U.S. Physical Therapy, Inc.

Good day and thank you for standing by. Welcome to the U.S. Physical Therapy fourth quarter 2022 and year-end earnings conference call. At this time, all participants are in listen-only mode. 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. If you require any further assistance, please press star then zero. I'd now like to turn the call over to Chris Reading, President and CEO. Please go ahead, sir.

Thank you, Gretchen. Good morning and welcome, everyone, to U.S. Physical Therapy's fourth quarter and four-year earnings call. With me on the call this morning include Carrie Hendrickson, our Chief Financial Officer, Eric Williams and Graham Reeve, our co-COOs, Jake Martinez, our Senior Vice President and Controller, and Rick Binstein, our Executive Vice President and General Counsel. Before we begin to discuss our results here this morning, we need to cover a brief disclosure statement. Jake, if you would, please.

Thank you, Chris. This presentation contains 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. Thanks.

Thanks, Jake. So we have a lot to cover this morning. I'll start by discussing demand. So we look at volumes which finish the year and really in nice fashion. We were steady in the quarter with October and November coming in at 29.4 visits per clinic per day for both of those months. Then we started December really well, averaging just above 30 visits per clinic per day for the first two, two and a half weeks. As you might recall, the country got hit with an extreme polar temperature and weather event just before Christmas. That threw a little damper on volume going into the holidays. But otherwise, we looked very good throughout the quarter. We finished December at 28.6 visits per day, which is about the quarter, and at 29.1 and then overall for the year at 28.7. These were the second-best volume per clinic per day numbers in our company's history for both the fourth quarter as well as the year. Considering the staffing challenges this year along with everything else, I'm very proud of our partners, our clinical teams, and all the many people who work to make sure our patients get taken care of and have a tremendous experience. They've worked extraordinarily hard these past few years under difficult conditions and continue to produce incredible results over nearly 4.5 million visits this year. and I'll just mention that volume out of the gate starting this year has been ahead of expectation. It's been nice. Shifting gears on the injury prevention side of the business, we had another strong growth year with revenue up more than 75% on the year and 37.6% for the fourth quarter. Despite those strong results, we were impacted throughout the year with open positions that were difficult to fill in some markets. due to rather across-the-board employee scarcity this past year. That has seemingly begun to improve, with more recent months seeing open positions filled at a greater rate, allowing us to get to revenue and profit generation in a better overall timeframe. And for some positions, and this is a comment that's meant to be across the board for all parts of our company, for some positions we are finally seeing a greater number of qualified applicants Thank you for joining us. Another bright spot that we expect to continue to help us as we go forward has been our net rate and our related contract renegotiations, which will continue through the entirety of our 2023 year. Our net rate improved to 104.28 in the 2022 fourth quarter, up sequentially from 105.53 I'm sorry, up from 103.53 in the final quarter of 2021. In spite of the Medicare rate change, the PTA reimbursement change, and the sequester relief phase-out in 2022, our contracting and ops teams have worked hard to overcome some of these headwinds, and that hard work is definitely paying off. Our rate progression quarterly this year went as follows. 103 even in Q1, up slightly to 103.18 in Q2, more traction in Q3 up to 104.01, and finally to finish the year at 104.28 in the fourth quarter. While we are pleased to make some progress through the year, we have much more work to do before we are done. One of the things we've decided as part of our overall strategy is begin to drop payers who will not acknowledge the value that our care, the care provided by all physical therapy, provides to the membership, the way of adequate and fair payment for the life-improving care that we provide. Offering substandard contracts is not fair and is not in keeping with the low-cost, high-value, return-to-function equation that physical therapy offers its patients today. A completed course of physical therapy results in a statistically healthier patient over the course of the next 12 to 24 months with lower overall healthcare spend for all things, and it's time that this is recognized. It is also time that we as providers refuse to accept low-ball, no-margin contracts from payers. We are in the process of some very frank discussions with some of these payers. We've given notice to some of those same payers that if we cannot get a reasonable fair rate, we will opt out of those contracts. To date, that has begun to bear some fruit, and we will continue. We plan on continuing those negotiations and discussions as we work our way through an extremely large portfolio of contracts. Our other challenge, particularly in the second half of 2022, surrounded the rapidly escalating inflationary environment, which impacted our cost of just about everything. For the final quarter of 2022, our physical therapy total operating costs decreased slightly from our cost per visit in third quarter. BP salaries and related costs also decreased slightly, about 1.6% from the prior quarter. However, an increase of 1.4% from the prior year's fourth quarter. All things considered, I think that's a pretty good job. Considering that our turnover for clinicians on a percentage basis has remained relatively steady throughout this whole time, when the profession in general has seen a considerable outflow, I'm very proud of how our clinicians, our partners, and our recruiting teams work together to fill open positions so that we could drive the second highest visit volume on a per clinic basis in the history of the company during a supremely challenging period. Another bright spot for us in 2022 is in the area of development, with five acquisitions and a nice stable of de novo and tuck-in facilities added throughout the year, bringing our total facilities owned at year-end to 640. Development discussions and opportunities continue to be strong, and we expect to have another good development year as things unfold. and many more. Fortunately, we have completed all of the deals we have set out to complete. We expect that to continue as we begin a new year, further setting us apart from many others in our industry with much higher leverage and much less balance sheet flexibility. One final note before I turn this over to Carrie. In the past couple of years, we have bought in minority interest with mostly discretionary, mostly partial buyouts of a portion of our partners' interest in key, strong partnerships across the country. These amounts totaled over 20 million in 2020, 31 million in 2021, and over 13 million in 2022. Additionally, we continue to bring in new, younger partners into these top partnerships to continuously ensure we have a stable and ongoing leadership into the future. were able to do those purchases in aggregate at an extremely efficient multiple overall throughout those three years that we just discussed. We are encouraged by our progress in some of these key areas, as I mentioned, as we work hard to deliver for our patients, our staff, and our shareholders in this coming year. That concludes my prepared comments. I know Kerry has a lot of detail that he wants to cover, so I'm going to turn it over to you, Kerry.

