Q2 2025 US Physical Therapy Inc Earnings Call
Good day and thank you for standing by.
Welcome to the US Physical Therapy, second quarter 2025 full year earnings conference call.
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I'd now like to turn the call over to Chris reading chairman and CEO. Please go ahead, sir.
Thank you. Good morning everyone and welcome to us Physical Therapy. Second quarter 2025 earnings call.
with me in the call include Carrie, Hendrickson, our Chief Financial Officer, Eric Williams, our president and Chief Operating Officer in East Graham, Reeve for chief operating officer in the west, Rick benstein, our Executive Vice President,
General Counsel Jason Curtis or Senior Vice President of Accounting and Finance. Um, before we begin today's call, we need to cover a brief disclosure, which I'll ask Jason to go ahead and read.
Thank you. Chris, the 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.
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, and the related reconciliations can be found in the company's earnings release and the company presentations on our website.
Thanks Jason. So guys I'm going to do this. I think a lot like I did at last time more of of a candid overview like me to tell the story a little bit better. Um I want to start out by thanking our partners our staff and our home office support around the country. They're just doing an excellent job. I'm going to share with you some statistics that we don't normally share. We haven't shared before that relates to a patient sentiment around their care. So the clinical staff, our partners, they're doing a wonderful job.
Um, we've had good.
Strong focus and execution in a number of different areas. This quarter, we'll talk about uh also want to mention our industry uh industrial injury, prevention Partnerships. Both are are really firing on all cylinders at this point.
We've added a number of very large opportunities, some of, which haven't even started yet. Uh, and we continue to be very, very bullish about that part of our business. As we go through the stat, you'll understand why?
So for the first, so for this second quarter talk about physical therapy first and and volumes um a record second quarter for us as you guys know. Second quarter is typically a busiest quarter and terms of you know, Peak volume.
And so every second quarter, pretty much, you know, last year the same was a record quarter for us a year ago this year, our visits per Clinic per day, jumped to 32.7 up really nicely from again last year's. Second quarter record of 30.6
so the drivers around this, I think more than anything are happy patients um who
Love us at the end of their care who refer their family and friends, uh, a neighbors to us.
and,
When pickle ball happens, you know a year or 2 down the road. They come back and see us.
This is the stat I want to share with you. That we really haven't talked about before, it's not a new stat for us, we measure it. Every quarter, we have an outside company, uh, tabulate our surveys. This is companywide.
Our net promoter score is 93.5.
Now, just to give you some perspective before this call. I Googled. What's a good? Net promoter score for Healthcare company. And I got 2 answers. Good was 30, and excellent was 50.
And so the way that the way that we get these results tabulated, we're able to see what percentage of patients are active promoters of our business. And we're at 95%, it's only 1% of our patients as a as a negative, or the tractor.
So that puts us in amazingly good standing and amazing category.
Part of the reason for our success, obviously, it's what we try to do every day.
On the injury prevention side again, I can't say enough good things about our teams. Both partnerships are doing really well; revenues are up 22.6%, and gross profit is up 25.8% compared to the prior year quarter.
And again we're working on some really large contracts 1 new uh in the auto uh industry. Uh actually several new many uh, 1 really large 1 and 1 uh, very large ones to come.
Here later in the year.
Revenues and PT were also strong increasing 17.3%.
We added over 50, net clinics compared to the prior year period.
and for the first time through this,
First, 6 months, we exceeded 3 million visits on a year to date so far.
we also able to drive a slight increase in our net rate, despite the Medicare headwinds, which you guys know all too well about
Number of years, the impact in this year.
On, on those stack, Cutz is right around, 25 million, that's straight off profit line. It's been a huge impact. It's been a major headwind, uh, on a year-over-year basis since I can't remember exactly Carrie can tell us, but between 5 and 6 million compared to last year this year.
You know that's 8 8 and a half percent of our earnings uh on on last year's number. Maybe even a little bit more than that. And so to grow over 20% with that kind of a headwind consistently.
We're, we're really happy about right now. Things are things are coming together.
A cost.
Our salaries and related costs was up on a per visit basis ever, so slightly less than 1%?
But our overall cost per visit.
was down, um, slightly and really, I think,
Beginning March, uh, and, and continuing forward, we're beginning to get traction on a number of initiatives that we've been working on, uh, that will help us impact cost, uh, that will help us continue to drive more volume. Uh, and we're feeling better about things right now that we have and sometime
Uh when you look at PT or gross profit margin and and we're going to say adjusted very very slightly uh I think around a couple hundred thousand dollars only relating to an incentive payment uh that Metro uh had as a result of closing that deal. Uh,
Our, our gross profit margin came in at 21.1% for the quarter. So that is a nice move forward as well.
On the development front, we've added home care business. A couple of physical therapy Acquisitions. We have more to come the remainder of the year, we intend to focus hard. On our injury prevention business, given the organic and and the overall growth elements in that business. The margins, just the performance of both those teams. Uh we widened our industry, verticals in that space.
Uh, we widened our service offerings in that space.
Uh, we're competing, uh, and winning large contracts, we're able to do that with some margin Improvement as well. And so that business is very strong for us and has continued to be strong really for a very long time.
Um, the combination of these positives.
Factors has caused us to look out over the remainder of the year and increase guidance uh which is now between 93 and 97 million in adjusted ibida.
Then before I turn it over to Carrie because I skipped through a lot of things I wanted to tell the story Carrie's going to go through the numbers with a little bit more granularity.
again, I just want to thank our teams um, at times, you know, we Endeavor every day,
To try to make a difference to try to make a positive impact in a patient's lives or or within the injury prevention space, in the lives of the workers who are working at our nation's largest companies, most prestigious companies.
