits at mature clinics, and of course, the increase in our net rate.
Speaker Change: Physical therapy operating costs were $114.7 million, which was an increase of 10.3% over the second quarter of last year, due in part, again, to having 25 more clinics on average in the second quarter of last year, as well as the increases in salaries and wages and contracts labor costs that we've mentioned.
Speaker Change: On a per visit basis, our total operating costs were $84.46 in the second quarter, which compares to $80.61 in the second quarter of 2023.
Speaker Change: Our salaries and related costs per visit were $59.66 in the second quarter of 2024, compared to $57.59 in the second quarter of 2023.
Speaker Change: and our physical therapy margin was 20.1% in the second quarter of 2014.
Speaker Change: As Chris noted, our IIP team produced excellent growth in the first quarter. IIP net revenues were up $4.5 million or 23.2% over the second quarter of 23, with IIP income up $1.1 million or 27.4%.
Carey Hendrickson: Excluding the acquisition that we closed on March 31, 2024, our net revenues were still up 13.5 percent, and our gross profit was up 15.7 percent. Our IIP margin increased from 20.7% in the second quarter of 23 to 21.4% in the second quarter. Our corporate office costs were $14.2 million, which is 8.5% of revenue, right in line with expectations in the second quarter of 2024.
Chris Reading: Excluding the acquisition that we closed on March 31, 2024, our net revenues were still up 13.5% with our gross profit up 15.7%.
Chris Reading: Our IIP margin increased from 20.7% in the second quarter of 23 to 21.4% in the second quarter of 24.
Carey Hendrickson: That compared to $12.1 million, or 8% of revenue, in the second quarter of 2023. The second quarter of 2023 included a downward revision in our bonus accrual, causing it to look a little bit better as a percent of revenue than in the second quarter of this year. Our corporate costs in the second quarter of this year were actually lower than our budget by about $400,000.
Chris Reading: Our corporate office costs were $14.2 million, which is 8.5% of revenue, right in line with expectations in the second quarter of 2024. That compared to $12.1 million, or 8% of revenue in the second quarter of 2023.
Speaker Change: The second quarter of 23 included a downward revision in our bonus accrual, causing it to look a little bit better as a percent of revenue than in the second quarter of this year. Our corporate costs in the second quarter of this year were actually lower than our budget by about $400,000.
Carey Hendrickson: Quickly turning to our balance sheet, it continues to be in an excellent position. We have $142.5 million of debt on our term loan with a swap agreement in place that places the rate on our debt at 4.7 percent, which you know is a very favorable rate in today's market and well below the current Fed funds rate. In the first half of 2024 alone, the swap agreement saved us $1.8 million in interest expense, with cumulative savings of $5.1 million since the third quarter of 2022. In addition to the term loan, we also have a $175 million revolving credit facility that had nothing drawn on it during the second quarter, so that's all available capacity.
Speaker Change: Quickly turning to our balance sheet, it continues to be in excellent position. We have $142.5 million of debt on our term loan with a swap agreement in place that places the rate on our debt at 4.7%, which you know is a very favorable rate in today's market and well below the current Fed funds rate even.
Speaker Change: In the first half of 2024 alone, the swap agreement saved us $1.8 million in interest expense, with cumulative savings of $5.1 million since the third quarter of 2022 in interest expense.
Carey Hendrickson: And we have approximately $90 million of excess cash over and above what we need for working capital ready for deployment into growth and development. We've deployed $40 million of cash and acquisitions so far this year and expect to deploy more before the end of the year. As we noted in our release, we're updating our EBITDA guidance for full year 2024, returning to our original range of $80 million to $85 million. The change in guidance reflects our updated expectations for salaries and related costs and contract labor through the end of the year related to the continuing challenging employment environment, particularly for our clinicians in our front office.
Speaker Change: In addition to the term loan, we also have a $175 million revolving credit facility that had nothing drawn on it during the second quarter, so that's all available capacity. And we have approximately $90 million of excess cash over and above what we need for working capital ready for deployment into growth initiatives.
Speaker Change: We've deployed $40 million of cash in acquisitions so far this year and expect to deploy more before the end of the year.
Speaker Change: As we noted in our release, we're updating our EBITDA guidance for full year 2024, returning to our original range of $80 million to $85 million.
Speaker Change: The change in guidance reflects our updated expectations for salaries and related costs and contract labor through the remainder of the year related to the continuing challenging employment environment, particularly for our clinicians and our front office staff.
Carey Hendrickson: We expect our patient volumes to continue to be strong during 2024, and we expect to make additional progress on net rate throughout. With those details, Chris, I'll turn it back to you. Okay, Cary, great job. Thank you.
Speaker Change: We expect our patient volumes to continue to be strong during 2024, and we expect to make additional progress on net rate throughout the year.
Speaker Change: With those details, Chris, I'll turn it back to you and we'll take questions.
Operator: Jamie, let's go ahead and open it up for questions. All right. At this time, if you would like to ask a question, please press star one on your telephone keypad. Should you find your question has been answered, you may remove yourself from the queue by pressing star two.
Chris Reading: Great job. Thank you. Jamie, let's go ahead and open it up for questions.
Operator: Once again, that is star one to signal for a question and star two to remove yourself. We will pause for just a moment to allow questions to queue. We will pause for just a moment to allow questions. We'll go first to Ryan Tanquilut with Jeffreys. Please go ahead. Hey, good morning guys. Good morning.
Speaker Change: Certainly. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. Should you find your question has been answered, you may remove yourself from the queue by pressing star 2. Once again, that is star 1 to signal for a question and star 2 to remove yourself. We will pause for just a moment to allow questions to queue.
Speaker Change: We'll go first to Ryan Tanquilut with Jefferies. Please go ahead.
Christopher Reading: Chris, maybe I'll start with you. So the labor challenges that we're seeing here, right? I mean, I have two questions. It doesn't seem like it's impacting your ability to drive volume growth. So is this just a matter of basically a reset in the baseline for what your therapists are doing? And then maybe the second part of the question would just be, you know, how are you thinking about strategies and initiatives to drive and improve that labor situation? Yeah, two good questions.
Speaker Change: Hey, good morning, guys.
Ryan Tenquillette: Good morning. Chris, maybe I'll start with you. So, the labor challenges that we're seeing here, right, I mean, I have two questions. It doesn't seem like it's impacting your ability to drive volume growth. So, is this just a matter of basically a reset in the baseline for what your therapists are making?
Speaker Change: And then maybe the second part of the question would just be, you know, how are you thinking about strategies and initiatives?
Speaker Change: to drive and improve that labor situation.
Christopher Reading: So the first part is, the perspective that it hasn't impacted our volume because the volume's been pretty good, but I think it has impacted our volume in a negative way. We beefed up our recruiting teams, we're doing better, but we still have markets where, you know, if somebody does leave us, turnover's been good, but if somebody does leave us, they relocate their family to, you know, another. I think if the labor market eases, I think it will reciprocally have, you know, a further uplift on volume. But demand's good.
Chris Reading: Yeah, two good questions. So first part is...
Speaker Change: The perspective that it hasn't impacted our volume because the volume's been pretty good. I think it has impacted our volume in a negative way.
Speaker Change: We've beefed up our recruiting teams. We're doing better, but we still have markets where if somebody does leave us, and turnover's been good, but if somebody does leave us, they relocate their family to another.
Speaker Change: State or another place, it takes a while to fill that spot and we do feel it and so
Speaker Change: I think if the labor market eases, I think it reciprocally will have a further uplift on volume, but demand's good.
Christopher Reading: Look, the operations team, it's a tough balance, particularly as we have gone into and through the vacation season with our staff working hard to deal with the volume that they have and, you know, the necessity to bring in some other or ancillary staff to fill those gaps to keep the volume up. The Operations team is very aware of it, Eric and Graham and our regional presidents, and it's, you know, it's tough, but we've got to just keep everything very dialed in.
Speaker Change: Look, the operations team, it's a tough balance, particularly as we...
Speaker Change: I've gone into, you know, and through now vacation season with our staff working hard to deal with the volume that they have.
Speaker Change: and, you know, the necessity to bring in some other or ancillary staff.
American Graham: to fill those gaps, to keep volume up. Ops team's very aware of it. Eric and Graham and our regional presidents.
American Graham: and it's
American Graham: You know it's it's tough, but we've got to just
Christopher Reading: We had a greater number of techs hired in the period than I kind of expected, so they're digging into that a bit. That may just be a seasonal thing, and we're coming out of that season now that school's back. And then just on the demand side. You know, any time that there's.
American Graham: Keep everything very dialed in.
American Graham: We had a greater number of techs hired in the period than...
American Graham: than I kind of expected, so.
American Graham: They're digging into that a bit. That may just be a seasonal.
American Graham: thing and we're coming out of that season now that school's back in.
Speaker Change: And then, just on the demand side,
Speaker Change: You know, any time that there's...