Great. Thank you, Chris. Appreciate it. And good morning, everyone. We noted in our earnings release that we're still evaluating our income tax expense. Just wanted to address that here. Our financial statements as presented represent where we currently believe they will land. There was a matter that came to our attention late in our evaluation of tax that we had to consider, and we simply need a little more time to fully evaluate it. We expect to have that vetting process completed in short order and certainly by the time we file our 10-K next week. Now, turning to our results, we reported adjusted EBITDA for the fourth quarter of $17.9 million, which was an increase of 2.8% over the $17.4 million that we reported on a comparable basis in 2021. And our full year adjusted EBITDA was basically flat with the prior year. Our operating results, which include the impact of higher interest expense, was $0.58 per share in the fourth quarter, and it was $2.70 for the full year of 2022. Our total company revenues increased 11.7% this year, growing from $495 million in 2021 to $553.1 million in 2022. Like all companies, we're continuing to deal with some inflationary cost pressures, but our volumes remain strong and our team is focused, as always, on finding ways to become even more efficient so we can produce the best possible results for all of our stakeholders. Our physical therapy patient volumes per clinic per day finished at 29.1, as Chris noted, for the quarter, which was the second highest per day volumes in the fourth quarter in our company's history, bested only by the fourth quarter of 2021. By month, our average visits per clinic per day were 29.4 in both October and November, and then 28.6 in December, which is typically the lowest month in the fourth quarter due to the holidays, and then there was the weather issue that Chris also noted. Our net rate for our physical therapy operations was $104.28 in the fourth quarter of 2022. That was a 75 cent per visit increase over the fourth quarter of 2021. That's particularly notable when you consider that the fourth quarter of 2021 had the 2% sequestration relief, which was no longer there in the fourth quarter of 2022, and that the fourth quarter of 2022 included the 0.75% Medicare rate reduction that was in effect at the beginning of 2022. as well as the PTA reimbursement change. A rate increase in each quarter in 2022 moving from $103 in the first quarter to $103.18 in the second quarter to $104.01 in the third and then to $104.28 in the fourth quarter. Again, this is despite the pressures on Medicare rates from the reductions put in place at the beginning of the year and the phase-out sequestration relief. We've seen some nice commercial rate increases this year due to the hard work of our contracting team which resulted in our average commercial rates also increasing each quarter in 2022. Our average commercial rate in the fourth quarter of 2022 was 3.4% higher than it was in the fourth quarter of 2021. We still have a lot of work to do on this front, but we're making progress and we expect that progress to continue. And as Chris noted, we're going to renegotiate or terminate contracts that reimburse us at a rate that is less than what it cost us to serve our patients which is primarily related to a subset of our Medicare Advantage contracts. Physical therapy revenues were $121 million in the fourth quarter of 2022, an increase of $6.8 million or 6% from the fourth quarter of 2021. Our physical therapy operating costs were $96.8 million compared to $90.2 million in the prior year. And on a per visit basis, our physical therapy operating costs were $4.05 per visit the fourth quarter which was a decrease of $1.09 per visit from the third quarter of 2022. We were pleased to see that cost per visit amount come down some in the fourth quarter from where it was in the third quarter. Our physical therapy margin also improved in the fourth quarter. It was 20.0%. That's less than it was in the fourth quarter of 2021 when it was 21%, but it is up from 18.7% in the third quarter of 2022. The revenues from our industrial injury prevention business were $18.9 million in the fourth quarter, which is a $5 million or 37.6% increase over the previous year. Expenses on the industrial injury prevention business increased $4.5 million, and so we ended up with operating income of $3.3 million in the fourth quarter of 22. That was 19.4% greater than the prior year. For the full year of 2022, our IIP revenue increased 75.5%, with our operating income up 49.3%. On a same-store basis, our industrial intervention revenue was up 9.1% in the fourth quarter