And more more having an impact, and we're making the world in our little little way, um, better. Uh, and and we feel really good about that. And so, again, I want to thank everybody that's involved in that. Uh, it's, it's making a difference and we appreciate it very much.
Carrie if you would go ahead.
Great. Thank you, Chris, and, and good morning, everyone. It's Chris mentioned. We're we're very pleased with our second quarter results. And, um, a few for performance metrics that that stood out to me.
We achieved a new record, uh, company record, 32.7 average, visits per clinic for day. That was the highest in our history. Our salaries are related costs, as Chris mentioned, increased slightly just 0.7% compared to the prior year. That's the smallest increase in that metric, we've had since the fourth quarter of 2023
Our total operating cost for visit actually decreased year-over-year. Our PT margin is Chris noted improved to 21.1% up from 20.1% in the second quarter of last year our iip Revenue excluding acquisition. So I want to organic basis grew 18.4% and our iip gross profit increased 21.8% on an organic basis.
million dollars in the second quarter of 2025, which was up 4.7 million from the second quarter of last year and then our adjusted debit on margin expanded to 17.5%
Up from 16.4% in the second quarter of last year. So all of those metrics, um, I was really pleased with turning the patient visit volumes, our average visits per day were 33.0 in April. They were 32.9 in May and 32.3 in June, that slight taper in. June is consistent with our historical Summer patterns when volumes dip slightly in the summer months before rebounding again in mid August,
We recorded 1,530,263 visits clinic visits in the second quarter and then also had 28,493 Home Care visits.
This is the first time we've reported home care visits separately from our in-clinic visits. They stem from the home care business that we acquired through the Metro PT transaction in New York in the fourth quarter of last year, and we'll continue to report those separately going forward.
Um for reference we had 22,943 in-home visits in the first quarter of this year and that number is the year to date numbers in the release too. Just so you'll have that for going forward.
Our net rate per patient visit was $105.33. That's ahead of the $105.05 we achieved in the second quarter of last year, but it is slightly less than what we had in the first quarter at $105.66.
As a reminder, we absorbed a 2.9% Medicare rate reduction that took effect at the beginning of the year and also our largest payer in Michigan. Which is our third largest state, with 56 clinics implemented, a policy change on April 1 that negatively impacted our net rate a little bit. So in that state so that was a bit of a headwind too. Even with those headwinds though our net rate held up well in the second quarter and we expected to grow from there.
Um, we continue our efforts to have a strategic focus on increasing reimbursement rates through targeted contract negotiations. Um, as well as efforts to grow our higher, net rate workers comp business.
Workers comp represented 10.4% of our net patient revenues in the second quarter with visits increasing 8.4% year-over-year.
We remain fully committed to all of our rate-enhancing initiatives, and we're working on those every day.
Physical Therapy, revenues, were 168.3 million in the second quarter of 2025 which represented a 24.8 million or 17.3% increase.
Compared to the same period last year.
The majority of that growth was driven by acquisitions completed since the second quarter of last year. Most notably, that Metro acquisition we made in New York last November accounted for $19.6 million of the $24.8 million.
Physical Therapy costs to operating costs were 133.1 million. That was an increase of 18.4 million or 16% over the prior year quarter.
Importantly, we managed cost, effectively our salaries and related costs. I mentioned we're just at 0.7% that's $60.88 and our total operating cost is also mentioned. We're actually down year-over-year
For therapy profit margin. I noted already 21.1% that's the, that's our highest quarterly margin since the second quarter of 2023 and that, of course, reflects, solid Revenue growth and the cost management.
Our iip team delivered, another strong performance in the second quarter, our iip, net revenues increased, 5.3 million or 22.6% compared to the second quarter of 2024 and income Rose 1.3 million or 25.8% of the prior year quarter. And then I gave the organic numbers earlier, IIT revenues increased, 18.4% and gross profit up 21.8%.
Yeah, IIP margin for the second quarter was 22%, which is up from 21.4% in the same quarter last year, reflecting strong topline growth and continued focus on operational execution.
Implementation and we'll start. Um, full bore on our implementation in the third quarter.
And that'll always be atomized on our non-GAAP reconciliation page.
Operating results were $12.4 million, up from $11 million in the second quarter last year. On a per share basis, we were at $0.81 versus $0.73 in the prior year quarter.
Our balance sheet remains an excellent shape. We currently have 135 million in her Term Loan with the swap agreement in place that fixes that interest rate at 4.7% that extends through mid 2027.
In addition, we have a $175 million revolving credit facility that had $24.5 million drawn on it at June 30, 2025.
We ended the quarter with 34.1 million in in cash.
As disclosed in our earnings release. The board of directors, authorized a share repurchase program. This week providing us the flexibility to repurchase up to 25 million of our shares through December, 31st, 2026, if market conditions are appropriate,
we view this as a prudent tool to have at our disposal. However, Acquisitions will continue to be our primary Capital allocation PRI priority consistent with our strategic growth strategy.
Our performance is the first half of the year has been strong exceeding. Our expectations coming into the year and we believe we're well positioned for a solid second half as well. And as a result, we've raised our full year 2025 adjusted debit our guidance from a range of 88 to 93 million, to the new range of 93 to 97 million in effect. The high end of our prior range becomes a low end of our new range with a 4 $4 million increase at the top.
Um, so with that I'll turn the call back over to Chris.
Thanks, Carrie. I appreciate it. I want to mention one more thing. We, you know, we're happy with where we are this quarter and the progress.
