SELECT MEDICAL HOLDINGS CORPSEMEarnings & Financial Report
NYSE · Health Care · Services-Hospitals
Select Medical is a healthcare company based in Pennsylvania. It owns long-term acute care and inpatient rehabilitation hospitals, as well as occupational health and physical therapy clinics. Select Medical is a subsidiary of Select Medical Holdings, which is listed on the New York Stock Exchange.
What changed in SELECT MEDICAL HOLDINGS CORP's 10-K — 2022 vs 2023
Top changes in SELECT MEDICAL HOLDINGS CORP's 2023 10-K
410 paragraphs added · 403 removed · 301 edited across 7 sections
- Item 7. Management's Discussion & Analysis+144 / −182 · 124 edited
- Item 1. Business+140 / −132 · 105 edited
- Item 1A. Risk Factors+107 / −71 · 54 edited
- Item 5. Market for Registrant's Common Equity+8 / −8 · 8 edited
- Item 2. Properties+5 / −5 · 5 edited
Item 1. Business
Business — how the company describes what it does
105 edited+35 added−27 removed125 unchanged
Item 1. Business
Business — how the company describes what it does
105 edited+35 added−27 removed125 unchanged
2022 filing
2023 filing
Insurance Risk Programs Under a number of the Company’s insurance programs, which include the Company’s employee health insurance, workers’ compensation, and professional malpractice liability insurance programs, the Company is liable for a portion of its losses before it can attempt to recover from the applicable insurance carrier.
Insurance Risk Programs Under a number of the Company’s insurance programs, which include the Company’s employee health insurance, workers’ compensation, and professional malpractice liability insurance programs, the Company is liable for a portion of its losses before it can attempt to recover from the applicable insurance carrier.
The Company’s Concentra segment consists of occupational health centers that provide workers’ compensation injury care, physical therapy, and consumer health services and onsite clinics located at employer worksites that deliver occupational medicine services.
The Company’s Concentra segment consists of occupational health centers that provide workers’ compensation injury care, physical therapy, and consumer health services and onsite clinics located at employer worksites that deliver occupational health services.
These restrictions and prohibitions are subject to certain qualifications and exceptions. 12. Interest Rate Cap The Company is subject to market risk exposure arising from changes in interest rates on its term loan, which bears interest at a rate that is indexed to one-month LIBOR, as discussed further in Note 11 – Long-Term Debt and Notes Payable.
These restrictions and prohibitions are subject to certain qualifications and exceptions. 12. Interest Rate Cap The Company is subject to market risk exposure arising from changes in interest rates on its term loan, which bears interest at a rate that is indexed to one-month Term SOFR, as discussed further in Note 11 – Long-Term Debt and Notes Payable.
Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate. Holdings is funding this program with cash on hand and borrowings under the revolving facility. The common stock repurchase program has available capacity of $399.7 million as of December 31, 2022.
Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate. Holdings is funding this program with cash on hand and borrowings under the revolving facility. The common stock repurchase program has available capacity of $399.7 million as of December 31, 2023.
As part of these assessments, the Company evaluates the current business environment, regulatory environment, legal and other company-specific factors. If it is more likely than not that the fair values are less than the carrying values, the Company will then perform a quantitative impairment assessment. The Company’s most recent impairment assessments were completed as of October 1, 2022.
As part of these assessments, the Company evaluates the current business environment, regulatory environment, legal and other company-specific factors. If it is more likely than not that the fair values are less than the carrying values, the Company will then perform a quantitative impairment assessment. The Company’s most recent impairment assessments were completed as of October 1, 2023.
At December 31, 2022, these businesses primarily consist of the following ownership interests: BIR JV, LLP 49.0 % OHRH, LLC 49.0 % GlobalRehab—Scottsdale, LLC 49.0 % ES Rehabilitation, LLC 49.0 % BHSM Rehabilitation, LLC 49.0 % RSH Property Ventures, LLC 50.0 % F-21 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9.
At December 31, 2023, these businesses primarily consist of the following ownership interests: BIR JV, LLP 49.0 % OHRH, LLC 49.0 % GlobalRehab—Scottsdale, LLC 49.0 % ES Rehabilitation, LLC 49.0 % BHSM Rehabilitation, LLC 49.0 % RSH Property Ventures, LLC 50.0 % F-21 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9.
F-15 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Redeemable Non-Controlling Interests The Company’s redeemable non-controlling interests are comprised of common shares held by equity holders other than the Company in nine less than wholly owned subsidiaries. These shares are subject to redemption rights.
F-15 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Redeemable Non-Controlling Interests The Company’s redeemable non-controlling interests are comprised of common shares held by equity holders other than the Company in eight less than wholly owned subsidiaries. These shares are subject to redemption rights.
The Company accrues for losses under an occurrence-based approach whereby the Company estimates the losses that will be incurred in a respective accounting period and accrues that estimated liability using actuarial methods. At December 31, 2021 and 2022, provisions for losses for professional liability risks retained by the Company have been discounted at 3%.
