The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Ben Hendrix - RBC Capital Markets Wealth Management - Analyst
: First, to Bob, our deepest condolences for Rocco's passing. Our thoughts are certainly with you there. And just a second question, I guess, for Marty,
I just wanted to get some more comments on LTAC occupancy trends. I think we may have misconstrued some seasonal occupancy trends as
staffing related. It doesn't sound like that's the case. Maybe you could provide just some more detail on kind of what you're seeing from an occupancy
standpoint, in that segment versus your targets? And if there's any outlier threshold influence there.
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NOVEMBER 01, 2024 / 1:00PM, SEM.N - Q3 2024 Select Medical Holdings Corp Earnings Call
Question: Ben Hendrix - RBC Capital Markets Wealth Management - Analyst
: And anything that you can comment on observations on outlier thresholds impacting the segment at all?
Question: Justin Bowers - Deutsche Bank Securities Inc. - Analyst
: Bob, condolences to you and your family. When I look at pro forma net leverage post spin, I arrive around a number of about 3x, maybe a little
lower than that. The company is going to generate a substantial amount of free cash flow, even after all the development projects that you laid
out. Any thoughts or preferences on capital deployment, given what we know now? And is there sort of an optimal leverage range for the company?
Or would you sort of even take that down to two or that level?
Question: Justin Bowers - Deutsche Bank Securities Inc. - Analyst
: Understood. And then two just quick clarifications. On LTAC development, it sounds like there's -- at least through 2026, there's one program that
you have or project that you have line of sight on. Is that right, with 26 additional beds?
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NOVEMBER 01, 2024 / 1:00PM, SEM.N - Q3 2024 Select Medical Holdings Corp Earnings Call
Question: Justin Bowers - Deutsche Bank Securities Inc. - Analyst
: Got it. And then one just quick one. On the IRF rates, I think in the 2Q call, you talked about 2% for the federal funds base rate. And then the final
rule said basically like 3% net market basket net of productivity. Can you just square those two for us, at least on the Medicare side? Is the right
way to think about sort of like the base rate is 3%?
Question: Bill Sutherland - The Benchmark Company LLC - Analyst
: My condolences as well on Rocco's passing, a great guy. I had one question on LTAC. Noticing on fewer hospital listed as of the last quarter, was
there a removal or something from the portfolio?
Question: Bill Sutherland - The Benchmark Company LLC - Analyst
: Maybe I was wrong. I thought you were 107, you -- okay, maybe I was wrong, but the second quarter is -- it was already at 106.
Question: Bill Sutherland - The Benchmark Company LLC - Analyst
: Okay. Just underperforming or --
Question: Bill Sutherland - The Benchmark Company LLC - Analyst
: Okay. All right. Marty, while I've got you, what are you thinking about as far as additional progress you can make on SWB as a percent of revenue?
Is there more wood to chop?
Question: Bill Sutherland - The Benchmark Company LLC - Analyst
: Got it. And then looking at outpatient rehab and the progress you're making steadily here, kind of what are the keys for the next sort of step up? I
know that -- it's a business that you run in the mid-teens margin area in the past. I'm not sure what's on your -- what's on the planner for progress
forward from here?
Question: Bill Sutherland - The Benchmark Company LLC - Analyst
: Was that an internally developed system or -- I'm just curious?
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NOVEMBER 01, 2024 / 1:00PM, SEM.N - Q3 2024 Select Medical Holdings Corp Earnings Call
Question: Christian Porter - BofA Securities, Inc. - Analyst
: This is Christian Porter on for Joanna. I also wanted to add my condolences. Our question was about outpatient rehab. So margins came in much
better than our estimate. And we just wanted to know if you could talk about your efforts to improve efficiency One of your peers saw higher
contract labor costs in Q2, and we were wondering if you were seeing any of that and just trends around volume, staffing and pricing?
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