Still have plenty of things to work on, right? Which to me is also encouraging because we're not there yet, we have room for improvement, 1 of those things. I want to point out as a matter of perspective, relates to our same store growth and mature facilities, which this quarter was a little bit lighter than, than, maybe everybody expected. It was over 1%, but not in what I would call our normal range. We still have a few markets, where Staffing is a little tight. Uh, and with cost control, it's probably put a little bit of a damper on us. I want to point out 1 thing. Now, back in the spring, we initiated um, a a, a stage roll out of cash-based programs.
We haven't spent a lot of time talking about it. It's with anything. It takes a little time to get traction getting real traction with that now. And so in our other income line,
This doesn't show up as additional visits, although some our patients were coming in for these cash Based Services. Um, we have generated about $100,000 worth of additional Revenue. A lot of that coming from our cache Based Services, which are continuing to ramp up as we go forward. And so that's an added benefit that we really haven't had before. We're seeing some of our Partnerships do extraordinarily well with that. Um, so with that, that concludes our
Uh, prepared and our candid comments and we'd like to go ahead and open up for questions.
Ask a question. Please press star 1 on your telephone keypad. You may remove yourself from the Queue at any time by pressing star 2 once again, that is star 1 to ask a question, we will pause for a moment to allow questions to queue
Our first question will come from Brian at 10, quilet? With Jeffrey's your line is open.
Hey, good morning guys. And congrats on a solid quarter. Um Chris, maybe I'll I'll start with a follow up or a, a question around your last comment. So as I think about your same store Outlook, how would you characterize demand for your services or just broadly in the market versus like you were saying kind of like pulling back and managing the cost because of the clinician the labor situation and then maybe how do I Think About, You Know, Your Capacity versus you know thinking about maybe the novo builds in the future as you start bumping up against capacity constraints potentially
You know to have too many f*** resources yet, you're still trying to meet demand and we certainly it's not perfect. We have some markets where you know, the Market's still a little tight, where we have additional FTE, we need to hire that where the demand is strong and and yet, you know, we need some more resources. Other places are being dialed in, you know where they need to be. Um,
So, you know that's that's a work in progress, the cash-based programs, uh, are helping us to generate additional Revenue. Uh, and so that is, is been kind of a net, add force that we haven't had before. And I'm trying to I'm trying to remember the second kind of part of your question, good? Yeah. Just as as you think about, you know, Capital deployment into maybe denovos as you start bumping up against maybe capacity. Constraints. Yeah. On the denovo side look, we're going to we've had this Market where we've had some headwinds and, you know, we've had to deal with that. This is going to be
Probably the strongest denovo year that we've had, since I've been with the company, so denovos are going to be good this year.
Uh, they're they're on a a a really good Pace. Um, we, we're, we're making adjustments and have made adjustments on the recruiting side of the house, on the residency side, which get more students into our programs. So we think we'll be able to continue to ramp into the demand. We just have to keep it dialed in right now but I don't see it impacting our denovo openings
and, and frankly in markets like New York where net rate is considerably higher than most of our competition, particularly our small competition
We're able to do these small Aqua Novos, which frankly, we don't even announce, but we're able to do those at very, very...
Um, nice multiples and and get a nice rate lift as a result and and and a lot more resources to help them grow and scale. And so that is going to continue to be strong as well.
Kristoff follow up on that. I mean, as we think about Capital deployment, obviously, the the announcement of the dividend is, is positive. So, just curious how you, and the board thought about, you know this that decision to introduce a dividend just when it sounds like this is going to be 1 of your best denovo years maybe just thinking about the balance sheet, the cash generation. And then yeah, just this decision to do the buyback.
Yeah, so you mentioned dividend, the dividend is ongoing. And so we've been, we've been paying dividends for a long time, so I meant to buy back. The, the buyback is, is a new look. We feel like the Stock's been undervalued for some time. Uh, we understand healthcare services and, you know, having a little bit of a tough year, and we've had some Medicare headwinds, and yet we're making progress and continuing to grow the company. So, we wanted to be in a position to have flexibility uh, at, you know, at a certain level where we could
Go in and demonstrate our belief that we're going to continue to grow this company and do well over time. So it gives us flexibility, as Carey mentioned. It's not our first preference for capital deployment. I would say our first preference right now, frankly, is directed toward injury prevention, where the embedded organic elements of that business are really, really strong.
The next would be PT. And then, you know, on from there. Um, we'll be disciplined about any share buyback, and it's going to be dependent upon, you know, other capital demands and really where the stock is at any given time.
Got it. Chris if I may throw 1 more question you know as I think about just the the efficiency of your physical therapists. I mean we hear about AI tools in the market uh aimed at physical therapists. I mean is that something that you're throwing in the mix that's helping you out and then maybe kind of
Related tangentially, you know, you talked about your home PT business. Just if there's anything out there that you can share with us in terms of the dynamics there, because obviously it's new to us investors on what that business looks like. Thank you.
Yeah, there are some cool AI tools right now. We're deploying, you know, AI-backed technologies for clinical documentation, which is helping people get through their least favorite thing of the day. If you're a clinician, which is to document all the cool stuff that you did with somebody in physical therapy.
A lot of things sets and Reps and weights, and motions and, you know, joint related movements and so it's tedious. Uh, it takes time
And so, this ambient listening, um, AI driven, uh, assist is helping our clinicians, get through that much quicker, much more efficiently, we're just on the front end of rolling that out, but that's been well received and we're rolling out what I would call broadly, you know, a semi virtualization of the front desk, which enables us not to go completely virtual because I don't think we're ready for that yet. No, no, no. I think patients are ready. Uh, but and and augmented situation where we're able to focus efforts from Cross multiple clinics through 1 individual, that may be, you know, on site or remote somewhere and be much, much more efficient and save the number of front desk, F CES which continue to be a laborer challenge for us, just in terms of longevity.