The Company accrues for losses under an occurrence-based approach whereby the Company estimates the losses that will be incurred in a respective accounting period and accrues that estimated liability using actuarial methods. At December 31, 2022 and 2023, provisions for losses for professional liability risks retained by the Company have been discounted at 3%.
The prices which would be paid if redeemed during the twelve-month period beginning on August 15 of the years indicated below are as follows: Year Percentage 2022 103.125 % 2023 102.083 % 2024 101.042 % 2025 100.000 % Select is obligated to offer to repurchase the senior notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events.
The prices which would be paid if redeemed during the twelve-month period beginning on August 15 of the years indicated below are as follows: Year Percentage 2023 102.083 % 2024 101.042 % 2025 100.000 % Select is obligated to offer to repurchase the senior notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events.
At December 31, 2022, the Company’s other indefinite-lived intangible assets consist of trademarks, certificates of need, and accreditations. To determine the fair values of its trademarks, the Company uses a relief from royalty income approach. For the Company’s certificates of need and accreditations, the Company performs qualitative assessments.
At December 31, 2023, the Company’s other indefinite-lived intangible assets consist of trademarks, certificates of need, and accreditations. To determine the fair values of its trademarks, the Company uses a relief from royalty income approach. For the Company’s certificates of need and accreditations, the Company performs qualitative assessments.
Earnings per Share The following table sets forth the net income attributable to the Company, its common shares outstanding, and its participating securities outstanding. There were no contractual dividends paid for the years ended December 31, 2020, 2021, and 2022.
Earnings per Share The following table sets forth the net income attributable to the Company, its common shares outstanding, and its participating securities outstanding. There were no contractual dividends paid for the years ended December 31, 2021, 2022, and 2023.
For the Company’s Concentra center operations, the Company currently maintains insurance coverages under a combination of policies with a total annual aggregate limit of up to $19.0 million for professional malpractice liability insurance and $19.0 million for general liability insurance.
For the Company’s Concentra center operations, the Company currently maintains insurance coverages under a combination of policies with a total annual aggregate limit of up to $29.0 million for professional malpractice liability insurance and $29.0 million for general liability insurance.
For the years ended December 31, 2020, 2021, and 2022, the Company’s other activities also include other operating income related to the recognition of payments received under the Provider Relief Fund for health care related expenses and loss of revenue attributable to the coronavirus disease 2019 (“COVID-19”). Refer to Note 22 – CARES Act for further information.
For the years ended December 31, 2021 and 2022, the Company’s other activities also include other operating income related to the recognition of payments received under the Provider Relief Fund for health care related expenses and loss of revenue attributable to the coronavirus disease 2019 (“COVID-19”). Refer to Note 21 – CARES Act for further information.
These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The Company is and has been a defendant in these cases in the past, and may be named as a defendant in similar cases from time to time in the future. Oklahoma City Investigation.
These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The Company is and has been a defendant in these cases in the past, and may be named as a defendant in similar cases from time to time in the future.
At December 31, 2022, the accreditations and trademarks have a weighted average time until next renewal of 1.5 years and 6.7 years, respectively. The Company’s finite-lived intangible assets amortize over their estimated useful lives. Amortization expense was $27.6 million, $29.5 million, and $31.0 million for the years ended December 31, 2020, 2021, and 2022, respectively.
At December 31, 2023, the accreditations and trademarks have a weighted average time until next renewal of 1.5 years and 5.7 years, respectively. The Company’s finite-lived intangible assets amortize over their estimated useful lives. Amortization expense was $29.5 million, $31.0 million, and $31.7 million for the years ended December 31, 2021, 2022, and 2023, respectively.
These variable interest entities have obligations payable for services received under their management agreements with the Company of $150.3 million and $158.3 million as of December 31, 2021 and 2022, respectively; these intercompany balances are eliminated in consolidation. F-17 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6.
These variable interest entities have obligations payable for services received under their management agreements with the Company of $158.3 million and $161.8 million as of December 31, 2022 and 2023, respectively; these intercompany balances are eliminated in consolidation. F-17 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6.
At December 31, 2021 and 2022, the Company recorded insurance proceeds receivable of $14.5 million and $13.1 million, respectively, for liabilities which exceeded its deductibles and self-insured retention limits and are recoverable through its insurance policies. F-22 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11.
At December 31, 2022 and 2023, the Company recorded insurance proceeds receivable of $13.1 million and $11.6 million, respectively, for liabilities which exceeded its deductibles and self-insured retention limits and are recoverable through its insurance policies. F-22 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11.
Although realization is not assured, based on the Company’s assessment, it has concluded that it is more likely than not that such assets, net of the determined valuation allowance, will be realized. The total state net operating losses are approximately $666.5 million.
Although realization is not assured, based on the Company’s assessment, it has concluded that it is more likely than not that such assets, net of the determined valuation allowance, will be realized. The total state net operating losses are approximately $628.3 million.