Christopher Reading: I'm going to go over a little bit about the pressure around hiring, the tendency is to pay more, to just lock it down. And so we need to do a better, longer-term job of widening the funnel. And so we're making some adjustments and some investments in the part of our business that really interfaces most closely with the PT schools around the country and offers, you know, I think a wider complement of things that we can do for those programs to help them and reciprocally help us as well. And so that's a little bit of a longer-term program and project, but all those things are in the works right now. Okay, that makes sense.
Speaker Change: pressure around hiring
Speaker Change: The tendency is to pay more, to just lock it down, and so we need to do a better, longer-term job on widening the funnel.
Speaker Change: And so we're making some adjustments and some investments
Speaker Change: The part of our business that really interfaces most closely with
Speaker Change: P.T. schools around the country and offering, you know, I think a wider complement of things that we can do for those programs to help them and reciprocally help us as well. And so, that's a little bit longer term.
Speaker Change: program and project, but all those things are in the works right now.
Christopher Reading: And then, maybe just my follow-up question would just be, if I can turn it over to you, are you seeing any change there, or is that something that's just stable, and then what we're seeing is just kind of like a replacement cycle? Yeah, I think it's kind of, it's actually been pretty steady, steady meaning it's been good, you know, for the last year and a half, two years. We've, I think the groups did a good job on that, you know, where we have Where we've seen pressure is, you know, this year we had the We gave probably larger than average raises just because people were pressed and the market's tight and it's very competitive. And then newer people coming in, you know, we know we're paying a bit more than we were a couple of years ago. And so I think it's that combination.
Speaker Change: Okay, let's make those a minutes. Maybe which is my follow-up question which is be on the turn over. Are you seeing any change there and is there or is that something that's just stable and then what we see is just to like our replacement cycle that this system is torquable trend.
Speaker Change: Yeah, I think turnover's been actually been pretty steady. Steady meaning it's been good, you know, for the last year and a half, two years. I think the group's done a good job on that.
Speaker Change: you know, where, where we have.
Speaker Change: Where we've seen pressure is, you know, this year we had to, we gave probably larger than average raises just because people were...
Christopher Reading: Where I think we're going to have to retest, and I don't know that it'll be on the clinician side of the market. But, you know, on our hourly wage area at our front desk and looking maybe for some more efficiencies there or retesting the numbers that we've been paying this last year to see how inflation is freaking out as a baby to see if we can get those back down a little.
Speaker Change: and the market's tight and it's very competitive. And then the newer people coming in, you know, we know we're paying a bit more than we were a couple of years ago. And so I think it's that combination.
Speaker Change: Where I think we're going to have to retest, and I don't know that it'll be on the clinician side of the market, but...
Speaker Change: You know, on our hourly...
Speaker Change: wage area in our front desk and looking maybe for some more efficiencies there, or retesting the, you know, the numbers that we've been paying this last year to see if we can, now that inflation has abated a bit, see if we can get those back down a little.
Christopher Reading: All those factors, along with making sure our cash flow has been fantastic, our collections have been really good, and our executive who handles that area is doing a great job, and just making sure we're as efficient as we need to be and can be on the backside of our operations as well. That, combined with the fact that I expect that we'll still see some more rate growth, and I'm really pleased with all of the reports and how that is lining up.
Speaker Change: And so all those factors, along with making sure our cash flow has been fantastic, our collections have been really good.
Speaker Change: are executive crew panels that area's doing a great job and just making sure was efficient as we need to be and can be.
Speaker Change: on the backside of our operations as well. So that in combination with the fact that I expect that we'll still see some more rate growth.
Speaker Change: I'm really pleased with, you know, all of the reports and how that is lining up. And Karen and I both expect to see that to continue to progress.
Christopher Reading: And Karen and I both expect to see that continue to progress over the coming period. And so it's going to have to be that combination of operational focus. You know, seeing what we can do in terms of rates at the front desk and some efficiencies in some other areas, and hopefully, we can get it down a bit. Thank you. Peace. We'll hear next from Larry Solow with CJS Securities. Please go ahead.
Speaker Change: You know, over the coming period and so it's going to have to be that combination of operational focus.
Speaker Change: you know seeing what we can do in terms of rate at the front desk and some efficiencies in some other areas and hopefully we can get it down a bit.
Speaker Change: Thank you.
Brian: Thanks, bye.
Brian: We'll hear next from Larry Solo with CJS Securities. Please go ahead.
Lawrence Solow: Great. Thanks, Tim. Good morning, Chris.
Larry Solo: Good morning, Chris. Good morning, Carey. I just wanted to ask, just a question on the volumes, maybe a little bit of a follow-up to Brian's question just on the...
Lawrence Solow: Good morning, Carey. It's fun to ask just a question on the volumes, maybe a little bit of a follow-up to Brian's question, just on the staffing constraints. So volumes are, as you pointed out, at record levels in a seasonally strong quarter. Just curious, if we look year-to-date, we're pretty much flat, right, on a same-store basis. I know Q1 was maybe a little unfair because there was some weather.
Speaker Change: Damn, I'm just trying to flip to buy him Zurt, you know what?
Speaker Change: Yeah, as you, you know...
Speaker Change: pointed out at record level in a seasonally strong quarter. Just curious though, if we look year to date, we're pretty much flat on a same store basis. I know Q1 was... Maybe that's a little unfair because it was some weather.
Lawrence Solow: But you've grown 2 to 3 percent volume in the last 10 years. So is there – as we get above this 30 per visit per day, and I've asked this question before, are there constraints? I mean, clearly, it sounds like I would guess staffing is one of them. Just – and you did mention that volumes are sort of in line with your expectations. So do you kind of bake in a little bit of a slower volume this year, or just any color around that would be great?
Speaker Change: But you've grown 2% to 3% volume in the last 10 years. So is there, you know, as we get above this 30...
Speaker Change: per day. I've asked this question before. Are there constraints? I mean, clearly it sounds like I would guess staffing is one of them.
Speaker Change: You did mention that volumes are sort of in line with your expectations, so do you kind of bake in a little bit of a slower volume year this year, or just any color around that would be great?
Christopher Reading: I don't think 30 is the threshold for anything. I mean, a lot of our workforce is part-time, regular, committed, part-time, but part-time moms that are working, part-time with kids still at home, other things. So we do have the ability to flex staffing, assuming that staffing is available and people are available. And I think that's been the biggest limiting factor so far this year. And you're right, we're flat on the year after having a lighter-than-expected first quarter. The second quarter came in about where we expected. It was a little bit lighter in June than I think we had modeled, particularly after a strong April.
Speaker Change: Yeah, I don't think 30 is the threshold for anything, you know, I mean a lot of our workforce
Speaker Change: Thank you. Bye-bye.
Speaker Change: part-time.
Speaker Change: You know, regular committed part-time, but part-time moms that are working.
Speaker Change: you know, part-time, with kids still at home, all those things.
Speaker Change: And so we do have the ability to flex.
Speaker Change: It's nothing.
Speaker Change: to me.
Speaker Change: It's staffing is available and people are available, and I think that's been the biggest limiting factor so far this year. And you're right, we're flat on the year after having a lighter than expected first quarter.
Speaker Change: The second quarter came in about where we expected. It was a little bit lighter in June than I think we had modeled, particularly after a strong April .
Christopher Reading: So, yeah. Thanks, everyone. But volume, generally speaking, demand for new patients is there; we just have to be able to address it from a staff perspective. And so I don't think this is a ceiling force.
Speaker Change: But volume, generally speaking, demand for new patients is there. We just have to be able to address it from a staff perspective. And so I don't think this is a ceiling force.
Christopher Reading: We certainly don't have a ceiling from a facility standpoint when you look at the physical plant and things like that. And, you know, it's all about creating incremental staffing so that we can continue to grow. And I'm probably saying you've done a great job, obviously, made some good strides. It feels to me like, hopefully, you know, you continue to negotiate and renegotiate, right? Because physical therapy, as we know, is a cost-saver, right? And with these inflationary pressures, right? You should be able to go back, and some industries are getting so much more money, right? So I feel like you guys are right for each other.
Speaker Change: We certainly don't have a ceiling.
Speaker Change: from a facility standpoint, you look at physical plant and things like that, and it's all about creating incremental staffing so that we can continue to grow.
Speaker Change: Right.
Speaker Change: You've done a great job, obviously, and made some good strides. It feels to me like hopefully you continue to negotiate and renegotiate, right? Because physical therapy, as we know, is a cost saver, right? And with these inflationary pressures, you should be able to go back.
Speaker Change: Some industries are getting so much more price, right? So I feel like You guys have right but had four years worth, right?
Christopher Reading: Right. And just on the Medicare side, any updates there? I think they came out with their proposals. Maybe this is the last year of proposed cuts. Any thoughts, longer term, maybe going to a CPI-based index pricing on the government or anything there for yeah, that's what we're supposed to, that's what's supposed to happen now in the in the interim period, this comment period following the July release. Now we're pressing hard. I mean, having five years worth of cuts. You know, in a row, in succession.