Unlike our PT Group, which frankly right now, we're having the best, uh, least amount of turnover that we've seen in maybe my recollection, really good right now. Um, and so these tools are helping us get some margin and efficiencies in areas where we just haven't been able to do.
Do that in the past, and, um, we're early, but it's directionally encouraging.
Thank you.
Thanks Brian.
Thank you. Our next question will come from Joanna Gunk with Bank of America. Your line is open.
Hey, good morning. Thanks for taking the question. Hi. Um, so he moved first on the the metric that really stood out, uh, besides the, the visitor clinic, but I bought that the cost per visit, right? The client that'll cost, right? So um, maybe in that context. Can you walk us through, or give us some update on the, um, your Labor Management strategies. The wage. Um, maybe you know, talk about turnover and other, I guess metrics, we can share because sounds like you're doing pretty good job there.
Yeah. Eric you want to go ahead and take that talk about turnover and and some of the things we're working on and what we're seeing.
Yeah, this is, you know, again you recall from from, you know, our our quarterly conversations here, we made a lot of Investments, uh, in systems and resources in 2024 that are really starting to pay, you know, dividends for us in 2025 as it relates to, um, recruiting and retention. Um, you know, we've seen a 25% increase in in student clinical rotations across our Partnerships in 2025 part of that was participating in a student rotation matching.
Program with, you know, software the exact software that's been used by all of the PT schools out there. So we've seen almost a 200 student pick up uh this year. Uh we put in a new applicant tracking system in 2024. That's also giving us you know better companywide visibility across our Partnerships to, you know, all the applicants Who Who Are, You Know, applying for jobs. It gives us better opportunity to follow up with these applicants, um, track them, pre-, higher, post higher. And then for the ones, of course that don't take jobs with us, we have this huge database that we're building of people that we can go back to when we do have job openings. So um systems that have a big difference, putting in some additional resources to help us on the recruiting front made a big difference for us and the mentorship piece has been a major Focus for us. And and you know, we really push that hard uh, with our partners to make sure that we're connecting and, and, and spending time with the younger therapists that we bring on board in order to, you know, reduce turnover rates. Uh, as as Chris mentioned.
And these are the lowest turnover rates we've seen for the 6 months this year. January through June lowest numbers. We've seen in the last 7 years, so it's, it's absolutely making an impact for us. The the pieces that we're really excited about and Chris reference, you know, 1 of them, I'll touch base on that in a second, this mentorship piece while we're really focusing. It, you know, on a partnership level which is, you know, where our our, our our you know, clinical staff goes to work for, in the process of of building out.
Um but have an expertise um and and we can take advantage of that across, you know, our entire company. So we're excited about that. We think that will pay dividends for us as well uh as it relates to our, our ability to um retain staff.
Um, those are the big ones, Chris you mentioned AI. I'll talk about that as well. So we are in the, the early Innings of, uh, using that voice recognition technology that Chris talked about it. I, I think we have that in the hands of, you know, 200 or 250 pts right now. It's been really, really well received, um, and I think that is going to have an impact for us over time, uh, with retention as well. I mean, if you can reduce documentation, it's the things that clinicians hate to do the most. Uh, and right now we're, you know, there's a, there's a lot of people dabbling in it. I think we're farther ahead than most. I think we're farther ahead, um, than most large platforms experimenting with that right now. And I think that is going to help us attract and retain uh staff going forward.
Are you willing?
Go ahead. Sure, I'm sure. Are you willing to share the turnover? Actual turnover number?
That you we actually what we post that we will report that uh publicly at the end of the year and you'll find that in our ESG.
Yeah, join. I don't want to be in a position quarter, to quarter, to to, to add to our already, exhaustive list of metrics. But we're, we're in a good spot right now. We're in a really good spot.
Yeah, it sounds like it. No, thank you. And if I met another topic, um, Medicare rates, right? Uh, been a headline for a couple of years. Now, that sounds like, uh, 26. It's going to be a better, uh, rate update. So the overall physician fee schedule is going up like 3 and a half percent or more 3.6 3.8%. So, um, and then we had estimated like, uh, 2 and a half percent or So Physical Therapy codes. But can you talk about, you know, um, your estimate for, for, for your company? In terms of how the rate increased would trust translate for your portfolio into next year? Thank you. Yeah, let me let me make a quick comment and then I'm going to kick it to Carrie and and help get you through the specifics this year. And this is proposed rules. So it's going to be a lot of commentary and certainly a lot from the PT industry. This year, was the most complicated of any year that I can remember. Literally in my career. Um, they changed
A lot of think about turning, you know, kind of metaphorically turning knobs. They turned a lot of different knobs, uh, for rvus for work values for for Geographic index factors. Um, and there were particularly large swings on the, the geography side, some so much that both us and the APTA thought that some of the tables weren't correct.
And so, our overall assessment is, um, Carrie can carry can get into, um, but the the takeaway is it's positive. No longer, you know, a headwind. Uh, we haven't had any kind of a Tailwind in a while and, you know, we're happy that it's forward, but we think it it, you know, there's more work to be done. Obviously, with CMS Carrie. Why don't you go through the specifics?
Yeah, thank you. Um, so Joanna, we we've looked at it looking at the various geographies and and you know what the changes were in those geographies is Chris mentioned that that that varies a lot based on where we are and the rates increases in those geographies? I think we're probably going to be somewhere.