The annual premium is equal to 0.0916% on the notional amount, or approximately $1.8 million. The interest rate cap has been designated as a cash flow hedge and is highly effective at offsetting the changes in cash outflows when one-month LIBOR exceeds 1.0%.
The annual premium is equal to 0.0916% on the notional amount, or approximately $1.8 million. The interest rate cap has been designated as a cash flow hedge and is highly effective at offsetting the changes in cash outflows when the variable rate index exceeds 1.0%.
The interest rate cap limits the Company’s exposure to increases in the one-month LIBOR rate to 1.0% on $2.0 billion of principal outstanding under the term loan, as the interest rate cap provides for payments from the counterparty when interest rates rise above 1.0%.
The interest rate cap limits the Company’s exposure to increases in the variable rate index to 1.0% on $2.0 billion of principal outstanding under the term loan, as the interest rate cap provides for payments from the counterparty when interest rates rise above 1.0%.
The Company has receivables from related parties of $16.3 million and $4.3 million, which are included as part of other current assets and other assets in the consolidated balance sheet, respectively, as of December 31, 2022. The Company had liabilities for the operating cash it holds on behalf of certain rehabilitation businesses in which it has an equity method investment.
The Company has receivables from related parties of $18.2 million and $4.5 million, which are included as part of other current assets and other assets in the consolidated balance sheet, respectively, as of December 31, 2023. The Company had liabilities for the operating cash it holds on behalf of certain rehabilitation businesses in which it has an equity method investment.
(2) Valuation allowance deductions relate to the disposition of certain subsidiaries. F-38
(2) Valuation allowance deductions relate to the disposition of certain subsidiaries. F-39
During the years ended December 31, 2020, 2021, and 2022, Select and members of Concentra Group Holdings Parent entered into agreements pursuant to which Select acquired additional outstanding membership interests of Concentra Group Holdings Parent for $576.4 million, $660.7 million, and $5.9 million, respectively.
During the years ended December 31, 2021, 2022, and 2023, Select and members of Concentra Group Holdings Parent entered into agreements pursuant to which Select acquired additional outstanding membership interests of Concentra Group Holdings Parent for $660.7 million, $5.9 million, and $6.3 million respectively.
Revenue generated from contracted services provided and management fees charged to related parties affiliated through the Company’s equity method investments was $337.6 million, $332.0 million, and $374.1 million for the years ended December 31, 2020, 2021, and 2022, respectively.
Revenue generated from contracted services provided and management fees charged to related parties affiliated through the Company’s equity method investments was $332.0 million, $374.1 million, and $402.8 million for the years ended December 31, 2021, 2022, and 2023, respectively.
The share repurchases and the cost associated with those repurchases are as follows: For the Year Ended December 31, 2020 2021 2022 Shares repurchased 491,559 1,770,720 7,883,195 Cost of shares repurchased (in thousands) $ 8,692 $ 58,598 $ 185,119 15.
The share repurchases and the cost associated with those repurchases are as follows: For the Year Ended December 31, 2021 2022 2023 Shares repurchased 1,770,720 7,883,195 — Cost of shares repurchased (in thousands) $ 58,598 $ 185,119 $ — 15.
Approximately 15% and 19% of the Company’s accounts receivable is due from Medicare at December 31, 2021 and 2022, respectively. Revenues from providing services to patients covered under the Medicare program represented approximately 25%, 23%, and 23% of the Company’s total revenue for the years ended December 31, 2020, 2021, and 2022, respectively.
Approximately 19% and 17% of the Company’s accounts receivable is due from Medicare at December 31, 2022 and 2023, respectively. Revenues from providing services to patients covered under the Medicare program represented approximately 23%, 23%, and 22% of the Company’s total revenue for the years ended December 31, 2021, 2022, and 2023, respectively.
As of December 31, 2021 and 2022, the total liabilities of the Company’s variable interest entities were $74.8 million and $78.8 million, respectively, and are principally comprised of accounts payable and accrued expenses.
As of December 31, 2022 and 2023, the total liabilities of the Company’s variable interest entities were $78.8 million and $84.3 million, respectively, and are principally comprised of accounts payable and accrued expenses.
If the Company did not discount the provisions for losses for professional liability risks, the aggregate liability for all of the insurance risk programs would be approximately $178.5 million and $197.2 million at December 31, 2021 and 2022, respectively.
If the Company did not discount the provisions for losses for professional liability risks, the aggregate liability for all of the insurance risk programs would be approximately $197.2 million and $183.7 million at December 31, 2022 and 2023, respectively.
Schedule II—Valuation and Qualifying Accounts Balance at Beginning of Year Charged to Cost and Expenses Acquisitions (1) Deductions (2) Balance at End of Year (in thousands) Income Tax Valuation Allowance Year ended December 31, 2022 $ 17,773 $ 2,671 $ — $ — $ 20,444 Year ended December 31, 2021 $ 17,339 $ 434 $ — $ — $ 17,773 Year ended December 31, 2020 $ 18,461 $ (484) $ — $ (638) $ 17,339 _______________________________________________________________________________ (1) Includes valuation allowance reserves resulting from business combinations.