Speaker Change: And just on the Medicare side, any update there? I think they came out with their proposals. Maybe this is the last year of proposed cuts. Any thoughts longer term? Maybe go into a CPI-based index pricing on the government side or anything there?
Speaker Change: That's what's supposed to happen now, in the interim period, this comment period following the July release, you know, we're pressing hard. I mean, having five years worth of cuts.
Christopher Reading: It just makes making operational adjustments very, very difficult. And I think we've squeezed and maneuvered and managed. You know, not perfectly by any stretch, but I think pretty well, and yet I don't know that I can name another industry that's had, you know, maybe home health and some stretches, you know, this kind of punishment unnecessarily, and it all, frankly, comes from a mistake that MedPAC made when this all began, where they didn't realize that physical therapy was part of, Code says that they were impacting, they thought they were impacting.
Speaker Change: in a row, in succession. It just, it makes making operational adjustments very, very difficult. And I think we've squeezed and maneuvered and managed.
Speaker Change: You know, not perfectly by any stretch, but I think pretty well. And yet, I don't know that I can name another industry that's had, you know, maybe home health and some stretches.
Speaker Change: You know, this kind of punishment unnecessarily, it all frankly comes from the stake that Medtac made when this all began or they didn't realize that physical therapy was part of.
Speaker Change: The code says that they were impacting, they thought they were impacting interventional pain, management specialists, PM&R doctors and orthopedic surgeons, the guys at the top of the food chain.
Christopher Reading: Interventional Pain Management Specialists, PM&R doctors, and orthopedic surgeons, the guys at the top of the food chain, and, you know, it's unfortunate, but we're in it. We're almost out the other side. I can't imagine that this is going to continue without some reversal.
Christopher Reading: And we're spending a lot more time in BC with our lobby group, our industry group, APTQI, with the APTA, with our congressman, and women. And hopefully, once this election cycle is through, and we get some daylight on the other side, and people can focus on governing, we can make some progress.
Speaker Change: It's unfortunate, but we're in it. We're almost out the other side. I can't imagine.
Speaker Change: that this is going to continue without some rehearsal.
Speaker Change: And we're spending a lot more time in D.C. with the lobby group, our industry group, APTQI, with the APTA, with our congressmen and women.
Speaker Change: and hopefully once this election cycle is through and, you know, we get some daylight on the other side and people can focus on governing, you know, we can we can make some progress.
Christopher Reading: And the proposed cut, I guess, for 25 is, I believe, just similar to the initial proposal for 24, just under 3%. Is that right? Yeah, I think that. I think that 2.5%.
Speaker Change: Got it. And the proposed cut, I guess, for 25, I believe, is just similar to the initial proposal for 24, just under 3 percent. Is that right? Yeah, I think that. I think that. 2.5 percent. Okay.
Christopher Reading: Okay. And Larry, in the meantime, we can't control what Medicare does, or what CMS does, unfortunately. But in the meantime, we're trying to control what we can control, and that's what we're doing. We put a lot of effort into contract rate negotiations for commercial, for workers' comp, for all those things. We're seeing really good progress there. When we did these negotiations, many of them, we built in three-year step increases, so they continue to produce fruit each year to have continual step increases on our rates.
Speaker Change: Right. Okay. It's actually hard. Yeah. Yeah. Go ahead, Larry.
Larry Solo: No, no, go ahead. Your comment, I just had a question, a random one. Just go ahead. What was your thought there? I was just saying in the meantime, you know, we're working, we can't control what Medicare does, what CMS does, unfortunately. But in the meantime, we're trying to control what we can control and that's
Larry Solo: putting a lot of effort towards contract and rate negotiations for commercial, for workers' comp, for other things. We're seeing really good progress there. And you'll remember.
Speaker Change: When we did these negotiations, many of them, we built in three-year step increases. So they continue to produce fruit each year to have continual step increases in our rates. So that's good, and that's going to benefit us going forward. It's already benefited us. We're seeing
Speaker Change: really starting to see the impact of it now and I'm pleased with our team that's been that's done a really good job on that as well as the increase in workers comp that
Speaker Change: You know the number of visits in particular and as a percent of our mix it's a really good thing because that's one of our highest.
Speaker Change: rate categories. So, you know, we're working hard to move that rate even with the pressure from CMS.
Lawrence Solow: I know it caused a little bit of a lateness in your results and some shutdowns in the Houston area. I know you guys have given my facilities down there. Was there any volume impact we should expect in the future? Thanks.
Speaker Change: Great. I was just going to ask you to start to hog the ball there. Just with the hurricane barrel, I know it caused a little bit of a lateness in your results and some shutdowns around in the Houston area. I know you guys have a decent amount of facilities down there. Was there any volume impact we should expect in the future?
Greg: We lost about 2600 visits as a result of that, but I noted in my comments that our average visits per day in July was 29.8, so it's still right in line with what June was and, you know, right in line with our expectations and right about the same place it was last year in July of 23.
Carey Hendrickson: We lost about 2600 visits as a result of that, but I noted in my comments that our average number of visits per day in July was 29.8, so it's still right in line with what June was and right in line with our expectations and right about the same place it was last year in July. Great, I appreciate all the calls.
Speaker Change: Great, I appreciate all the call. Thank you.
Greg: Thanks, all.
Joanna Gajuk: Thank you. We'll go next to Joanna Gajuk with Bank of America. Hi, good morning. Thanks so much.
Greg: We'll go next to Joanna Gajuk with Bank of America.
Joanna Gajuk: Hey, thanks so much for taking the question here. So I guess on the labor since it's very topical here, but my question is, you know, because to your point, you've been hiring these workers for a year or maybe even longer at this higher rate. So my question is, like, why such a surprise on labor during this quarter, right? I mean, you've been talking about, like, staffing improving and turnover below the industry, which I guess that still holds. But I guess, you know, why were you so surprised by this quarter? Why I guess it didn't transpire, you know, in Q1. Yeah, it's a great question. Go ahead, Kevin.
Joanna Gajuk: Hi, good morning. Thanks so much for taking the question here. So I guess on the labor, since we're at a topical here, but my question is, you know, because to your point, you know, you've been hiring these
Joanna Gajuk: workers for a year or maybe even longer at this higher rate. So my question is like, why such a surprise on labor during this quarter, right? I mean, you've been talking about like, you know, staffing improving and turnover below the industry, which I guess that still holds. But I guess, you know, why were you so surprised with this quarter? Why I guess it didn't transpire, you know, in Q1?
Speaker Change: Yeah, it's a good thing.
Carey Hendrickson: I was just going to say one of the things that played into it was we expected to be able to transition from contract labor to permanent employees in some of these markets that were really challenged with, and so that would have helped us, but we had higher contract laborers, and you know that was part of the equation, but Chris, go ahead. No, I think part of it was that we had a really strong April, a really, really strong April, and spring quarter is usually a very strong volume quarter for us.
Speaker Change: Go ahead, Carey. I was just going to say, one of the things that played into it, I think, was we expected to be able to transition from contract labor to permanent employees in some of these markets that we're really challenged with. And so ... ... ... ... ... ... ...
Speaker Change: That would have helped us, but we had higher contract labor and that was part of the equation, but Chris, go ahead.
Speaker Change: I think part of it was we had a really strong April and string quarter is usually a very strong volume quarter for us.
Carey Hendrickson: And I think the combination of starting the quarter, you know, with a lot of demand, resulted maybe in us having, you know, slight increments here and there of staff beyond where we needed as the quarter progressed. You know, we're still peeling this onion a bit.
Speaker Change: And I think the combination of starting the quarter, you know, with a lot of demand.
Chris Reading: resulted maybe in us having, you know...
Chris Reading: Flight increments here and there, staff, you know, beyond where we needed as the quarter progressed, you know, we're still peeling this onion a bit. As Carey said, we have a handful of markets.
Christopher Reading: As Carey said, we have a handful of markets that kind of stand out as markets where. At least I believe that we shouldn't have as much contract labor as we do; we should be able to find, you know, long-term employees that, you know, are committed and part of our staff. We have good teams there, but for whatever reason, we're struggling in those central markets.
Carey: that kind of stand out as markets where
Carey: At least, I believe that we shouldn't have as much contract labor as we do, we should be able to find, you know, long-term employees that, you know, are committed and part of our staff.
Christopher Reading: And so, Eric and Graham and the rest of the team, meeting with partners, working on that, we're trying to look at some of the underlying factors. But, you know, as Karen mentioned, we didn't expect to be carrying as much contract labor as we have. Well, honestly, you know, I thought as inflation began to subside a bit, we could get our offered hourly rates down. I don't know that we've seen that transpire yet, but we're [inaudible] Because I think, you know, particularly at our front desk, we're too high.
Speaker Change: We have good teams there before, whatever reason, we're struggling in those simple markets and so Eric and Graham and the rest of the team, being with partners, working on that, we're trying to look at some of the underlying factors.