Between 1 percentage, something like that. Um,
For us again positive, we're just, we're happy to have a positive increase and not be looking at negative numbers for next year. So we're really pleased about that. Um, that 1 point, you know, if, if it's in that 1 to 1.75% range, that would be somewhere between 2 and 3 million dollars of a positive force next year on the top line. And then, um, from an even a standpoint, it would translate to somewhere between 1 and a half and, and 2 and a half million dollars. So, in that range is kind of what we're looking at. At this point, again, this is a preliminary ruling. We'll know the, we'll, we'll know the final ruling in December and we'll see if anything changes but that's kind of where we see it today.
be um,
you know, we the the irony is unfortunately, if you get under the hood and see how the sausages made, is that the Specialties that have the most extraordinary increases in the cost of equipment. So very expensive equipment and have the most highly, uh, litigated, whether you know, areas where there's exposure to, you know, litigation and other things, which you just heard, you know, the number of patients that love us on a percentage basis. So physical therapy in general, doesn't have that problem and so we're making a decided push
Where we know that we saved the system, a lot of money in fact, in the state of Maryland, uh, or a physical therapy on a pilot program of CMS is in the position, as kind of a primary care for muscular skeletal. They determine the physical therapists. Do what happens in the case, there's a massive. There's a massive aggregate savings and we're hoping to use those results with CMS to extend that equip pilot beyond the state of Maryland. Uh, which could be a big pay for uh, for a reasonable rational, annual cost of living increase for the fee schedule.
Yule and we think we should be front and center in that. So yes, we're pushing we hope it gets better. Uh we think there's some flaws in the existing methodology and we're going to be working on that between now and year.
End great. Appreciate the call. Thank you so much.
Thanks John.
Thank you. Our next question, will come from Benjamin Rossi with JP Morgan. Your line is open.
Hey, good morning. Thanks for taking my question here.
so,
Turning to the IP segment performance, you mentioned adding some services here over the course of the year. It certainly seems to be off to a strong start in the first half, with margins expanding year-over-year. Is it fair to say that? That segment's coming in ahead of your initial expectations of a $3 million absolute increase in gross profit, particularly as we head into the seasonally stronger Q3.
Uh yeah I don't have in front of me exactly what our budget was but we're definitely ahead of budget for the year. Um you know, q q q. Second half is um,
There's a little different seasonal pattern with injury prevention.
We tend to be pretty strong through the year, a little light in January, like everywhere else, and a little light in December where some of the big auto manufacturers and some of the nation's biggest manufacturers have an early shutdown in December, and that points our earnings a little bit. But if you go back, not just this first half or this quarter, but on a year-over-year basis, injury prevention has really done well for us and had really strong organic growth contributing to it. So we continue to be bullish. We're spending more time in development in that area, and we're identifying good companies. And of course, like anything else, we've got to get things done, but we expect to continue to deploy capital directionally there.
And I I guess this is a a follow-up to your comments on Medicare. PFS rates, obviously seems like the change for 2026 is kind of a mountain to more of like a 1-time fix and it doesn't necessarily address anything in 2027 and doesn't obviously biggie out of that 25 million dollar hole. You described after decreases in recent years, do you just walk us through where your conversation stand with your counterparts at the federal level and maybe how they are framing the decision to include that 1 time fixed for 2026 and the obba.
Yeah, I think it depends on who you talk to but nobody in Congress is happy that this is an annual issue.
But this isn't the only Annual issue that the government faces these days. It's, it seems like that's how we fund the government. Each year, is through this, you know, um, crisis management process and eventually ultimately gets done with a lot of chicken on both sides. And so,
It's not the optimal way to do anything.
It's certainly not fair to providers to have a one-month.
You know through the holiday to get things ready to go. We should have a multi-year plan, it should be locked. All of the lawmakers believe. That's the way it should be. And yet, you know, let's call it a 10-year kind of permanent fix on the physician fee schedule about 100 billion dollar event and so they need savings to be able to do that. You know 1 of the 1 of the big areas that we think is a saver and we're we're through apt Q the alliance for physical therapy quality and innovation.
Group that I'm heavily involved in and with all the other big companies in PT, we're going to have a, a pretty significant spend this year to use an outside Beltway analytics group to take the results that we've seen from the equip study in Maryland and extrapolate those Real Results. Not not, you know, theoretical but actual over, you know, the the, the the nation and create what we think is, um, a, a massive savings for the system with physical therapists in that key role, as kind of the primary care director of the muscular skeletal case. And so that's a possible, pay for a physician fee schedule. Fix
It's gotten a lot of very positive attention.
Among our lawmakers, you know, our Congress on both sides, CMS is, I would tell you, is kind of a difficult place to be because it's so siloed. And so people have, you know, one infant testimony, a small fraction of what amounts to, you know, a very complicated series of areas and rules, and responsibilities. And so, it's a little bit different to get a clear picture there; a little bit difficult. Um, but with Congress, we, as long as we can come up with some savings so we can get out of this deficit spending that we're in, maybe, you know, hear about tariffs and all the revenue that's creating, we'll see. But we need more than one year fixed for sure. And we have the AMA and the Hospital Association; everybody else wants more than that.
A year to your fix, it's unsustainable.
Great. Thanks for the additional commentary here.
Thank you. Our next question. Will come from Larry solo with CJs Securities. Your line is open.