Schedule II—Valuation and Qualifying Accounts Balance at Beginning of Year Charged to Cost and Expenses Acquisitions (1) Deductions (2) Balance at End of Year (in thousands) Income Tax Valuation Allowance Year ended December 31, 2023 $ 20,444 $ (3,017) $ — $ — $ 17,427 Year ended December 31, 2022 $ 17,773 $ 2,671 $ — $ — $ 20,444 Year ended December 31, 2021 $ 17,339 $ 434 $ — $ — $ 17,773 _______________________________________________________________________________ (1) Includes valuation allowance reserves resulting from business combinations.
These liabilities were $22.0 million and $37.0 million as of December 31, 2021 and 2022, respectively, and are included as part of accrued other in the consolidated balance sheets.
These liabilities were $37.0 million and $66.3 million as of December 31, 2022 and 2023, respectively, and are included as part of accrued other in the consolidated balance sheets.
The Company had receivables from related parties affiliated through its equity method investments of $23.9 million and $3.5 million, which are included as part of other current assets and other assets in the consolidated balance sheet, respectively, as of December 31, 2021.
The Company had receivables from related parties affiliated through its equity method investments of $16.3 million and $4.3 million, which are included as part of other current assets and other assets in the consolidated balance sheet, respectively, as of December 31, 2022.
The revolving facility requires Select to maintain a leverage ratio, as specified in the credit agreement, not to exceed 7.00 to 1.00. As of December 31, 2022, Select’s leverage ratio was 5.96 to 1.00.
The revolving facility requires Select to maintain a leverage ratio, as specified in the credit agreement, not to exceed 7.00 to 1.00. As of December 31, 2023, Select’s leverage ratio was 4.54 to 1.00.
Acquisitions During the year ended December 31, 2020, the Company made acquisitions consisting of critical illness recovery hospital, rehabilitation hospital, outpatient rehabilitation, and Concentra businesses. The consideration given for these acquired businesses consisted principally of $20.8 million of cash.
Acquisitions (Continued) During the year ended December 31, 2022, the Company made acquisitions consisting of critical illness recovery hospital, outpatient rehabilitation, and Concentra businesses. The consideration given for these acquired businesses consisted principally of $27.0 million of cash.
As of December 31, 2022, Holdings has capacity to issue 3,116,662 stock-based awards under its equity plan. The equity plan allows for authorized but previously unissued shares or shares previously issued and outstanding and reacquired by Holdings to satisfy these awards.
As of December 31, 2023, Holdings has capacity to issue 1,477,956 stock-based awards under its equity plan. The equity plan allows for authorized but previously unissued shares or shares previously issued and outstanding and reacquired by Holdings to satisfy these awards.
At December 31, 2021 and 2022, the Company’s net deferred tax liabilities of approximately $120.6 million and $152.8 million, respectively, consist of items which have been recognized for tax reporting purposes, but which will increase tax on returns to be filed in the future.
Income Taxes (Continued) At December 31, 2022 and 2023, the Company’s net deferred tax liabilities of approximately $152.8 million and $122.2 million, respectively, consist of items which have been recognized for tax reporting purposes, but which will increase tax on returns to be filed in the future.
F-37 Table of Contents The following Financial Statement Schedule along with the report thereon of PricewaterhouseCoopers LLP dated February 23, 2023, should be read in conjunction with the consolidated financial statements.
F-38 Table of Contents The following Financial Statement Schedule along with the report thereon of PricewaterhouseCoopers LLP dated February 22, 2024, should be read in conjunction with the consolidated financial statements.
Equity method investments of $270.8 million and $292.6 million are presented as part of other assets in the consolidated balance sheets as of December 31, 2021 and 2022, respectively.
Equity method investments of $292.6 million and $316.0 million are presented as part of other assets in the consolidated balance sheets as of December 31, 2022 and 2023, respectively.
F-34 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. Commitments and Contingencies Construction Commitments At December 31, 2022, the Company had outstanding commitments under construction contracts related to new construction, improvements, and renovations totaling approximately $21.6 million.
F-35 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 20. Commitments and Contingencies Construction Commitments At December 31, 2023, the Company had outstanding commitments under construction contracts related to new construction, improvements, and renovations totaling approximately $16.4 million.