Speaker Change: But, you know, as Carey mentioned, we didn't expect to be carrying as much of contract labor as we have.
Speaker Change: Honestly, I thought as inflation began to subside a bit, we could get our offered hourly rates down. I don't know that we've seen that transpire yet, but we're going to have to test it.
Speaker Change: because I think you know particularly at our front desk we're too high and we're gonna have to see what we can do there and so combination of factors I wish it was perfect it's not of course and we have to make some adjustments
Christopher Reading: And we're going to have to see what we can do there. And so, a combination of factors. I wish it was perfect. It's not, of course. And we'll have to make some adjustments. It's a win-and-a-one. This is Eric.
Speaker Change: This is Eric.
Eric Williams: The only other comment I want to add to that is while the turnover rate is low and we are backfilling clinical and nonclinical positions at a higher rate, there's also an impact on the existing staff within the business. I mean, when you start bringing in newer people, potentially less experienced, it does have an impact in terms of making market adjustments to hang on to existing staff. So it's something that we're battling right now.
Speaker Change: The only other comment I want to add to that is while our turnover rate is low and we are back pulling clinical and non-clinical positions at a higher rate.
Speaker Change: There's also an impact on the existing staff within the business. I mean, when you start bringing in
Speaker Change: Newer people, potentially less experienced, that does have an impact in terms of doing market adjustments to hang onto existing staff. So something that we're battling right now, there's no question, I think there's a couple of things that we're in the process of doing now that we'll have an impact for us. We're certainly going to Chris's point where we saw labor ads in the business, taking a hard look at ensuring that the productivity we have within that clinic is consistent with our staffing ratios for clinical and non-clinical staff, so the people that added staff to be the volume to leverage those additional expenses. I will say that looking a little bit deeper in this and the Chris's point, we still are peeling the onion a little bit, the 23-demovos.
Eric Williams: There's no question I think there's a couple of things that we're in the process of doing now that will have an impact for us. We're certainly going to Chris's point where we saw labor ads in the business, taking a hard look at ensuring that the productivity we have within that clinic is consistent with our staffing ratios for clinical and nonclinical staff. Did we get the volume to leverage those additional expenses? I will say that, looking a little bit deeper into this, and to Chris's point, we still are peeling the onion a little bit. The 23 de novos that we had in place didn't lever costs as effectively as they should have.
Speaker Change: We haven't placed
Eric Williams: So we're in the process of evaluating those businesses to see what we can do in terms of changing their trajectory. We did expect them to contribute a little bit more than they did from a net income perspective. So that's a place we're going to have to revisit.
Speaker Change: didn't lever costs as effectively as they should, so we're in the process of evaluating those businesses to see what we can do in terms of changing their trajectory. We did expect them to contribute a little bit more than they did from a net income perspective, so that's a place we're going to have to revisit.
Eric Williams: There's no doubt that the additional resources that we're putting in here will help us, particularly in recruiting. I think we've added roughly a 40% increase in recruiting staff to help us in those problem markets where we've over relied on contract labor. So I think those additional resources will help us there. And my hope is that the additional resources will also decrease fill times to bring PTs on board where we do have turnover.
Speaker Change: There's no doubt that the additional resources that we're putting in here will help us in a particular recruiting, I'm going to help us. I think we've added roughly a 40% increase in recruiting staff to help us some of those problem markets where we've over-reline on contract labor. So I think both additional resources will help us there. And my hope is the additional resources will also.
Chris Reading: B.C. Phil times to bring PT's on board where we do have turnover, because to Chris's point, there is a volume impact associated with turnover that's reflected in these.
Eric Williams: Because, to Chris's point, there is a volume impact associated with turnover that's reflected in these first two quarters of numbers for us. So it's an area that we're just going to continue to have to focus on and invest in going forward here over the balance of the year. So this is great, thanks so much.
Chris Reading: first two quarters in numbers for us. So it's an area that we're just going to continue to have to focus and invest in and going forward here over the balance of the year.
Joanna Gajuk: And if I may, it sounds like there are, I guess, a handful of markets that stand out. So, and I guess the question there is, like, you know, does anything change competitively? Are you seeing, like, more competition from other therapy providers, you know, physical therapy, or is it nursing homes, or is there anybody else that, I guess, changed their behavior that made it kind of more competitive? Yeah, let me take that.
Speaker Change: This is great, thanks so much. And if I may, it sounds like there are a handful of markets that stand out.
Speaker Change: And I guess the question there is, like, you know, did something change competitively? Are you seeing, like, more competition from other therapy providers, you know, physical therapy? Or is it nursing homes? Or is there anybody else that, I guess, changed their behavior that made it kind of more competitive?
Christopher Reading: We're seeing young people come out of school right now. Now that, you know, some years ago, everybody moved to a mandatory doctorate program, we are seeing younger people come out of school with higher and higher levels of that. I mean, those of us who have kids in college know that the progression for just general college, little, and graduate-level programs has increased every year. And so what we're also seeing, which differs from, you know, years and years ago, is we're seeing people with levels that are so high that, wow, when I came out of school, I knew the only thing I wanted to do was orthopedic outpatient physical therapy.
Speaker Change: Yeah, let me, let me...
Speaker Change: Take that I think We're seeing young people come out of school right now now that you know some years ago everybody moved to mandatory doctorate program
Speaker Change: Seeing younger people come out of school with higher and higher levels of debt. I mean, those of us who have had kids in college, we know that the progression
Speaker Change: for just general college, let alone graduate.
Speaker Change: The level of programs has increased every year.
Speaker Change: And so what we're also seeing, which differs from, you know,
Speaker Change: years and years ago is we're seeing people with death levels that are so high that while when I came out of school, I knew the only thing I wanted to do was orthopedic outpatient physical therapy.
Christopher Reading: And while some of these kids would like to be in the settings that we offer because they're fantastic settings, they have to go where the money's the highest until, in some cases, that may be in the hospital or may mean a physician-owned practice. It may mean, you know, home health care nights and weekends.
Speaker Change: And while some of these kids would like to be in the settings that we offer, because they're fantastic settings, they have to go where the money's the highest. And so in some cases, that may mean a hospital.
Speaker Change: may mean a physician-owned practice. It may mean, you know, home health nights and weekends. And so, you know, while...
Christopher Reading: And so, you know, while the competitive market hasn't necessarily seismically shifted, what has shifted is the amount of debt that these kids have and the necessity to make choices that are purely based on, you know, how many dollars they can put in the bank at any given time. And we haven't been a profession that's been driven that way. But, you know, we've seen more and more people that are faced with those realities. And we've got to, you know, as an industry, we've got to adjust. Thanks for the call.
Speaker Change: The competitive market hasn't necessarily seismically shifted.
Speaker Change: What has shifted is the amount of debt that these kids have and the necessity to make choices that are purely based on, you know, how many dollars they can put in the bank at any given time. And we haven't been a profession that's been driven that way.
Speaker Change: But, you know, we've seen more and more people that, you know, are faced with those realities. And we've got to, you know, as an industry, we've got to adjust.
Joanna Gajuk: If I made a last one on the topic, then I guess my last question. So you also mentioned that you looked to obviously try to, you know, manage down the cost, but you also mentioned some efficiencies. So can you maybe elaborate a little bit, maybe Eric can, can chime in in terms of what exactly you can do to kind of, you know, improve efficiencies, which would result in, you know, improve labor, I think? So you can, you can, you can, you can, you can, you can, you can, you can, you can, you can.
Speaker Change: Thanks for the call. If I may, last one on this topic, and I guess my last question. So you also mentioned that you look to, obviously, try to, you know, manage down the costs.
Speaker Change: But he also mentioned some efficiencies, so can you maybe elaborate a little bit, maybe Eric can chime in, in terms of what exactly you can do to kind of, you know, improve, I guess, efficiencies, which would result in, you know, improved labor. Thank you.
Eric Williams: Well, that's definitely volume. I mean, volume is our best way to lower our costs. But the point that I was referencing earlier is, you know, going back and taking a look at where we had headcount ads, particularly in the tech and front office space, which is where a lot of our headcount ads took place, and making sure that those clinics with those additional heads are really at the threshold that we would expect from a visit perspective to support that kind of staffing.
Speaker Change: Well, that's definitely volume. I mean, volume is our best way to lever our costs, but the point that I was referencing earlier is, you know, going back and taking a look at where we had headcount ads, particularly in the tech and front office space.
Speaker Change: which is where a lot of our headcount ads did take place.
Speaker Change: and making sure that those clinics with those additional heads are really at the...
Speaker Change: threshold that we would expect from a visit perspective to support that kind of staffing. So that's a clinic-by-clinic analysis that's gonna result in, you know, if we're overstaffed, shuffling people around and putting them in the right place or taking labor out in the event that they don't have the volume to support it.
Eric Williams: So that's a clinic by clinic analysis that's going to result in, you know, if we're overstaffed, shuffling people around and putting them in the right place or taking labor out in the event that they don't have the volume to support it. Great, thank you so much.