Uh, good morning. Good morning guys. Uh, thanks for taking the question. Most of my questions have been actually answered. I just a couple. I'm just curious, so the the 7% are nearly 7% year-over-year increase in just visits per day per Clinic, um, and, and also the, the very modest, um,
Growth in in, in labor or and then less the contract. Overall operating expenses per visit how much of that just relates to, um,
The clo. You know, you had an acceleration enclosures last year. I know you closed like 30 clinics at the end of the back in Q3, I think. So, it feels like a lot of that. Um, just more efficiencies, um, driving these games is that, is that, is that fair to say? And then second part of the question is, I know you had set out. Um, you you discussed last year, some cost cutting initiatives, um, you never really put a number on it, but you sort of thought you could add up to maybe even double digits of millions over, you know, over the time. So I'm curious how that is played, you know, into the good uh, performance this quarter.
Yeah, it's like bacon cake. There's a lot of ingredients to go together and you know at the end of the day you hope it tastes good. Um I don't have in front of me, the relative pieces parts of every 1 of those ingredients and in fact some blend together so it's a little bit hard to measure cost efficiencies you know on on on 1 hand you know create
some some bulk challenges and opportunities sometimes in terms of volume related, you know, aspects and so we're trying to do the best we can to balance um technology
Efficiency.
Or what you're hearing is.
We're, we're feeling more confident that the things that we've done, which again, as you point out, are multifaceted are coming together in the right way. But as I pointed out earlier, it's not perfect. We still have, we still have plenty to work on. You know, there's still plenty of opportunity being focused on it, um, but where we are feels a little better than what we've been for maybe a while now.
Right. In terms of factors affecting visits per day growth, I was going to say that the addition of Metro in November has contributed to this increase. We've seen a rise in visits since that point in time. Prior to the addition of Metro, we were averaging about 31 visits per day, and now that number has kicked up a little bit because they average about 45 visits per day at Metro. So, that does look promising. Overall, there’s still really good growth in visits per clinic per day.
Good. Well, well, that's a good segue, then Carrie in into metric because I know you, you know, that was your, I think your biggest acquisition, um,
Historically. Uh, um, so curious. It sounds like that's progressing really well. Um, and I know when you, when you acquire at the time of the acquisition you spoke about a lot of um opportunities and I guess these Aqua, they Nova openings sounds like that's happening um at Metro. Um and and I assume since New York has better 1 of the better rates that probably benefits. You guys disproportionately too.
Yeah, we have a strong team there. Michael and his team are are are strong. They're very strong clinically. They're they're strong. Operators are strong in development and so um
Yeah, we've we've got plenty of opportunities, to, to chew on and, and, and work our way through for, you, know what, should be a long period of time? Um, aquanova is being just 1 of those
So, they're doing well.
That's been really positive there is. And we've talked about this before, as a net rate increase we've seen at Metro since we acquired them. You know, that's 1 of the
Things that we do with Acquisitions. We we look at trying to increase all their contracts is that we bring them over when we first uh uh the first month for Metro was around 101 dollars net rate and right. Um that and then that increase it was like averaged 10450 and the first quarter. It was 107.50 in the second quarter. So we've really seen some nice rate Improvement there, that doesn't show up in the Maduro clinics line and instead it shows up in the clinic editions line, but but I just wanted to point out that we're seeing really good net rate increases their at Metro. So that's helpful as well.
And did you just can you just walk through just the the pricing and break out in the quarter? Um I guess on the did you discuss that? Usually you give us kind of what commercial pricing was um the quarter. I know I heard you discuss the workers comp piece. Did you give any more details on the on the commercial side?
Sure, I'm sure happy to look at that. So I was 10533 overall commercial rates were about around 105 50. So that was a nice increase in commercial rates, medicare's a little a little north of 92 workers comp was still a little bit north of $150 per per visit, which is really good. Um, you know, so those those are the 3 primary categories. The others were relatively stable as well. Medicaid, personal injury self-pay
Great. Okay. Appreciate it. Thank you.
Thanks. Thanks.
Thank you. Our next question will come from Jared Hoss with William Blair. Your line is open.
Hey, good morning. Thanks for taking all the questions. Uh, you know, Chris maybe for you. I, I wanted to ask another 1 on the iip segment and nice to see the continued momentum there. I think you mentioned a number of larger opportunities that haven't started yet. So I'm wondering if there's any way that you can contextualize, I guess what? That backlog looks like or any way to frame up what the incremental Revenue opportunity is and and how that might compare to to Prior years.
Yeah, I don't have it. I Jarred I don't have it in front of me and and I I my preference and maybe I need to be a little bit careful. My preference is to not you know constitute Revenue ahead of when we've generated it either in development or otherwise and so um we're definitely making progress, we're having a good year. Um I'm I'm not prepared to get into the reason is frankly.
But if we hadn't 150, if we'd only hired 20, or 30, the revenue generation, you know, compared to the potential would have been different. So I really can't afford to be that far out on a limb and don't want to be in. So we're not going to do that, but um, as that comes about and it we're realizing it, I'm happy to to talk more about it, you know, once it actually happens.
Yeah, that that's fair. Totally makes sense. Um, maybe I'll ask a follow-up and I think you all have made some public comments in the past about some of the virtual PT applications that are out there. And I think recently 1 of the larger ones announced, they're building out sort of a network of in-person providers as a way to kind of supplement their digital offerings. So I'm wondering if you have any more that you can say about that, you know, would you consider participating in a in a virtual Network like that or excuse me, in a, in a network like that with a virtual partner? Um, you know, how how are you thinking about maybe the potential opportunity in terms of call a patient acquisition? Or you know, opening up any referral Channel?