versus the previous year, and for the full year, it was up 20.7%, and that same-store operating income was up 12.9%. Our corporate office costs were $11.9 million in the fourth quarter of 2022, As a percent of revenue, those corporate costs were 8.4% of revenues in the fourth quarter of 2022, which is virtually the same as it was in the fourth quarter of 2021 when they were 8.3% of revenue. And then for the full year, our corporate costs were 8.3% of revenue. That's down from 9.4% of revenue in 2021. You'll note in the release we did record a $9.1 million impairment related to our November 2021 Industrial Energy Prevention Acquisition that we made in the fourth quarter of 2021. We recorded that in the fourth quarter of this year. The impairment analysis was initially triggered by the sellers not achieving their earn-out. Our assessment of the expected future performance of the acquisition hasn't changed, and it's projected cash flows over time are similar to those at the time of the acquisition. However, we have used a higher discount rate and discounting those cash flows to present value now that we did when determining the value at the time of transition. So that higher discount rate was really the source of the majority of that impairment amount. Our interest expense increased from $191,000 in the fourth quarter of 2021 to $2.2 million in the fourth quarter of 2022. which was due to an increase in our debt, primarily related to acquisitions that we've closed during and since the fourth quarter of last year, and then also, of course, significantly higher interest rates in the fourth quarter this year than last year. Our balance sheet overall remains in an excellent position. We have a $150 million term loan with a five-year swap agreement in place that fixes the one-month term SOFA rate on that $150 million at 2.815%. including the applicable margin based on our leverage ratio, the all-in rate on that $150 million of debt was 4.665% in the fourth quarter. In our statement of comprehensive income, you'll note that our swap agreement currently has a mark to market value of $5.4 million, which means the current expectation is that we will pay $5.4 million less in interest expense over the remaining term of our five-year swap agreement We also have a $175 million revolving credit facility that had $31 million drawn on it at December the 31st, and we had a cash balance on our balance sheet of $31.6 million at December 31st. The borrowings on our revolver are at a variable rate. and the weighted average variable interest rate on the debt on our facility in the fourth quarter was approximately 5.75%. We also noted in the release that we increased our quarterly dividend rate from 41 cents per share to 43 cents per share, effective at the first quarter of 2022. We're pleased to increase that again as we have each year since the inception of the dividend in 2011. Our volumes in January and the first couple weeks of February have been very strong at a comparative basis to those same months in past years. And while inflation pressures remain, our costs on a per visit basis stabilized in the fourth quarter of 2022 as compared to the third quarter of 2022. We believe the progress we've made with commercial and other rate wins in 2022 and that we expect to continue to have in 2023 will enable us to offset the headwinds in 2023 related to the 2% Medicare rate reduction that became effective on January 1st, as well as the full-year impact of the phase-out of sequestration relief which occurred during 2022, which together represent an impact on our revenue in 2023 of approximately $4.3 million. With expected continued strong volumes will be on Adjusted EBITDA. will continue to provide operating results and operating results per share in our earnings reports, but our guidance will be related to adjusted EBITDA. We'll also provide information related to our debt and interest rates so that you can project our interest expense accurately. For 2023, we expect the rate on our $150 million term loan to be 4.915% based on our leveraged pricing grid. The debt on our line of credit, which was $31 million at the end of 2022, will be at a variable rate of one month term SOFR plus a spread based on a leverage grid. Currently, our all-in variable rate is approximately 6.65%, which includes the January increase in Fed funds rate. That rate is expected to move in tandem with any changes in the Fed funds rate going forward. In closing, we're in a good position as we start 2023, and we look forward to producing stronger results for all of our stakeholders in 2023. And with that, Chris, I'll turn the call back to you.