Speaker Change #100: Thank you so much.
Joanna Gajuk: Thank you. Our next question will come from the line of Jared Haase with William Blair. Please go ahead. Good morning, Jared. Hey, good morning.
Speaker Change #100: Thank you.
Speaker Change #101: Our next question will come from the line of Jared Hates with William Blair. Please go ahead.
Jared Haase: Thanks for taking the questions. Carey, maybe for you, I just want to make sure I understood kind of the, you know, going back to the original guidance range for adjusted EBITDA for the year, some of the assumptions in the second half of the year, just want to understand kind of the puts and takes there. Is that largely reflecting swing factors in the labor environment in the second half of the year or anything else that you'd call out in terms of assumptions for the guidance?
Speaker Change #102: Good morning, Jared.
Jared Hates: Hey, good morning. Thanks for taking the questions. Carey, maybe for you, I just want to make sure I understood, kind of going back to the original guidance range for adjusted EBITDA for the year.
Speaker Change #104: Some of the assumptions in the second half of the year just want to understand kind of the puts and takes there. Is that largely reflecting, you know, swing factors in the labor environment in the second half of the year or anything, you know, or anything else that you call out in terms of assumptions for the guidance and are you assuming further increases in labor costs for here or is that largely you kind of based on current trends.
Jared Haase: And are you assuming further increases in labor costs here or is that largely, you know, kind of based on current trends? The guidance, it includes, is based on current trends in our labor, and that really isn't there's really no impact on the revenue side.
Carey Hendrickson: We're doing what we thought we would from our previous guidance and forecast on that side. It's just on the cost side, we had to bump it up a little bit to kind of reflect what we've seen so far.
Speaker Change #105: It includes, it's based on current trends in our labor, and that really is, there's really no impact on the revenue side. We're doing what we thought we do from our previous guidance and forecast.
Speaker Change #106: On that side, it's just on the cost side, we had to bump it up a little bit to kind of reflect what we've seen so far this year.
Christopher Reading: We originally did guidance. We had a pretty good size deal that we had, you know, close to done, and we had baked in, and, unfortunately, as life happens sometimes, one of the owners went, and probably is still going through a difficult divorce that put the kibosh on that opportunity.
Speaker Change #106: I, Carey, if I may, I want to add one thing. When we originally did Guidance, we had a pretty good-sized deal that we had, you know, close to done and we had baked in and unfortunately, as life happens sometimes,
Speaker Change #107: One of the owners went...
Speaker Change #108: And probably still going through a difficult divorce that put the kibosh on that opportunity.
Christopher Reading: And so that, combined with some of the other factors that we've discussed at length here, but that was a pretty good chunk of both revenue and EBITDA that we expected to be in the door by the end of June that, you know, we had to adjust out. That makes sense, and that's helpful. And then, maybe taking a step back, this is a bit more of a strategic question, but I'm curious how you think about the balance between growth and profitability going forward.
Speaker Change #109: And so that, in combination...
Speaker Change #109: with some of the other factors that we discussed at the link here, but that was a pretty good chunk of both revenue and EBITDA that was we expected to be in the door by the end of June that we had there a just out.
Christopher Reading: Obviously, you're seeing strong demand and very nice volume trends, that of course is leading to some of the incremental contract labor utilization to help support that. Do you start to consider at all kind of pivoting the strategy a bit? You may be capturing a little less volume growth.
Speaker Change #110: I understood that that makes sense and that's helpful
Speaker Change #111: and then I guess it's as a follow-up, maybe taking a step back, this is a bit more of a strategic question, but I'm curious how you think about the balance between growth and profitability going forward. You obviously are seeing strong demand and very nice volume trends.
Speaker Change #112: That, of course, is leading to some of the incremental contract labor utilization to help support that. Do you start to consider at all kind of pivoting this strategy a bit? Maybe capture a little less volume growth, but have a little bit more stability on the expense side?
Christopher Reading: It's a good question. You know, we're in the service business to take care of people. And so when somebody's at your door, and they've had surgery, and they want to be seen, we, just as caregivers at heart, we have a hard time saying no to that. And so, generally speaking, most of our facilities, probably with a few exceptions, they don't have waiting lists, they don't have, you know, a lot of patients that they turn away.
Speaker Change #113: Yeah, you know, it's tough. I mean, it's a fair question. It's a good question. You know, we're in the service business to take care of people. And so, when somebody's at your door and they've had surgery, and they want to be seen.
Speaker Change #113: We, just as caregivers, at heart, we have a hard time saying no to that.
Speaker Change #113: And so, generally speaking,
Speaker Change #113: You know, most of our facilities, probably with a few exceptions.
Speaker Change #114: They don't have waiting lists, they don't have, you know, a lot of patients that they turn away.
Christopher Reading: You know, it's not to say that we shouldn't look at our mix of patients and how we prioritize, you know, based on acuity and maybe even based on, in some cases, payer dynamics. You know, who gets to the front of the line.
Speaker Change #114: You know, it's not to say that we shouldn't look at our mix of patients.
Speaker Change #114: and how we prioritize, you know, based on...
Speaker Change #114: Accuity and maybe based on in some cases paired dynamics, you know, who gets to the front of the line. We're having to look at all those things quite honestly to make sure that.
Christopher Reading: And we're having to look at all those things quite honestly to make sure that, you know, where the next 10 patients come in aren't patients that are just barely above, you know, our cost to deliver care. You know, we've got to be focused. That's why the focus on War Comp has been. I'd like Eric to talk a little bit about the growth in that comp area because I do think it relates to your question and how we prioritize what we do and when we make step adjustments and other things. Eric, do you want to touch on that? Sure.
Speaker Change #114: you know, where the next 10 patients come in aren't patients that are just barely above, you know, our cost to deliver care. You know, we've got to be focused. That's why the focus on World Comp has been.
Speaker Change #114: So, um, so important.
Eric Williams: And I guess on that, just to create some perspective, I'd like Eric to talk a little bit about the growth in that comp area because I do think it relates to your question and how we prioritize what we do and, you know, when we make step adjustments and other things.
Eric Williams: Yes, sure. I'm happy to talk about that. I know it's been a focus of our core policy for a little while. There was a lot of work that was done to really, you know, properly position the organization to grow work. You know, Carey referenced it, work comp went from 9.6 percent of revenues Q2 last year or 10.1 this year. And while that may seem relatively slow or light when compared to what work comp percentages looked like in the past, we're making substantial strides in terms of visit growth. Our visit growth in Q2 on the worktop was 12.6 percent.
Eric Williams: Eric, you want to touch on that? Sure!
Eric Williams: Yeah, sure. I'm happy to talk about that. I know it's been a focus of our quarterly calls here for a little while. There was a lot of work that was done to really, you know, properly position the organization to grow WorkHop.
Eric Williams: You know, Carey referenced it, you know, work count went from 9.6% of revenues due to last year or 10.1 this year.
Speaker Change #115: and while that may seem relatively slow or light when compared to what work percent of just look like in the past, we're making substantial strides in terms of visit growth. Our visit growth in Q2 on work top was 12.6%.
Speaker Change #115: We're running about 9.3% year-to-date, so this category is growing really, really well. I think it's directly tied to the efforts we've had in terms of substantially increasing.
Speaker Change #115: Network Participation.
Speaker Change #115: Um, and we have another nine work comp contracts are going to be coming online here in Q3 and Q4 that I think will further drive growth in the work comp category and it's absolutely our highest.
Speaker Change #115: Paying segment of the business and growing well, so it's gone great and I think it will continue to grow going forward as we move through the year.
Eric Williams: Yeah, thank you. Any additional questions, Mr. Haase? No, that was great. I appreciate all the color.
Speaker Change #115: In the additional questions, Mr. Hayes.
Mr. Hayes: No, that, that, that was great to appreciate all the color.
Jared Haase: Once again, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. We'll go next to Michael Petusky with Barington Research. Please go ahead.
Speaker Change #117: Thank you.
Speaker Change #118: Once again, ladies and gentlemen, if you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change #119: We'll go next to Michael Petusky with Barrington Research. Please go ahead.
Michael Petusky: Thank you, Mike. So, I guess I wanted to circle back. I know that you guys have. Autumn, Autumn 8th, front desk.
Speaker Change #119: Hey Mike. So I guess I wanted to circle back in Inter.
Speaker Change #120: Things that you can do. I know that you guys have done some...
Mike: Initiatives in terms of automation, you know, with particular with the front desk and I'm just wondering, have you guys sort of maxed out where you're going to do that, you know, can do there or or.
Michael Petusky: And I'm just wondering, have you guys sort of maxed out where you're going to do this? www.physicaltherapyinc.com. I don't think we're maxed at the front desk, Eric. I don't know if you or Graham want to touch on that, but, you know, what do you think?
Speaker Change #122: Or is there more that can be done to sort of maybe alleviate some of the pressures you're feeling around labor in that part of your business?