Income Taxes The components of the Company’s income tax expense for the years ended December 31, 2020, 2021, and 2022 are as follows: For the Year Ended December 31, 2020 2021 2022 (in thousands) Current income tax expense: Federal $ 95,633 $ 99,254 $ 42,000 State and local 30,949 25,464 13,032 Total current income tax expense 126,582 124,718 55,032 Deferred income tax expense (benefit) (14,715) 5,055 7,521 Total income tax expense $ 111,867 $ 129,773 $ 62,553 Reconciliations of the statutory federal income tax rate to the effective income tax rate are as follows: For the Year Ended December 31, 2020 2021 2022 Federal income tax at statutory rate 21.0 % 21.0 % 21.0 % State and local income taxes, less federal income tax benefit 5.8 4.2 5.0 Permanent differences 0.5 0.5 0.7 Deferred income taxes — state income tax rate adjustment 0.0 (1.2) 0.6 Uncertain tax positions (0.1) 0.0 0.0 Valuation allowance 0.0 0.2 1.7 Limitation on officers’ compensation 1.1 0.9 2.0 Tax credits (0.3) (0.4) (1.6) Stock-based compensation (1.4) (1.7) (0.8) Non-controlling interest (3.3) (1.9) (4.2) Other 1.2 (1.0) (0.4) Effective income tax rate 24.5 % 20.6 % 24.0 % F-31 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 19.
Income Taxes The components of the Company’s income tax expense for the years ended December 31, 2021, 2022, and 2023, are as follows: For the Year Ended December 31, 2021 2022 2023 (in thousands) Current income tax expense: Federal $ 99,254 $ 42,000 $ 76,878 State and local 25,464 13,032 21,866 Total current income tax expense 124,718 55,032 98,744 Deferred income tax expense (benefit) 5,055 7,521 (16,119) Total income tax expense $ 129,773 $ 62,553 $ 82,625 Reconciliations of the statutory federal income tax rate to the effective income tax rate are as follows: For the Year Ended December 31, 2021 2022 2023 Federal income tax at statutory rate 21.0 % 21.0 % 21.0 % State and local income taxes, less federal income tax benefit 4.2 5.0 4.9 Permanent differences 0.5 0.7 0.7 Deferred income taxes — state income tax rate adjustment (1.2) 0.6 (1.0) Valuation allowance 0.2 1.7 (0.7) Limitation on officers’ compensation 0.9 2.0 2.0 Tax credits (0.4) (1.6) (1.1) Stock-based compensation (1.7) (0.8) (0.7) Non-controlling interest (1.9) (4.2) (3.7) Other (1.0) (0.4) 0.2 Effective income tax rate 20.6 % 24.0 % 21.6 % F-32 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 18.
The interest rates on the term loan and the revolving facility are equal to the Adjusted LIBO Rate (as defined in the credit agreement) plus a percentage ranging from 2.25% to 2.50%, or the Alternate Base Rate (as defined in the credit agreement) plus a percentage ranging from 1.25% to 1.50%, in each case subject to a specified leverage ratio.
The interest rate on the revolving facility is equal to Adjusted Term SOFR plus a percentage ranging from 2.25% to 2.50%, or the Alternative Base Rate (as defined in the credit agreement) plus a percentage ranging from 1.25% to 1.50%, in each case subject to a specified leverage ratio.
The consideration given for these acquired businesses consisted principally of $27.0 million of cash. The Company allocated the purchase price of these acquired businesses to assets acquired and liabilities assumed, principally property and equipment and operating lease right-of-use assets and lease liabilities, based on their estimated fair values.
The Company allocated the purchase price of these acquired businesses to assets acquired and liabilities assumed, principally property and equipment and operating lease right-of-use assets and lease liabilities, based on their estimated fair values.
Income Taxes (Continued) For the year ended December 31, 2021, the Company recorded a net valuation allowance increase of $0.4 million. These changes resulted from net changes in state net operating losses. For the year ended December 31, 2022, the Company recorded a net valuation allowance increase of $2.7 million.
For the year ended December 31, 2022, the Company recorded a net valuation allowance increase of $2.7 million. These changes resulted from net changes in state net operating losses. For the year ended December 31, 2023, the Company recorded a net valuation allowance decrease of $3.0 million.
At this time, the Company is unable to predict the timing and outcome of this matter. Medicare Dual-Eligible Litigation The Company’s critical illness recovery hospitals pursued claims against CMS involving denied Medicare bad debt reimbursement for copayments and deductibles of dual-eligible Medicaid beneficiaries for cost reporting periods ending in 2005 through 2010. A U.S.
Medicare Dual-Eligible Litigation The Company’s critical illness recovery hospitals pursued claims against CMS involving denied Medicare bad debt reimbursement for copayments and deductibles of dual-eligible Medicaid beneficiaries for cost reporting periods ending in 2005 through 2010. A U.S.
The Company recorded a liability of $173.5 million and $192.3 million related to these programs at December 31, 2021 and 2022, respectively.
The Company recorded a liability of $192.3 million and $179.1 million related to these programs at December 31, 2022 and 2023, respectively.
The Company allocated the purchase price of these acquired businesses to assets acquired, principally accounts receivable and property and equipment, and liabilities assumed based on their estimated fair values. The Company recognized goodwill of $6.0 million, $2.5 million, $2.7 million, and $12.3 million in our critical illness recovery hospital, rehabilitation hospital, outpatient rehabilitation, and Concentra reporting units, respectively.
