Encompass Health Corporation

program is about to begin. If you need assistance on today's call, please press star zero. Good morning, everyone, and welcome to Encompass Health's first quarter 2023 earnings conference call. At this time, I would like to inform all participants that their lines will be in a listen-only mode. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, please press star one on your telephone keypad. You will be limited to one question and one follow-up question. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Mark Miller, Encompass Health's Chief Investor Relations Officer.

Thank you, operator, and good morning, everyone. Thank you for joining Encompass Health's first quarter 2023 earnings call. Before we begin, if you do not already have a copy, the first quarter earnings release supplemental information and related form 8K filed with the SEC are available on our website at encompasshealth.com. On page two of the supplemental information, you will find the safe harbor statements, which are also set forth in greater detail on the last page of the earnings release. During the call, we will make forward-looking statements, which are subject to risks and uncertainties, many of which are beyond our control. Certain risks and uncertainties, like those relating to regulatory developments, as well as volume, bad debt, and labor costs trends that could cause actual results to differ materially from our projections, estimates, and expectations are discussed in the company's SEC filings, including the earnings release and related form 8K, The Form 10-K for the year ended December 31, 2022, and the Form 10-Q for the quarter ended March 31, 2023, when filed. We encourage you to read them. Your caution not to place undue reliance on the estimates, projections, guidance, and other forward-looking information presented, which are based on current estimates of future events and speak only as of today. We do not undertake a duty to update these forward-looking statements. Our supplemental information and discussion on this call will include certain non-GAAP financial measures. For such measures, reconciliation to the most directly comparable GAAP measure is available at the end of the supplemental information, at the end of the earnings release, and as part of the form 8-K filed yesterday with the SEC, all of which are available on our website. I would like to remind everyone that we will adhere to the one question and one follow-up question rule to allow everyone to submit a question. If you have additional questions, please feel free to put yourself back in the queue. With that, I'll turn the call over to Mark Tarr, Encompass Health's President and Chief Executive Officer.

Thank you, Mark, and good morning, everyone. We're very pleased with our first quarter results, which, once again, exhibited strong volume growth and substantial year-over-year improvement in labor costs. Our first quarter revenues increased 9.5%, and adjusted EBITDA increased 17.5%. Demand for IRF services remained strong, and we have continued to invest in capacity additions to meet the needs of patients requiring inpatient rehabilitation services. We opened three de novos in the first quarter and a fourth de novo earlier this month. adding a total of 199 beds. Over the balance of the year, we plan to open three more de novos and add 93 beds to existing hospitals. Our Fitchburg, Wisconsin de novo, originally scheduled to open in Q4 of this year, has been moved to Q1 of 2024 due to weather-related construction delays. We continue to build and maintain an active pipeline of de novo projects, both wholly owned and joint ventures with acute care hospitals. We currently have 18 de novos under development with opening dates beyond 2023. This pipeline includes Danbury, Connecticut, for which we recently received approval for a certificate of need. Danbury will be our first hospital in the state of Connecticut And we look forward to providing high quality IRF services to patients in this market. During Q1, we again met the increase in demand for our services while reducing contract labor and sign-on and shift bonus expenditures. Contract labor was down approximately $21 million, or 51%, from Q1 of 2022, while sign-on and shift bonuses decreased approximately $5 million, or 23% from Q1 of 2022. On a sequential basis, contract labor and sign-on and shift bonus expenditures were similar to Q4 of 2022. As compared to Q4, contract labor rates were lower, but FTEs increased, primarily due to higher patient volumes. Our talent acquisition efforts resulted in 54 same store net new RN hires in Q1. Earlier this month, CMS issued the 2024 IRF proposed rule. This included a net market basket update of 3%, which we estimate would result in a 2.9% increase for our IRFs beginning October 1st of 2023. The IRF final rule is expected to be released in late July or early August. We are continuing to invest in our hospital-based technology through initiatives like our Tableau on-site dialysis rollout. We now offer in-house dialysis in 64 of our hospitals and will continue the rollout in 2023, reducing our reliance on third-party providers and obviating patient transport to receive this service leads to fewer disruptions to therapy schedules and improved patient outcomes and satisfaction. On-site dialysis via Tableau also reduces our costs for these services. Moving now to guidance. We are increasing our guidance for 2023. We now expect net operating revenue of $4.7 to $4.77 billion, adjusted EBITDA of $870 to $910 million and adjusted earnings per share of $2.94 to $3.23. The key considerations underlying our guidance can be found on page 12 of the supplemental slides. Finally, I want to remind investors that we are planning to host an Investor Day in New York City on September 27, 2023. At that meeting, We will provide more detailed insights into key elements of our strategy, including de novo hospitals, clinical technologies, and labor management. Please mark your calendars for September 27th. Details will follow in the days ahead. We hope to see you there. Now I'll turn it over to Doug for some further color on the quarter.