Speaker Change #123: I don't think we're maxed at the front desk, Eric. I don't know if you or Graham want to touch on that, but, you know, what do you think?
Christopher Reading: We're still, fortunately, and unfortunately, I think we still have opportunity there, and we're early in it, I think, on some of that automation change. Yeah, Chris, I think that's a very fair description of where we're at. I think there's still an opportunity here. We haven't taken advantage of all of the functionality that is available to us, and that really goes back to some integration issues that we're having with our EMR vendor that we're working through as it relates to the ability to turn on some of that functionality.
Eric Williams: We're still, fortunately and unfortunately, I think we still have opportunity there, and we're early in it yet, I think on some of that automation change. Yes.
Christopher Reading: So it's going slower, but it's not going to be the magic pill. I think it's going to help some, but it's not going to have this major, major impact in terms of decreasing front office staff. I think at our larger facilities, it creates efficiencies for us, but we're continuing to look at other opportunities besides automation in terms of how we can leverage administrative costs within our business.
Eric Williams: More to come on that as we go down that path, and we'll share it with you guys as that vision unfolds. One other initiative that was talked about maybe 12, 18 months ago that I haven't heard a lot about since is GPS. That is, is that something that's still at all? Full, Focus, or War. For more information, visit www.fema.gov.
Graham: G P O and I mean is that is that it is that something that's still at all are you now.
Speaker Change #125: Meaningful focus or or or or is that also sort of very marginal in terms of the impact.
Mike: Yeah, Mike.
Greg: Go ahead Greg.
Michael Petusky: Yes. Go ahead, Grant. Yeah, go ahead.
Eric Williams: Well, we're still working through it. No, no. We're still working through it. It's, it's been, challenging in some areas. We're looking at different options for how we can do different savings mechanisms. We do have it stood up.
Mike: We've gotten through it.
Speaker Change #126: We're still working through it it's been.
Eric Williams: It's rolled out to probably about 45 to 50% of all spending. We've seen some savings, but it hasn't moved the needle as much as we were thinking it might. So we're looking at some different options on how we might be able to get some more movement on that sort of spending. I guess just to sort of wrap up. Is there an issue, Chris, do you feel like?
Mike: It's been a challenging in some areas, we're looking at different options and how we can do different savings [noise] mechanisms. We do have it stood up it's rolled out to probably about 45% to 50% now.
Oh: Of our Oh.
Oh: About clinics.
Oh: We've seen some savings, but it hasn't it hasn't moved the needle as much as we were thinking it might so we're looking at some different options on how we might be able to get.
Oh: Some more movement on that sort of one that sort of Spain.
Oh: Okay.
Oh: I guess just to sort of wrap up. This this idea I mean is there is there an issue Chris do you feel like in terms of getting partner buy in on some of on some of these initiatives.
Christopher Reading: Getting partner buy-in on some of these initiatives that really, you know, you want to let these guys, they're entrepreneurial guys, you want to let them run their business, but at some level, maybe they're not taking it, journalists. Thank you very much and happy national day. could help them with in terms of optimizing. I'm just curious if maybe... calibration of how Yeah, no, I actually don't think that, and that's not to say that in any initiative that we don't have people who are excited and early adopters and other people who are going to come on board with a little different perspectives, but I think our partners have done a great job, and we built a lot of trust over the years. You know, it varies by category and by, you know, by specific activity, whatever it is we're doing. For instance, right now.
Chris Reading: Really as is needed where you want to let these guys. They're entrepreneurial guy if you want to let them run their business, but at some level, maybe theyre not taking advantage of all that you guys. Yes.
Chris Reading: Could help them with in terms of optimizing I'm just curious if if maybe.
Speaker Change #128: Recalibration of of how this works is you know would be helpful.
Speaker Change #129: Yeah, No I actually don't think that too and that's not to say that.
Speaker Change #129: Any initiatives that we don't have you know.
Speaker Change #130: People, who are excited and early adopters and the other people who you know.
Speaker Change #130: We're going to come on.
Speaker Change #130: With a little different perspective.
Speaker Change #131: Our partners have done a great job and we built a lot of trust over the years.
Speaker Change #132: You know it varies by category.
Speaker Change #132: And by.
Speaker Change #132: No.
Speaker Change #132: Specific activity whatever it is we're doing for instance, right now.
Christopher Reading: And we've been working on this for a while, and it really has been, as Eric mentioned, the systems issue, but remote therapeutic monitoring, which is an opportunity that CMS provides to us to interface with patients as they perform their home program and maintain a level of consistency. We think that's really important, and we thought it was important a year ago, but we couldn't get the vendors and systems to talk efficiently, and while we had partners who were interested in it, it was too clunky, and it was difficult. We've finally gotten the vendor interface worked out, which took a lot longer than we had hoped.
Speaker Change #133: And we've been working on this for a while and it really hits bearing as Eric mentioned, the systems issue, but remote therapeutic monitoring which is an opportunity that.
Eric Williams: CMS provides to us to interface with patients.
Eric Williams: And as they perform their home program and maintaining a level of consistency. We think that's really important when we thought it was important a year ago, but couldnt get the vendors and systems to talk efficiently and while we have partners who are interested in it.
Eric Williams: Was too clunky and it was difficult and we finally got the vendor interface worked out and taken a lot longer than we had hoped.
Eric Williams: That's the nature.
Christopher Reading: That's the nature of things sometimes; you bring different companies together and, you know, you try to get things to work and try to push as hard as you can, and if it's too inefficient, you know, it doesn't get adopted as readily. And so there was a period of time, for instance, on that initiative and rollout where we just had to press pause because it wasn't worth beating the drum on and getting people frustrated.
Eric Williams: Time, so as you bring different companies together.
Eric Williams: You know you tried to get things to work in.
Eric Williams: Tried to push as hard as you can and if its too inefficient.
Eric Williams: It doesn't get adopted readily.
Eric Williams: So there was a period of time for instance on that.
Eric Williams: Initiative and rollout, where we've just had the press pause because it wasn't worth.
Eric Williams: Beating the drum on.
Eric Williams: And in getting people frustrated.
Christopher Reading: And so we had to focus on other things. And that's the nature of operations. I mean, you live by relationships, and you focus where you think you can get the greatest. And if you're working on a hundred things, you're probably not getting a lot done. You have to focus on the key things that are going to make a difference.
Eric Williams: It focused on other things and that's the nature of operation somebody new.
Eric Williams: You live.
Eric Williams: On relationships and you focus where you think you can get the greatest return.
Eric Williams: And if you're working on 100 things, you're probably not getting a lot done do you have to focus on the key things that are going to make a difference and so.
Eric Williams: Our partners do a good job.
Christopher Reading: And so I think our partners do a good job. I think they understand they're certainly not fighting, but these are day-to-day, minute-to-minute kind of issues that just require a lot of attention and precision, and in some places, we've got to dial in a little better. In other places, we're going to have to just figure out that the reality is it's going to be a little bit more expensive, and we're going to have to come up with some other revenue opportunities to offset it.
Eric Williams: I think they understand they're certainly not fighting.
Eric Williams: But these.
Eric Williams: These are day to day minute to minute kind of issues that just require a lot of attention and precision.
Eric Williams: And.
Eric Williams: Some places where we've got it dialed in a little better than other places.
Gonna have to just figure out the reality is it's going to be a little bit more expensive.
Eric Williams: And we're gonna have to you know, we're going to have to come up with some other revenue opportunities to offset it.
Christopher Reading: And that's just the nature of, you know, the business right now. We just sneak one last one in and then I'll get off of it in terms of... Labor Headwinds, and just on the other side, the CMS cuts. Is there, do you think there's an, you know, other sort of leader? Go and say, look, at this point, like something's going to give. We're at a place where something's going to give, and Yeah, access to service and all the rest of it is going to be impacted like this just feels like it is gotten. Enough is enough, and I'm just curious if you guys, you know, have been talking... go to the powers that be and say, look. [inaudible] https://www.youtube.com But we still face headwinds and pricing, and then headwinds and pants.
And that's just the nature of the <unk>.
Eric Williams: Business right now.
Speaker Change #134: Let me just sneak one last one in and then I'll get off.
Speaker Change #134: In terms of in terms of sort of the labor headwinds and just on.
Speaker Change #134: On the other side.
Speaker Change #134: CMS.
Speaker Change #134: Cuts over the last several years I mean is it is it is there do you think there's an opportunity for a P. T a.
Speaker Change #134: You know other sort of leaders.
Speaker Change #134: In terms of this industry to sort of go in and say look.
Speaker Change #134: At the at this at this point like like Something's going to you know, where we're at a place where something's going to give an end and access.
Speaker Change #134: To access the service and all the rest of it is going to be impacted like this just feels like it has gotten to a point where you know it's almost enough is enough and I'm. Just curious if you guys are.
Speaker Change #134: It had been talking about you know sort of a.