Yeah, thank you, Kerry. Great job. Operator, we're going to go ahead and open it up for questions now.

At this time, if you'd like to ask a question, please press the star and 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and 1 to ask a question. We'll take our first question from Brian Tanquillette from Jefferies.

Morning, Brian. Morning, guys. Chris, maybe the first question for you. As we think about the environment in the physical therapy space, some of your bigger competitors are clearly struggling with over-leveraged balance sheets and tough operations, high turnover rates of clinicians. As I think about market share opportunities from some of those disruptions or distractions, and then M&A Opportunities. I mean, how are you thinking about, you know, what's in front of you and what you guys can do to maybe potentially gain market share as a result of all this?

Yeah, I appreciate that question, Brian. So, you know, anytime, and I'm going to speak broadly, anytime there's, you know, a tough operating environment, let's call it that, you know, it affects certain providers more than it affects other providers. And because we do have Thank you for joining us. and we've done that. We have a really good development plan for this year around our top 30 to 35. Partnerships would make, which make up, you know, vastly about 80% of our overall earnings and those include de novo and tuck-in acquisition, so smaller practices in existing strong markets. And so I expect As we've seen in the past, although I would love for the market to have a great tailwind for all of us, it's not that way right now. But for us, there'll be some opportunity in here for us on the development front for sure.

That makes a lot of sense. Then, Kerry, you know, you called out how your cost per visit is down slightly. But as I think about the labor market, I know in your case, the challenges last year were more in the lower end of the labor or the skills spectrum. Maybe any color you can share with us on what that looks like right now.

Yeah, I mean, just as our total operating costs did, our salaries and related costs also came down in the fourth quarter versus the third quarter. Chris talked about how we're seeing more success in finding and hiring qualified candidates. I'd say there's going to continue to be some labor pressure, for sure, but we feel we're in a much better position to begin 2023 than we were in the middle of 2022, particularly. Chris, I don't know, or Eric or Graham, if you have any comments on that.

I'll just say, Brian, we're not seeing rates come down yet, we don't think. We're going to continue to test that, and I'll let either Graham or Eric discuss the rollout of some automation at the front desk and speak on that just for a minute.