Yeah. Well, you know, again, I don't, I don't want to, I don't want to speculate too much and and hypothetical situations have we had discussions with
Uh, 1 or more providers about providing, you know, a uh, a brick and mortar opportunity in person to add to a virtual offering. Yes. Um, it remains to be seen whether that's something that the industry uh, is accepting of or not. Uh, and I say that because a lot of the virtual providers have sold,
I'm going to use air quotes that PT service.
Uh, at a very low cost.
Kind of a, you know, per member pricing level. Very generic, not delivered by therapists, it's delivered, you know, either through an app or
Backed up by call center employees, who again, for the most part aren't licensed clinical folks. They follow a script.
And so what's been sold is that, you know, they can take all comers and any diagnosis and very complicated things post-op.
Reconstructions and wrote to the cuff repairs. And and frankly
I I'll tell you, my opinion is is that can't be done efficiently or effectively and so I think they are in a tough spot where they have to figure out, you know, whether it's the bricks and mortar solution, reciprocally we are now using technology.
Through companies like limber who's been a nice partner for us. Uh, that has, uh, an augmented solution that we use with our patients to be able to go into their home and see them complete. Their home program and actually see objective measures of motion and activity and other things, which help us better be better. Informed to guide that care and there will be a point in time. And we're not there yet because we're working on some, some really important things. Um, don't be a time when we focus more on
A broader digital solution that I think will help to augment what we do for our patients and, in some cases, make us a little bit more geographically agnostic regarding where somebody is.
Um but we're going to approach it very differently than the groups that have done it so far. I I think
I think they've tried to do too much and I think they're finding out, it's not possible to
To deliver it that way.
Okay, that's great. Thank you. I appreciate all the color.
Thank you.
Thank you. Our next question, will come from Jetton saying hi with Corey Partners? Your line is open
Hey guys. Congrats on a great quarter, and I appreciate the questions and answers here. Maybe I have two for me. One is, is there like a theoretical capacity we should think about? Because clearly, the volume growth in record Q2 is great, but like, is the system operating at 90% or some X percent security? I ask the question because incremental visits are very, very accretive to margins.
And then, a related point: if you think about the de novos,
Maybe a record you for opening the door, so I think they both relate to what's in available in the system. But then how will you recruit X number? I don't know if its 50 100, uh, of ftse.
And and you know, finding them is hard but the question isn't just finding them. It's what you pay them and how the economics works. I think there's 2 parts to it. If, if you could address both, that would be super helpful. Thank you.
Yeah, so on the capacity side think of it this way our capacity really isn't limited generally speaking by physical footprint. So the typical Clinic may be open from 7 to 6:00 but we have the ability in that same physical footprint which has more peak times and and also has slower times, we have the ability to fill in. Certainly some of the slower times then we have the ability to extend hours and do other things. So our our, our visit per Clinic per day, number can continue to grow its not constrained by our physical footprint. It may be, um, limited or it correlates with our staffing. And so we have to have the staff available as you mentioned to be able to see the next 5 or 10 visits per day. And, and there really is the possibility ultimately of
You know, getting that number up much higher than it is right now, won't happen overnight. But a little bit over time as as we've shown, you know, over the last couple of decades, we've increased that number really xco, um, every single year so that part I think will continue
To move forward um as long as we can continue, as you mentioned to find staff, and I would point you back to Eric's comments.
Around the Investments that we made in recruiting retention, uh, in school, affiliations residency programs, mentorship and other things to try to.
Have a stable bench from which, to draw from.
To backfill or more senior therapists. Those are the ones that go and open the next adjacent Clinic. Not the new grad, but the more senior person and that more senior person then gets backed up, maybe by somebody more Junior, in a clinic with a lot of people with tenure, so they can grow and learn, and it's easier to absorb that way. So, again, it's not perfect, um, you know, the Market's competitive and in some cases it's tight, but we're we're finding people and we're growing. And we expect to continue to be able to do that, particularly with the Investments that we made, you know, over the last 6 to 9 months.
And Chris that's super helpful because what it sounds like is there's no theoretical capacity so is the way we're thinking about it is equity holders, the right lens which is incremental visits or extremely margin accretive so whatever your margin guides just for this. You're using your updated with our range as we think about next year, they will be on there should be some flow through or increase in. So you're sort of margin should expand over time. As you have incremental volumes, is that the right General lens? I don't know if you can quantify that or is if that's just a good sound, bite to sort of end on from my perspective, know, I think it's, I think it's a reasonable Sound by, there's certainly points of inflection where when you have to go up,
You may go back a little bit before you can go forward again but generally, you're right, the last few patients of the day.
Are incrementally more profitable.
Your fixed costs are covered. I think that's one of the reasons why you see our total costs for visits come down a bit this quarter, because of the jump in visits per clinic per day. So hopefully, with particularly continued commercial rates, and continued wins like we're seeing with Metro, uh, with, you know,
567, you know, dollars a visit in in, in, in in rate growth, uh, with a combination of continued efforts around War comp and other more. Um, preferable payers that that combination.
Gives us more than enough to offset white. My, what might be a little bit of wage pressure year to year that wage pressure for us.
I mean, we're well below right now.
Getting started, uh, but you give us some some additional lift as we go forward. So I'm, you know, you have to deliver it, you have to make it happen. But I'm hopeful at this point that we can
We can continue to execute on that.
Great, thank you for your time, guys. I appreciate it. Yeah, thank you. Thank you.
Thank you. Our next question, will come from
With bington research, your line is open.