The Company allocated the purchase price of these acquired businesses to assets acquired and liabilities assumed, principally property and equipment and operating lease right-of-use assets and lease liabilities, based on their estimated fair values. The Company recognized goodwill of $6.5 million, $10.9 million, and $4.7 million in our critical illness recovery hospital, outpatient rehabilitation, and Concentra reporting units, respectively.
As of December 31, 2022, the term loan borrowings bear interest at a rate that is indexed to one-month LIBOR plus 2.50%. As of December 31, 2022, the revolving facility borrowings bear interest either at a rate indexed to one-month LIBOR plus 2.50% or the Alternate Base Rate plus 1.50%.
As of December 31, 2023, the term loan borrowings bear interest at a rate that is indexed to one-month Term SOFR plus 3.00%. As of December 31, 2023, the revolving facility borrowings bear interest either at a rate indexed to one-month Adjusted Term SOFR plus 2.50% or the Alternative Base Rate plus 1.50%.
Basic and Diluted EPS For the Year Ended December 31, 2020 2021 2022 (in thousands) Net income $ 344,606 $ 499,949 $ 198,026 Less: net income attributable to non-controlling interests 85,611 97,724 39,032 Net income attributable to the Company 258,995 402,225 158,994 Less: Distributed and undistributed income attributable to participating securities 8,896 13,435 5,609 Distributed and undistributed income attributable to common shares $ 250,099 $ 388,790 $ 153,385 The following tables set forth the computation of EPS under the two-class method: For the Year Ended December 31, 2020 Net Income Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ 250,099 129,780 $ 1.93 Participating securities 8,896 4,616 1.93 Total Company $ 258,995 For the Year Ended December 31, 2021 Net Income Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ 388,790 130,249 $ 2.98 Participating securities 13,435 4,501 2.98 Total Company $ 402,225 For the Year Ended December 31, 2022 Net Income Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ 153,385 124,628 $ 1.23 Participating securities 5,609 4,557 $ 1.23 Total Company $ 158,994 _______________________________________________________________________________ (1) Represents the weighted average share count outstanding during the period.
Basic and Diluted EPS For the Year Ended December 31, 2021 2022 2023 (in thousands) Net income $ 499,949 $ 198,026 $ 299,731 Less: net income attributable to non-controlling interests 97,724 39,032 56,240 Net income attributable to the Company 402,225 158,994 243,491 Less: Distributed and undistributed income attributable to participating securities 13,435 5,609 8,773 Distributed and undistributed income attributable to common shares $ 388,790 $ 153,385 $ 234,718 The following tables set forth the computation of EPS under the two-class method: For the Year Ended December 31, 2021 Net Income Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ 388,790 130,249 $ 2.98 Participating securities 13,435 4,501 2.98 Total Company $ 402,225 For the Year Ended December 31, 2022 Net Income Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ 153,385 124,628 $ 1.23 Participating securities 5,609 4,557 1.23 Total Company $ 158,994 For the Year Ended December 31, 2023 Net Income Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ 234,718 123,105 $ 1.91 Participating securities 8,773 4,601 $ 1.91 Total Company $ 243,491 _______________________________________________________________________________ (1) Represents the weighted average share count outstanding during the period.
The changes in redeemable non-controlling interests are as follows: For the Year Ended December 31, 2020 2021 2022 (in thousands) Balance as of January 1 $ 974,541 $ 398,171 $ 39,033 Net income attributable to redeemable non-controlling interests 37,761 50,153 7,572 Distributions to and purchases of redeemable non-controlling interests (11,255) (911) (5,443) Redemption value adjustment on redeemable non-controlling interests (27,470) 250,083 (3,385) Purchase of membership interests of Concentra Group Holdings Parent (576,366) (660,658) (5,876) Other 960 2,195 2,142 Balance as of December 31 $ 398,171 $ 39,033 $ 34,043 3.
The changes in redeemable non-controlling interests are as follows: For the Year Ended December 31, 2021 2022 2023 (in thousands) Balance as of January 1 $ 398,171 $ 39,033 $ 34,043 Net income attributable to redeemable non-controlling interests 50,153 7,572 8,087 Distributions to and purchases of redeemable non-controlling interests (911) (5,443) (8,217) Redemption value adjustment on redeemable non-controlling interests 250,083 (3,385) (1,527) Purchase of membership interests of Concentra Group Holdings Parent (660,658) (5,876) (6,268) Other 2,195 2,142 179 Balance as of December 31 $ 39,033 $ 34,043 $ 26,297 3.
F-5 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Comprehensive Income (in thousands) For the Year Ended December 31, 2020 2021 2022 Net income $ 344,606 $ 499,949 $ 198,026 Other comprehensive income (loss), net of tax: Gain (loss) on interest rate cap contract (2,027) 14,270 90,730 Reclassification adjustment for (gains) losses included in net income — 39 (14,410) Net change, net of tax benefit (expense) of $705, $(4,799) and $(24,658) (2,027) 14,309 76,320 Comprehensive income 342,579 514,258 274,346 Less: Comprehensive income attributable to non-controlling interests 85,611 97,724 39,032 Comprehensive income attributable to Select Medical Holdings Corporation $ 256,968 $ 416,534 $ 235,314 The accompanying notes are an integral part of these consolidated financial statements.