Yeah, Curtis, this is Eric. I'll tie in a couple comments here. So no question, rates have not come down yet for clinical staff or front office staff as it relates to replacing positions. But it was a little bit easier here in Q4 in terms of hiring people. So the time to fill open positions got shorter. And without a doubt, the biggest challenge we saw last year from a race side was on the non-clinical side. You know, very competitive environment. Those folks had the opportunity to work anywhere besides healthcare. So that was tough. And so we realized that we needed to bring automation into our environment to help us. And so last year, we upgraded our EMR system, you know, all of our databases in order to take advantage of automated functionality that's available on the platform and this is really going to help us on the front office side so examples of that automated functionality would be appointment reminders you know going out to appointments on demand messaging uh things that um you know we weren't doing everywhere before and the ones that we're the most excited about that we think is really going to give us some some leverage here are check-in kiosks for our patients allowing them to check themselves in for their appointments complete forms, questionnaires, medical history, where we don't need front office people doing that anymore. And then there's a patient portal that offers patients the ability to request appointments, message the clinic, and provide access to the medical records, things before that our front office would have to do. So we're in the process of rolling that out right now with our largest partnerships. We're going to gain significant traction over the year across the portfolio, and we think that's going to allow us to leverage our front office costs as a whole.

Awesome. Thank you, guys. Thanks, Eric.

Our next question comes from Larry Solow from CJS Securities.

Morning, Larry. Hi. Good morning, Chris. Good morning, guys. Thanks for taking the questions. Just on looking at sort of high-level same-store sales volumes, were very good and found that they ended the year well and strong, excluding the holiday season, and started this year strong. You know, full year last year, obviously, it feels like you hit kind of a wall. I mean, you had a really good 2021, of course, and I think last year you had some, you know, obviously staffing issues and maybe a little step back from COVID or whatever, you know, You kind of look down a little bit for the year. What do you look at, you know, or the back half of the year, at least? How should we look at, you know, 23? You know, do you feel like volumes should, you know, growth in volume should return? Or are there some things that will still hold you back, you know, before we even get into the pricing discussion, but just in terms of, you know, volumes on a same-source level?

I can tell you, you know, we're out of the gate pretty well, really well. You know, that month, month and a half, two months doesn't make for a year yet. But our plan for the year is certainly up volumes this year. As you mentioned, last year we were impacted on a couple of different fronts. While COVID is kind of for everybody in the rearview mirror, what happened last year was people had not taken vacations in a really long time until that, in combination with just a really tight labor market, increased our time to fill positions. And the pullback from our record year, which was 21, Thank you for joining us. We made some improvements in staffing. It's beginning to feel better. You know, and I hope that continues. You know, we'll see. But so far, so good.

Okay. And, Chris, you know, you sound very encouraged just about pricing. I know, you know, even for the last few quarterly calls, it sounds like at least in the near term, Hopefully, the increase in commercial rates will maybe even more than offset the government cost. But it does sound like, at least qualitatively, I know you can't get into too much specifics, but it sounds like you're starting to get better things. Things are coming your way, and hopefully, I know you can't move the needle too fast, but hopefully, the next several quarters, the needle will keep moving in your direction, it sounds like.

That's the goal. Frankly, Larry, this is overdue. You know, we've taken contracts probably in the past and accepted them that we should have pushed back on hard. Frankly, we're just not going to continue to do that. And we're getting some good results from the efforts. It does take time, as you mentioned. And in our structure, we don't just have one big contract for everybody because we have lots of and many more. We're working our way through. The team's done a really good job. It's going to take some time, but I do think we can offset some of the Medicare pricing things for this year and continue to move the ball forward.

Great. If I could just squeeze one more in, just in terms of just acquisitions Sounds like, you know, you probably have maybe, you know, an upper hand or certainly a better position than a lot of your competitors on that front. What about just leverage? You're not super levered, but you're more levered than you guys have been historically, so about a little less than about two times. So would you consider taking that up higher? I mean, is there, you know, and still not being all that high, especially for a business that generates pretty good cash flow? Any thoughts on that?

Yeah, Kerry, you want to start with that, and then I can jump in if needed?