Speaker Change #134: A way to to go to the powers that be and say look we need some help here everybody else gets the price increases you know relative to inflationary pressures and we continue to face these headwinds but.
Speaker Change #134: But we still face the.
The headwinds in pricing and then headwinds and paying a paint clinical front office staff.
Mike: Yeah, you know Mike.
Christopher Reading: Yeah, you know, the world's complicated, but this particular issue isn't complicated. We know that we save money on the medical side of things. You know that we save significant costs. You know, patients who go through a course of physical therapy spend the last some of their health care in the year, 18 months following a course of PT. You know, from a Medicare-age patient.
The world is complicated, but this particular issue isn't complicated we know that we save.
Mike: The on the medical side of things you know.
Mike: We see significant cost no patients who go through a course of physical therapy.
Mike: And the last from the entirety of their health care.
Mike: A year or 18 months following of course the P T.
Mike: Good for Medicare age patients.
Speaker Change #135: They're going to spend less.
Christopher Reading: They're going to spend less, particularly be more active, more socially engaged, lower, you know, more activity, lower A1C, all of that. You know, it's not lost on anybody in most... APTQI, which I'm a part of and that all of the big companies, for the most part, are a part of, along with the APTA. We're in D.C. now a lot, and we don't run into many lawmakers who think that, you know, we should have these cuts, or they're necessary, or they make sense to them.
Speaker Change #135: Particularly be more active more socially engaged.
Speaker Change #135: Lower you know more activity.
Speaker Change #135: And see all of that.
Speaker Change #135: Yeah.
Speaker Change #135: Okay.
Speaker Change #135: Okay.
Speaker Change #135: <unk>.
Speaker Change #135: Or both of them at all the big companies for the most part are part of along with the P. P. A.
Speaker Change #136: We're in D C L. A law and we don't run into many automakers.
Speaker Change #136: Who think that.
Speaker Change #136: Sure.
Speaker Change #136: These cuts.
Speaker Change #136: Terry.
Speaker Change #137: Makes sense to them.
Christopher Reading: But Washington's been a bit of a dysfunctional place, in a way. I think we've all, you know, we've all noticed that. And so, you know, unwinding these, which have a secondary budget impact relative to, you know, the neutrality, has been difficult. They've been mitigated, but they haven't been unwound.
Speaker Change #137: Watching this.
Speaker Change #137: What is the way.
Speaker Change #138: I think we all know.
Speaker Change #139: We've all noticed that so.
Speaker Change #140: Winding knees, which have a secondary budget impact.
Speaker Change #140: Relative to you know the neutrality.
It's been difficult they've been mitigated, but they haven't been.
Christopher Reading: I hope we can partially, at least, partially cut for 25 as we have in the more recent period, and then we should move into a system which allows us to have cost of living-based rate changes. I mean, if you look at the accumulation, I don't know exactly, I have to look at it, what it's been, but it's close to 10% that we've absorbed this year. You know, on an accumulated basis, but this year, if you look at where we are compared to where we were in 2019, it's tens of millions of dollars that fall straight to the bottom line or specifically get removed straight from the bottom line. And it's an every year thing. And, you know, I'm not whining.
Speaker Change #140: Hum.
Speaker Change #140: I hope we can personally at least maybe cut for 25.
Speaker Change #140: And the more recent period and then we should move into the system, which allows us to have.
Cost of living based rate changes I mean, if you look at the accumulation I don't know exactly how to look at it what it's been but it's close to 10%.
Speaker Change #140: We've absorbed.
Speaker Change #140: And this year.
Speaker Change #140: Now on an accumulated basis, but in this year, if you look at where.
Speaker Change #140: Where we are compared to where we were in 2019, it's tens of millions of dollars of fall straight to the bottom line or specifically get removed straight from the bottom line.
Christopher Reading: It is what it is. We've got to deal with it. But if you'd given me, you know, a neutral to one to 2% increase every year,
And it's been an every year thing and you know my.
Speaker Change #140: One is it is what it is we've got to deal with it but if you're giving me you know neutral to one 2% increase every year.
Christopher Reading: What we could do with that would be amazing. And I think we're about to turn the page, and it's been a long time coming, and we're kind of tired of being in this, you know, wash cycle that we've been in, but, you know, I think we're nearing the end. And we will continue to press our DC constituency hard with the way the world is. It's just hard to get.
Speaker Change #140: What we can do that would be amazing and I think we're about turning the page and it's been a long time coming.
Speaker Change #140: And we're kind of tired of being you know wash cycle that we've been in but you know.
Speaker Change #140: I think we're nearing the end.
Speaker Change #140: We will continue to press our D C constituency hard.
Speaker Change #140: With the way the World is it's just hard to get.
Necessarily be aggregated attention that you need to.
Speaker Change #140: Dramatic change, but you know.
Speaker Change #140: We're not giving up.
Michael Petusky: Thanks, guys. Thanks, Mike. And our final question in queue will be a follow-up from Larry Solow with CJS Security. Right, thank you, guys. I just have a question on workers' comp.
Speaker Change #140: Alright, Thanks, guys I appreciate it thanks, Mike.
Speaker Change #141: And our final question in queue will be a follow up from Larry Solow with CJS Securities.
Speaker Change #141: Alright, Thank you guys.
Lawrence Solow: I guess more from a high level. This used to be like a mid-teens percent of your business, right? A pre-COVID, and obviously, the world has changed a little bit for remote work and all accelerated, but I feel like you're a target audience. Can't really really be remote in terms of our work and field. So I'm just curious, structurally, is there anything different that has caused a dramatic decline and work as comp volume over the years? I guess since COVID-19.
Speaker Change #142: Question on the on the workers comp I guess more from a high level.
Larry Solow: It used to be like a mid teens percent of your business right, our pre COVID-19 and obviously.
Speaker Change #144: The World has changed a little bit our remote working all accelerated but still your target audience.
I can't really be remote right in terms of our working field. So I'm just curious what.
Speaker Change #145: Structurally is there anything different that caused the dramatic decline in workers' comp volume over the years I guess since COVID-19 really.
Christopher Reading: Yeah, Larry, I wish I had a perfect answer for that. I mean, all of our companies that I'm aware of, post-COVID, have seen a pretty significant drop in work on percentage. I can't tell you why that makes sense or why it would happen, but it has happened, and all we can do is focus on what we do, and that focus has been to retrain, particularly the front office, to make sure that communication and follow-up across, in the common world, multiple constituencies who have an interest in the case.
Speaker Change #145: Yeah, Larry I I wish I wish I had a perfect answer for that I mean, all you know all of our companies that I'm aware of.
Speaker Change #146: Post COVID-19.
Speaker Change #147: Drop in a pretty significant drop in work comp percentage.
Speaker Change #147: I can tell you that I know why that makes sense or what would happen, but it has happened.
Speaker Change #148: Now all we can do is to focus on.
Speaker Change #148: What we do and that focus has been to retrain them.
Speaker Change #148: Particularly our front office to make sure that communication.
Speaker Change #149: And <unk> and <unk>.
Speaker Change #150: Follow up across.
Christopher Reading: You know, it's the payer, it's the case manager, maybe the company, the doctor, of course, always, but it's just that continuous retraining, and we've focused on that. And, you know, as Eric said, we've got access to a broader network and, to be honest, you know, through COVID. We were dealing with other things at the time, and, you know, and along the way over that period, which was a couple years, give or take, you know, with front desk turnover, you lose people, and you lose subtraction.
Speaker Change #150: Comp world multiple constituencies, who have interest in the case.
Speaker Change #150: The Payor case manager, maybe the company the Doctor of course always but.
Speaker Change #150: It's just that continuous retraining and we've focused on that.
Speaker Change #150: You know as Eric said.
Speaker Change #150: We've.
Eric Williams: We've gotten access to.
Eric Williams: A broader network and to be honest you know through Covid.
Speaker Change #151: We were dealing with other things at the time and.
Speaker Change #151: No.
Speaker Change #151: Long over that period, which was a couple of years give or take.
Speaker Change #151: That's turnover you lose people you lose subtraction, so I'm trying to get it back.
Christopher Reading: So, we're trying to get back. I'm not going to promise that we're going to get back to 14%, but as Eric said, we are growing our comp visits at a rate that's a pretty nice rate, so we'll see where it ends up. Okay, that just may squeeze one last one on a more positive note. Carrie said the industrial prevention business obviously grew nicely. I think he said low double digits or on an organic basis. What's the driver there?
Speaker Change #151: I'm not going to promise that we're going to get back to 14%.
Speaker Change #151: But as Eric said, we are growing our comp.
Speaker Change #151: Right.
Eric Williams: It's a pretty nice rate, so, we'll see where it ends up.
Eric Williams: Okay.
Speaker Change #152: One last one on a more positive note.
Kerry: Sure Kerry said.
Speaker Change #154: The industrial a bunch of business, obviously grew nicely I think you said the low double digits or.
Speaker Change #155: Organic basis.