F-5 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Comprehensive Income (in thousands) For the Year Ended December 31, 2021 2022 2023 Net income $ 499,949 $ 198,026 $ 299,731 Other comprehensive income (loss), net of tax: Gain on interest rate cap contract 14,270 90,730 15,783 Reclassification adjustment for (gains) losses included in net income 39 (14,410) (61,478) Net change, net of tax expense of $(4,799), $(24,658) and $(15,202) 14,309 76,320 (45,695) Comprehensive income 514,258 274,346 254,036 Less: Comprehensive income attributable to non-controlling interests 97,724 39,032 56,240 Comprehensive income attributable to Select Medical Holdings Corporation $ 416,534 $ 235,314 $ 197,796 The accompanying notes are an integral part of these consolidated financial statements.
As of December 31, 2021, Select owns 100.0% of the outstanding voting membership interests of Concentra Group Holdings Parent.
As of December 31, 2021, Select owned 100.0% of the outstanding voting membership interests of Concentra Group Holdings Parent. As of December 31, 2023, Concentra Group Holdings Parent is wholly owned by Select.
F-6 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Changes in Equity and Income (in thousands) Total Stockholders’ Equity Common Stock Issued Common Stock Par Value Capital in Excess of Par Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Non-controlling Interests Total Equity Balance at December 31, 2019 134,328 $ 134 $ 491,038 $ 279,800 $ — $ 770,972 $ 158,063 $ 929,035 Net income attributable to Select Medical Holdings Corporation 258,995 258,995 258,995 Net income attributable to non-controlling interests — 47,850 47,850 Issuance of restricted stock 1,478 1 (1) — — Forfeitures of unvested restricted stock (84) 0 0 — — Vesting of restricted stock 24,738 24,738 24,738 Repurchase of common shares (872) 0 (8,996) (7,038) (16,034) (16,034) Issuance of non-controlling interests 3,042 3,042 5,020 8,062 Distributions to and purchases of non-controlling interests 102 (5,935) (5,833) (20,787) (26,620) Redemption value adjustment on non-controlling interests 27,470 27,470 27,470 Other comprehensive loss (2,027) (2,027) (2,027) Other (795) (48) (843) 2,347 1,504 Balance at December 31, 2020 134,850 $ 135 $ 509,128 $ 553,244 $ (2,027) $ 1,060,480 $ 192,493 $ 1,252,973 Net income attributable to Select Medical Holdings Corporation 402,225 402,225 402,225 Net income attributable to non-controlling interests — 47,571 47,571 Cash dividends declared for common stockholders ($0.375 per share) (50,600) (50,600) (50,600) Issuance of restricted stock 1,363 1 (1) — — Forfeitures of unvested restricted stock (18) 0 0 — — Vesting of restricted stock 28,798 28,798 28,798 Repurchase of common shares (2,311) (2) (33,322) (46,152) (79,476) (79,476) Issuance of non-controlling interests 3,646 3,646 17,540 21,186 Non-controlling interests acquired in business combination — 11,153 11,153 Distributions to and purchases of non-controlling interests (3,757) (15,440) (19,197) (52,961) (72,158) Redemption value adjustment on non-controlling interests (250,083) (250,083) (250,083) Other comprehensive income 14,309 14,309 14,309 Other (178) 57 (121) 125 4 Balance at December 31, 2021 133,884 $ 134 $ 504,314 $ 593,251 $ 12,282 $ 1,109,981 $ 215,921 $ 1,325,902 Net income attributable to Select Medical Holdings Corporation 158,994 158,994 158,994 Net income attributable to non-controlling interests — 31,460 31,460 Cash dividends declared for common stockholders ($0.50 per share) (64,589) (64,589) (64,589) Issuance of restricted stock 1,642 1 (1) — — Forfeitures of unvested restricted stock (98) 0 0 64 64 64 Vesting of restricted stock 35,550 35,550 35,550 Repurchase of common shares (8,255) (8) (87,838) (107,682) (195,528) (195,528) Issuance of non-controlling interests 665 665 9,505 10,170 Non-controlling interests acquired in business combination, measurement period adjustment — 12,463 12,463 Distributions to and purchases of non-controlling interests (507) (2,450) (2,957) (34,707) (37,664) Redemption value adjustment on non-controlling interests 3,385 3,385 3,385 Other comprehensive income 76,320 76,320 76,320 Other 37 37 37 Balance at December 31, 2022 127,173 $ 127 $ 452,183 $ 581,010 $ 88,602 $ 1,121,922 $ 234,642 $ 1,356,564 The accompanying notes are an integral part of these consolidated financial statements.