Hey Mike. Hey, good morning morning. Uh, hey, uh, hey, you gave, uh, you gave a sort of the, uh,
The hard numbers on the, on the, uh, rate per visit, but I'm just curious commercial pricing, was that, was that? I'm assuming that was up a little bit in the quarter. Do you have a percentage that was up versus the comparable period a year ago?
Sure, I can calculate that real quick. Um,
This up and then the second, I guess the second. Go ahead. Sorry.
Sure. It was up about between write about 1 to 1 and a half percent versus last year's second quarter. Um, and a second quarter of last year was actually this the strongest quarter for commercial rates. Uh, last year it's up.
It's up about 2.2% from the first quarter. So we had a nice bump in the second quarter versus the first quarter in that commercial rate.
Okay? And and and the uh, the issue in Michigan with the, with the large payer, uh,
How much impact did that have on on the commercial pricing overall I mean, did that take it down? You know, 20 basis points more than that?
yeah, you know, it was it was
I again let me calculate just a second. I know how much the impact is so uh
It probably had about a a 30 Cent per visit impact or so. Yeah. So it would have been we would have been kind of right at the first quarter. Number had, it not been for that. Michigan rule kind of rules rule, payer, rule change.
Okay, okay, so is is there is there is there anything to suggest that that what's going on in in, you know, in terms of that payer in Michigan, uh, you know, could be an issue with with other payers elsewhere, or, or do you really feel like this is sort of an isolated situation?
Mike, I mean each year, I wish it was. I guess. I wish it was uniform. Maybe maybe I shouldn't wish that. I mean, we've got, we've got 48 or 49 other states, where, you know, it's not an issue. So, you know, I don't see contagion problem, necessarily and Michigan has had some ebb and flow with this, payer on a number of different fronts, utilization caps, and other things that have been challenged and even litigated and so it's bounced around a bit. Um, and we're always going to have that. People are going to try different things at different points in time. And, and, uh, it's really no different, but, but that's 1, that we've called out this year, which is a little bit of a headwind.
Yeah and Mike you know as Chris said there's always puts and takes on the on the net rate and you know, you'll have things like that. But then we've got other things that are overcoming it and other areas. But I don't see it as Chris said as as a contagion kind of thing at all.
Okay, great. That's that's what I was trying to get at. So Chris earlier, you said uh, that I iip you felt like was a top priority in terms of capital allocation, when you were talking about that were you sort of talking about it in terms of internal investment hiring trainers? And such are we talking about more in terms of external assets that you, you know, you may try to sort of build on the current base of business
Or both, thanks.
Yeah, well it's it's always internal. I mean, but that's really not a problem and I really don't.
Think about that, maybe it should. But when I talk about Capital allocation, I I don't that's just, you know, matter of course. So what I'm talking about is investing in additional
Companies to to continue to fill in our service compliment to, to build on what we have to give us more opportunities for cross sale and uh, to continue to grow as as we have the last few years.
Do you feel like they're asking?
It'll be ongoing but we're actively involved. And we've spent more time this year. I think probably than ever before attending conferences and getting face-to-face meetings and being active in the space. People now kind of know who we are and while it's a much smaller space in aggregate than the PT World, um we're making some, we're making some progress and so
You know, I I don't don't be surprised if if you know, we're we're active and continue to be in that area, so it's it's important. It works. Um, team is has done and is doing a really good job and and we like the embedded growth elements in this business. Particularly I think, you know,
not to make any kind of a political statement, but if
Manufacturing is going to increase in this country and I think just with the announcement yesterday on Apple and and others uh you know, there's going to be a push to onshore manufacturing and we're positioned pretty well to you know, to benefit from that we continue to execute on what we've been doing. So and I think we will
Absolutely. Hey, let me just make 1 last 1 in and then I'll I'll well. What's the, what the next person asked questions? Uh, because you mentioned on the last conference call that you guys had been involved in sort of a deep operational, dive with your top 40 Partnerships. I'm just wondering anything interesting. Surprising as, as anything come out of that, that you that you're sort of, uh, you know, would would be willing to share that, uh, that, uh, that might matter thanks.
Yeah, the only thing that I'll share is that we're a couple things 1. This calls have been important making progress, I think what Partners have appreciated and it was kind of
was my theory going into. This is, you know, when you look back beginning with Co and and after the year after Co, we were both lean.
And busy. And it was, it was kind of a good year to Benchmark again, but, you know, I use the analogy. It's, it's like, you know what? Your weight that may fluctuate since. If, if you use your college days as being kind of, you know, this is this is a great comparative point or maybe a difficult comparative point, you know, as you go forward, you might not change a lot year to year, but the change over time you kind of lose track of where you are and pretty soon. Your belt, doesn't fit the same way anymore. And you lose kind of where you are in space a little bit. And, you know, that's
That's 1 measure weight's kind of pretty easy to keep track of but we're measuring a bunch of different things in this business. And there have been a lot of influences that have caused certain things to happen that are just part of the reality. But I think having now a really visible tangible tool that our partners get every month
That compare where they are now to where they were at the most efficient point. And how things stack against that, it's been kind of a really good yard stick to see change and then to be able to focus on those areas that need focus. And so, we've used that and we're making progress, and I think our partners have been very understanding and appreciative and um, you know, we're we're seeing change as a result.
Thank you.
Sure.
Thank you. It appears, we have no further questions at this time. I'll now turn the program back over to management for any additional or closing remarks.
Look it's been um it's been a good call. Thank you all for your questions. A lot of really good questions Carrie and I are available for the rest of the day. And whenever you need us uh we appreciate your your time and attention and particularly your support, you know, if you have a great day. Thanks.
Great. Thank you.
thank you, ladies and gentlemen, this concludes today's event, you may now disconnect