Yeah, Larry, as you noted, our leverage ratio at the end of the year is 2.0 times. I mean, I think we would be comfortable moving that up from there, certainly. You know, it just has to be the right deal and at the right price. I mean, I think that's what we're really focused on right now. We do have the available capacity. We have Thank you for joining us.

Yeah, I don't really have anything to add. I don't want to talk too much about what's prospective because it's not done until it's done. But we're trying to be smart about how we deploy capital. Part of that is in our dividend increase this year, and we expect to continue to do deals. And we're hoping we can get those done at pricing that makes sense for everybody. Excellent. I appreciate all the callers. Thanks, guys. Thanks, Larry.

And once again, that is star and one to ask a question. We'll take our next question from Matt LaRue from William Blair.

Good morning.

Good morning. Hi, Matt.

Hey, Chris.

Hey, Kerry. I wanted to go back on the payer issue one more time. You referenced obviously some contracts paying below your cost of care. Directionally, could you maybe just and many more.

Let me start with that, Kerry. I don't want to get into too deep a detail into some of these discussions. They are sensitive. The percentage of our reimbursement on some of these lower contracts isn't particularly great. It's low single digits. We have a lot of contracts that we are renegotiating across the commercial spectrum and contracts that are much higher paying contracts where we have gotten increases as well. Some cases we have given notice and that is according to the terms in individual contracts. And so those do vary. And with respect to other and many more. The world changed last year in terms of inflation in a lot of different areas, and certainly employee inflation was one of those. We do a tremendous, we provide a tremendous service to our patients. It bends the downstream cost curve. for the entire healthcare system when a patient comes through a completed course of physical therapy. That's well documented now in some independent studies. And some use that information to get ourselves not an extraordinary rate. We don't need to be greedy, but we shouldn't be paid. certainly not below our cost and we should be paid to have an adequate margin because these payers have adequate margins, more than adequate in some cases in my view. And so my encouragement is for everybody to do this and we'll see what happens. All I can control is what happens here, but we're focused on it here right now.

Okay. That makes sense. If I can switch to IIP of the number of acquisitions in the last couple of years, when you think about the same store outlook for that business, how are you viewing it for 23 versus in years past? And is there a similar environment with some of the other operators in the space potentially being over levered or stressed where Thank you for your time.

and many more. I think it's early next week, Kerry, you know, with some bankers who are helping us look and think about and consider, you know, similar and potentially adjacent opportunities in some cases, slight expansions to the portfolio, similar acquisitions. We don't have anything ready to go yet for sure. This year, you know, I'm going to say that This year I expect that just by virtue of the size of that business that organically we had just an incredible year this last year. I hope we can produce another good year, but we haven't necessarily budgeted that way. We've been a little bit more conservative. I think it'll depend a lot on Thank you for joining us. and so there are certain industries I think we'll continue to do well. There are other industries where I think things will slow down a little bit. We'll slow with them likely and as things pick back up, we'll pick back up accordingly. So this year I think we'll be a little bit more muted than years past, but we're working hard as we have to overcome any headwinds and at the end of it to lay down a good year when it's all said and done.

Okay, thanks, Chris. Maybe for Eric or Graham, a follow-up to your comments around automation and other tools you can use on the patient interaction side of the front end. Where do you, are you piloting those tools? You mentioned rolling out. Maybe just curious what kind of timeframe would it look like to roll out the tools that you've evaluated? Do you feel like they're adequate relative to what you want or the things that you need to tweak? Maybe give a sense for where

We're rolling it out and are in the process of rolling it out at our first partnership right now. It's our largest partnership in the portfolio. Learning from that, it's only partially implemented in that portfolio right now. Really, really well received, by the way, by the front desk as well as the patients who are utilizing those. and our learnings from this first partnership that we're rolling out will allow us to roll it out concurrently at other partnerships. So we should have a fairly fast implementation, a faster implementation as we move through the year. But we'll have a better idea in terms of the timing for our top 40 partnerships, which is where we're focused to start within the next, by the end of April, April 30th.

