ATI Physical Therapy, Inc.

Good afternoon and welcome to ATI Physical Therapy's third quarter 2023 earnings conference call and webcast. All participants have been placed in the listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you can press star 1 on your telephone keypad. Please note this event is being recorded. On the call today is Sharon Vitti, Chief Executive Officer, Emily Tansey, Chief People Officer, Joseph Jordan, Chief Financial Officer, and Joanne Fong, Senior Vice President, Treasurer, and Head of Investor Relations. I'll now turn the call over to Ms. Fong.

Thank you, Lisa. Good afternoon, everyone. Thank you for joining us today. To cover, we'd like to remind you of certain financial statements made during this call before looking at statements that are subject to various risks and uncertainties and reflect our current expectations based on beliefs, assumptions, and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of some of the factors that cause after results are different materially from these forward-looking statements can be found in the risk factors section of the company's filings to the Securities and Exchange Commission. In addition, please note that the company won't be discussing certain non-GAAP financial measures that we believe are important in evaluating performance. Details on the relationship between these non-GAAP measures for the most comparable gap measures and reconciliation of historical non-gap financial measures can be found in the earnings press release that's posted on the ATI's website and filed with the SEC. And with that, I'd like to turn the call over to Sharon. Thank you, Joanne.

Welcome everyone to the ATI Q3 2023 earnings call. I wanted to let folks know that in addition to the ELT members Joanne mentioned, we also have Chris Cox, our COO on the call. Scott Gregerson, our chief growth officer on the call, Gus Oakes, our chief information officer, and Eric Cantz, our chief legal officer. And they'll be available to participate in the Q&A. So earlier today, we reported our third quarter 2023 results. And we delivered strong people, operating, and financial gains in the quarter. We have seen continued advancement in many areas within the ATI organization. driven by our strong teamwork across the national platform and the continued passion around our mission to expand access to care and help people live their healthiest lives. So I'm going to go through some highlights of the third quarter, and I'll start with growth. Demand for ATI services remained strong and was escalated in Q3. Our providers are committed to ensuring all new patients get started with their care at ATI as soon as possible. As we know, that is the best for the patients and their clinical outcomes. So as our referrals convert to visits, it creates a vibrant and busy atmosphere that is palpable to our patients and our providers. In particular, in the quarter, our sales team outperformed expectations in generating physician referrals to our clinics. Q3 visits per day were the highest since the start of COVID. In September 2023, our referrals per day were greater than 3,000, which is an all-time high for us. Our visits per day per clinic was also the highest since the start of COVID. Contributing to that favorable performance was the meaningful progress we've made in the quarter optimizing our clinic footprint. We closed 14 underperforming clinics in the quarter, bringing the year-to-date total of closures to 36. We also selectively opened three de novo clinics in the quarter, bringing the year-to-date total of openings to 13. Lastly, we've completed a strategic review of the market and our business capabilities. Under Scott Gregerson's leadership, we've identified several opportunities for growth beyond clinic footprint expansion. We look forward to discussing the areas of growth that position ATI to lead in the musculoskeletal sector as we make progress in the quarters ahead. A key area for us, our people are what differentiate us from the competition. Emily Tansey, who you'll hear from later, has done an outstanding job since joining the company just over a year ago. While her accomplishments are numerous, I want to call out two key areas. Under Emily's leadership, she has reorganized the talent acquisition team and positioned them as strategic business partners to our field leaders. She has also reestablished ATI's culture as people-focused and is extending our refreshed ATI brand to the candidate pools. As our people, teams, and programs gain traction, our base of clinical FTEs is growing and increasing our ability to provide more patients with access to high-quality care. Growing clinician headcount is an important unlock for our business. In the third quarter, the clinician headcount increased by an astounding 134 people, an all-time high growth number. This was achieved through a combination of targeted hiring and strong retention. Emily will go into details on our approach to provider acquisition and retention later in the call. From an operations lens, we're continuously working to improve operations to positively impact the patient experience, the patient journey, the clinician experience, and our financials. In this quarter, the team notably drove rate per visit improvements and clinician productivity to favorably impact Q3 results. So as we dig into rate, our rate per visit in Q3 was $109.90. That increased by more than $5 from the second quarter. Primary drivers include increases in contracted rates and operational improvements in revenue cycle management, both driving stronger revenue per visit in current and prior periods. While the improvement related to prior periods is one time, the enhancements in revenue cycle management and contract rates should carry forward into 2024. Speaking of rates, The Medicare fee schedule final rules were just published. We're disappointed in the continuing Medicare fee schedule rate cuts for physical therapy. It makes no sense given the value and effectiveness of high quality PT to our country's physical health. There is a bright spot on the CMS front for ATI. This is the fourth year that ATI has received an exceptional provider rating from the MIPS program, which is the Merit-Based Incentive Payment System, which is one of the CMS quality payment programs. The exceptional provider rating earned by our clinical team for high quality performance will again qualify the provider for a bonus percentage on top of the Medicare reimbursement rate and will be helpful to our 2024 financials once finalized. Onto provider productivity, our providers continue to perform at a high level sequential quarter over quarter. While Q3 showed up with a modest 0.2 visits per day per clinical FTE decline from Q2 to Q3, each established provider on average had slightly higher visits per day quarter over quarter on those days when in the clinic, basically accounting for higher vacation days taken during the summer months and the ramp time. for all our new providers. Financials show consistent progress. In 2023, revenue increased every quarter from the prior sequential quarter. Q3 2023 marked ATI's highest revenue since the impact started, since the pandemic started, in early 2020. Joe will provide detailed financial walkthrough of Q3 results later in the call. We have incredible teams at ATI that are making a difference in the lives of our patients and our communities every day. Today starts our ATI Employee Appreciation Week. I want to thank our talented and dedicated clinicians and leaders that emotionally invest and are passionate about enriching the lives of our colleagues, patients, and communities. You are what fuels ATI and makes us special. With that, I'll turn the call over to Emily for a discussion of our people in performance during the quarter.