Select Medical ((SEM)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Select Medical painted a generally positive picture, highlighting significant revenue growth across various divisions. The inpatient rehab hospital division showed particularly strong performance, while the outpatient rehab division faced challenges due to an unfavorable payer mix and Medicare reimbursement issues. Despite these hurdles, the company remains optimistic, buoyed by regulatory relief and expansion plans that contribute to a favorable outlook.
Revenue and Earnings Growth
Select Medical reported a consolidated revenue growth of over 7%, reaching $1.36 billion compared to $1.27 billion in the previous year. Adjusted EBITDA also saw an increase of over 7% to $111.7 million. Notably, earnings per common share rose by more than 21% to $0.23, up from $0.19 per share in the same quarter last year.
Inpatient Rehab Hospital Division Performance
The inpatient rehab hospital division experienced a robust revenue increase of 16% year-over-year, totaling $328.6 million. Adjusted EBITDA for this division rose by 13% to $68 million. The division also saw improvements in revenue per patient day, average daily census, and occupancy rates, indicating strong operational performance.
Critical Illness Recovery Hospital Division Growth
In the critical illness recovery hospital division, revenue increased by over 4% to $609.9 million, with adjusted EBITDA rising by more than 10% to $56.1 million. The adjusted EBITDA margin improved to 9.2% from 8.7%, while admissions increased by 2.1%, showcasing steady growth in this segment.
Regulatory Relief and Development Plans
Select Medical benefited from regulatory relief as CMS deferred the 20% transmittal rule, leading to a favorable revenue adjustment. The company expanded its footprint by acquiring a 30-bed hospital in Memphis and adding three new clinics to its outpatient portfolio, with several development projects in the pipeline.
Outpatient Rehab Division Challenges
The outpatient rehab division faced challenges, with revenue increasing by 4% but adjusted EBITDA decreasing by over 14% to $24.2 million. The division was impacted by a reduction in Medicare reimbursement and an unfavorable shift in payer mix, leading to a decline in the adjusted EBITDA margin from 9.1% to 7.4%.
Medicare Reimbursement and Payer Mix Issues
A significant issue for Select Medical was the decrease in net revenue per visit, driven by reduced Medicare reimbursement and an unfavorable shift in payer mix. This issue particularly affected the outpatient rehab division, highlighting the need for strategic adjustments in this area.
Forward-Looking Guidance
Looking ahead, Select Medical reaffirmed its financial outlook for 2025, projecting revenue between $5.3 billion and $5.5 billion and adjusted EBITDA between $510 million and $530 million. Despite some challenges, the company remains confident in its growth trajectory, supported by strong performance in key divisions and strategic expansion plans.
In conclusion, Select Medical’s earnings call revealed a generally positive sentiment with significant growth in revenue and earnings. While challenges persist in the outpatient rehab division, the company’s strategic initiatives and regulatory relief efforts provide a favorable outlook for the future.