Okay. Thank you for the questions.

Thank you.

Our next question comes from Mike Patisci from Barrington Research. Good morning, Mike.

Good morning. Good morning. Hey, so slightly distracted here, five earnings reports. So if you've covered this, forgive, but I'll ask it anyway. Have you guys given any update on progress with the GPO and how partners are either starting to get traction with that or not so much? Graham, do you want to take that?

Chris, I didn't hear the question.

GPO progress and how it's being received.

It's being well received. We're actually going live on the 27th. We're rolling it out at 180 locations starting on the 27th of February. It's been worth getting all of the items that we need in our different partnerships located in the warehouses. They're going to be adjacent to their practices. We go live on that next week.

How many partnerships does that represent, 180?

30, probably. We try to do them in geographic diverse areas to test the program, and after the first group partnerships go live, we'll be rolling it out in further partnerships. I can get the exact number for you. I don't have it in front of me.

All right, well, great. That is meaningful progress. That's great. Chris, I'm just curious because so much, I guess, your commentary started with the sort of contract negotiations and some commentary and Q&A. Is there a chance that ultimately some of these payers just sort of don't get it and you end up saying, well, you know, I mean, obviously there's a chance, but I guess, You know, I don't think anything happens uniformly.

Look, we're prepared, in fact, in some markets where we have given notice and they've said, fine, we have other providers, we'll use other providers. We're able to fill those slots with better paying patients, frankly, you know, better paying plans. And so we may lose some of these in the short run. Now, interestingly, in one of our big partnerships where they said, fine, we don't care. We're not going to move. Within two months, they came back and offered a very meaningful increase. and many more.

and sort of on a related note in terms of pricing, you know, and I know it's way, way early, but, you know, in 24 in terms of CMS, I mean, is the industry lobbyists and the social, you know, APTA and others that sort of get this, I mean, You know, I guess what I'm trying to get to is, will there be any kind of reprieve from sort of what the industry has been sort of going through the last few years in terms of these headwinds? Because it just seems between inflation and the pricing, it's just made it awfully difficult for smaller operators, particularly or leveraged operators, to do business.

Yeah. I'm trying to get out of the predicting what CMS is going to do business because what they do doesn't make a lot of sense. In fact, it doesn't make a lot of sense to our lawmakers and others where our efforts in APTQI and with APTA and other constituencies are focused. and many, many more. Key constituents in Congress understand what it is that physical therapy does between balance and fall prevention. Falls are a massive, massive cost to the healthcare system and to individuals and their ability to function. Opioids, again, You don't hear about it as much, but it's still a massive problem. And there's some great studies out that just indicate a massive cost differential when people start with the primary care of musculoskeletal care, which is really physical therapy. And so we're trying to pound that message and drive it home. Washington's a little dysfunctional, you know, for These days, and so, again, my ability to predict what happens. But I think we have a great story. I think we have good data, and we're going to continue to bang on it. And at some point, it's got to turn around in my view.

One more quick one for Kerry. In terms of the borrowing capacity, I mean, to me it looks like you could go to four times if you wanted, but there's probably maybe a comfort level slightly lower than that, or for the right deal, would you go to four times or a right series of deals? Can you just speak to maybe where the top end realistically in your view is as far as your comfort level is?

Yeah. Well, right now our covenant is at three times. Thanks, guys. Really appreciate it. Thanks, Mike. Thank you.

And once again, that is star and 1. If you'd like to ask a question, we'll pause for a moment. It appears we have no further questions at this time. I will now turn the program back over to our speakers for any additional closing remarks.

Okay, thanks, Gretchen. Listen, I just want to thank everybody for the questions, for the time today, for the ongoing support. We greatly appreciate it. I know we've got some follow-up calls scheduled with some of you, so for those we don't talk to, I hope you have a great day. And that concludes our conference call this morning. Thank you.

This does conclude today's program. Thank you for your participation. You may now disconnect.