Speaker Change #156: What's the what's the driver there.
Christopher Reading: And does that business? Is that a contra-indicator as, you know, employment gets a look? Because obviously, although I know the labor market is tight, things are maybe getting worse, unemployment's coming up a little bit, some things are maybe not, you know, loosening a little bit or getting worse, I guess, you know, maybe better for you guys in a sense. But what's going on in just, you know, this business that's driving that growth? Yeah. Yeah, yeah. So, simply put, it works. It works really well.
Speaker Change #157: Does that business does that contra indicator as you know employment gets a lot.
Speaker Change #158: Because obviously it.
Speaker Change #159: Although I know the labor market is tight things are maybe getting unemployment is coming up a little bit some things off maybe.
Speaker Change #160: Not loosening, a little bit or getting worse, I guess, maybe better for you guys and it sounds like what's going on in the job.
Speaker Change #161: And this business, that's driving that growth yeah, yeah, yeah. So simply it works it works really well, we now have more programs and services.
Speaker Change #161: And kind of program lines than ever before.
Speaker Change #161: When we started we had.
Speaker Change #161: One primary in a couple of very peripheral and.
Speaker Change #161: We have 15 or 20 different.
Speaker Change #161: Individualized programs as a result of some of the acquisitions that we've done.
Speaker Change #161: So are all integrated well and some of the growth that we've had both in the team.
Speaker Change #161: And our service offerings. So one it works it saves money.
Speaker Change #161: Seeing companies, where we get our foot in the door be willing to expand.
Speaker Change #161: Just most problematic site two sites across the country. So that there is really nice organic.
In truck customer.
<unk> growth opportunity.
Speaker Change #161: Seeing as you might guess.
Speaker Change #162: Risk managers and heads of HR move.
Speaker Change #162: Within an industry within an industry area two different companies and they've had good luck with US good success before its not block good success.
Speaker Change #163: They're bringing us in.
Speaker Change #163: And in a lot of companies are dealing with a muscular skeletal issue that is.
Speaker Change #163: A significant problem for them.
Speaker Change #163: Hum.
Speaker Change #163: The word's getting out this these types of programs they work and so it's a combination of things but.
Speaker Change #164: I'm really proud of our teams we've added in and grown in.
Speaker Change #164: And and strengthen these teams over time and they're doing a good job right now.
Speaker Change #164: No I expect the momentum that we have will continue.
Speaker Change #165: The question about how it relates to where the economy is.
Christopher Reading: I would say some of these programs are cyclical and that when the economy is blowing and going, they're busier, and some are counter-cyclical. So, in other words, maybe when labor gets really tight, you know, our post-offer testing, which is meant to screen out people who might get injured down the line or are likely to be injured. You know, we have companies in some segments where we can't find anybody.
Speaker Change #165: I would say some of these programs are cyclical in that when the economy is.
Speaker Change #166: Blowing and going they're busier.
Speaker Change #165: Some are counter cyclical so in other words.
Speaker Change #165: Maybe when labor gets really tight you know our post offer testing, which is meant to screen out people, who might get injured down the line, we're likely to be injured.
Speaker Change #165: We have companies in some segments or we can't find anybody we can't screen anybody out until.
Speaker Change #167: So it was a waiver.
Speaker Change #167: Gets tighter or some of those programs slow down, but that's always been the mix now we have enough diversity across our programs to where you know if we see a slowdown in one we're seeing a pick up in another and it doesn't show up as much. So it's just pretty steady overall.
Speaker Change #168: Got it great. Thank you guys I appreciate it.
Lawrence Solow: Got it. Great. Thank you, guys. Appreciate it.
Speaker Change #169: Thank you.
Chris <unk>: And ladies and gentlemen at this time as there are no further questions I would like to turn the floor back over to Chris <unk> for any additional or closing comments.
Christopher Reading: Thank you. And ladies and gentlemen, at this time, as there are no further questions, I'd like to turn the floor back over to Chris Reading for any additional or closing comments. Okay, Jamie, thank you. Listen, I know this was a long call. I want to thank everybody for their questions and attention. I know we have some follow-up calls scheduled. So, please reach out to Carey or me, and we're happy to spend time with you.
Christopher Reading: And just know that we're working hard on these opportunities. So, have a great day. Thanks again. Thank you. Once again, ladies and gentlemen, that will conclude the U.S. Physical Therapy second quarter 2024 earnings call. Thank you for your participation. You may disconnect at this time. Brian Tanquilut,
Chris: Okay, Jamie. Thank you listen I know this was a long call I want to thank everybody for your questions. Your attention and now we have some follow up call scheduled so.
Chris: Please reach out to carrier I and we're happy to spend time with you and just know that we're working hard on all of these opportunities. So have a great day. Thanks again bye.
Speaker Change #172: Once again, ladies and gentlemen that will conclude the U S. Physical therapy second quarter 2024 earnings call. Thank you for your participation you may disconnect at this time.
Speaker Change #172: [music].
Christopher Reading: And all of this follows our normal seasonal progression with school finishing and summer vacations kicking off for a bit before things get back to normal, as they've begun to do with school starting up again here in Texas this week in many places. Speaking in a minute about our expectations, our total visits are ahead of where we budgeted them to be at the midpoint this year, better by approximately 6600 visits, and ahead of last year, same period, by over 108,000 visits. Our partnerships are doing a great job addressing demand and doing a terrific job with patients in what seems to be a rather tight labor market. More on that in a minute.
Carey Hendrickson: This was due, again, to having 25 more clinics on average in the second quarter of last year, as well as the increases in salaries and wages and contract labor costs. On a per visit basis, our total operating costs were $84.46 in the second quarter, which compares to $80.61 in the second quarter of 2023. Our salaries and related costs per visit were $59.66 in the second quarter of 2024, compared to $57.59 in the second quarter of last year, and our physical therapy margin was 20.1 percent in the second quarter. Chris noted our IIP team produced excellent growth in the first quarter. IIP net revenues were up $4.5 million or 23.2% over the second quarter of 23, with IIP income up $1.1 million or 27.4%.
Christopher Reading: We're busy and remain committed on the development side of things. A few of our deals have pushed out a little bit due to factors that we don't control on the sell-side of the equation, but rest assured, we're working hard, and we expect a strong finish to the year for our development efforts with some exciting markets and partners who we are anxious to make part of our family as we look ahead. That concludes my overview and prepared remarks. Carey, as he always does so well, will provide the detail behind these themes.
Christopher Reading: So that's good, and that's going to benefit us going forward. It's already benefited us. We're really starting to see the impact of it now, and I'm pleased with our team that's done a really good job on that, as well as the increase in workers' comp due to the number of visits in particular, and as a percent of our mix, it's a really good thing because that's one of our highest rate categories, so we're working hard to move that rate, even with the pressure from... I was just going to ask you to start off the ball. They're just in the hurricane barrel.
Christopher Reading: You know, I think we're going to have a lot of time. We're going to have a lot of time. We're going to have a lot of time, necessarily the aggregated attention that you need to make dramatic change, but you know, we're not giving up. Very good.
Christopher Reading: We now have more programs and services and kind of program lines than ever before. When we started, we had, you know, one primary and a couple of very peripheral, and now we have 15 or 20 different, you know, individualized programs. As a result of some of the acquisitions that we've done and those that have integrated well and some of the growth that we've had both in the team and in our service offering. So, one at work saves money.
Jared Haase: But you have a little bit more stability on the expense side. Yeah, you know, it's tough. I mean, it's a fair question.
Christopher Reading: But we can't screen anybody out. And so as labor gets tighter, some of those programs slow down, but that's always in the mix. Now we have enough diversity across our programs so that, you know, if we see a slowdown in one, we're seeing a pickup in another, and it doesn't show up as much. So it's just pretty steady overall.
Eric Williams: We're running, we're running about 9.3 percent year-to-date. So this category is, is it growing really, really well? I think it's directly tied to, you know, the efforts we've had in terms of substantially increasing network participation. And we have another nine work comp contracts. They're going to be coming online here in Q3 and Q4.
Eric Williams: But I think we'll further drive growth in the work comp category. And it's absolutely our highest paying segment of the business and is doing well. So it's gone great, and I think it'll continue to grow going forward. Here's a move to the year.
Christopher Reading: We're seeing companies where we get a foot in the door, be willing to expand from just their most problematic sites, sites across the country so that there is a really nice organic, intra-customer, you know, growth opportunity. We're seeing as you might guess, you know, as risk managers and heads of HR move, within an industry or within an industry area to different companies and they've had good luck with us, good success before, it's not luck, good success, you know, they're bringing us in and low companies are dealing with a musculoskeletal issue that is, you know, a significant problem for them and, you know, it's the words getting out that these types of programs they work and so, the combination of the things, but I'm really proud of our teams, we've added and grown and strengthened these teams over time and they're doing a good job right now and I expect the momentum that we have will continue in terms of the question about how it relates to where the economy is.