F-6 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Changes in Equity and Income (in thousands) Total Stockholders’ Equity Common Stock Issued Common Stock Par Value Capital in Excess of Par Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Non-controlling Interests Total Equity Balance at December 31, 2020 134,850 $ 135 $ 509,128 $ 553,244 $ (2,027) $ 1,060,480 $ 192,493 $ 1,252,973 Net income attributable to Select Medical Holdings Corporation 402,225 402,225 402,225 Net income attributable to non-controlling interests — 47,571 47,571 Cash dividends declared for common stockholders ($0.375 per share) (50,600) (50,600) (50,600) Issuance of restricted stock 1,363 1 (1) — — Forfeitures of unvested restricted stock (18) 0 0 — — Vesting of restricted stock 28,798 28,798 28,798 Repurchase of common shares (2,311) (2) (33,322) (46,152) (79,476) (79,476) Issuance of non-controlling interests 3,646 3,646 17,540 21,186 Non-controlling interests acquired in business combination — 11,153 11,153 Distributions to and purchases of non-controlling interests (3,757) (15,440) (19,197) (52,961) (72,158) Redemption value adjustment on non-controlling interests (250,083) (250,083) (250,083) Other comprehensive income 14,309 14,309 14,309 Other (178) 57 (121) 125 4 Balance at December 31, 2021 133,884 $ 134 $ 504,314 $ 593,251 $ 12,282 $ 1,109,981 $ 215,921 $ 1,325,902 Net income attributable to Select Medical Holdings Corporation 158,994 158,994 158,994 Net income attributable to non-controlling interests — 31,460 31,460 Cash dividends declared for common stockholders ($0.50 per share) (64,589) (64,589) (64,589) Issuance of restricted stock 1,642 1 (1) — — Forfeitures of unvested restricted stock (98) 0 0 64 64 64 Vesting of restricted stock 35,550 35,550 35,550 Repurchase of common shares (8,255) (8) (87,838) (107,682) (195,528) (195,528) Issuance of non-controlling interests 665 665 9,505 10,170 Non-controlling interests acquired in business combination, measurement period adjustment — 12,463 12,463 Distributions to and purchases of non-controlling interests (507) (2,450) (2,957) (34,707) (37,664) Redemption value adjustment on non-controlling interests 3,385 3,385 3,385 Other comprehensive income 76,320 76,320 76,320 Other 37 37 37 Balance at December 31, 2022 127,173 $ 127 $ 452,183 $ 581,010 $ 88,602 $ 1,121,922 $ 234,642 $ 1,356,564 Net income attributable to Select Medical Holdings Corporation 243,491 243,491 243,491 Net income attributable to non-controlling interests — 48,153 48,153 Cash dividends declared for common stockholders ($0.50 per share) (63,904) (63,904) (63,904) Issuance of restricted stock 1,651 1 (1) — — Forfeitures of unvested restricted stock (12) 0 0 12 12 12 Vesting of restricted stock 43,619 43,619 43,619 Repurchase of common shares (443) 0 (5,184) (7,575) (12,759) (12,759) Issuance of non-controlling interests 1,870 1,870 21,181 23,051 Non-controlling interests acquired in business combination — 9,007 9,007 Distributions to and purchases of non-controlling interests 927 (2,672) (1,745) (53,569) (55,314) Redemption value adjustment on non-controlling interests 1,527 1,527 1,527 Other comprehensive income (45,695) (45,695) (45,695) Other (1) (33) (34) (34) Balance at December 31, 2023 128,369 $ 128 $ 493,413 $ 751,856 $ 42,907 $ 1,288,304 $ 259,414 $ 1,547,718 The accompanying notes are an integral part of these consolidated financial statements.
The gain resulted from the sale of a Concentra business. 18. Stock-based Compensation Holdings’ equity incentive plan provides for the issuance of various stock-based awards. Under its current plan, Holdings has issued restricted stock awards. The equity plan currently allows for the issuance of 7,600,000 awards, as adjusted for cancelled or forfeited awards through December 31, 2022.
Stock-based Compensation Holdings’ equity incentive plan provides for the issuance of various stock-based awards. Under its current plan, Holdings has issued restricted stock awards. The equity plan currently allows for the issuance of 7,612,000 awards, as adjusted for cancelled or forfeited awards through December 31, 2023.
As of December 31, 2022, the Company had operations in 46 states and the District of Columbia. As of December 31, 2022, the Company operated 103 critical illness recovery hospitals, 31 rehabilitation hospitals, 1,928 outpatient rehabilitation clinics, 540 occupational health centers, and 147 onsite clinics at employer worksites.
As of December 31, 2023, the Company had operations in 46 states and the District of Columbia. As of December 31, 2023, the Company operated 107 critical illness recovery hospitals, 33 rehabilitation hospitals, 1,933 outpatient rehabilitation clinics, 544 occupational health centers, and 150 onsite clinics at employer worksites.
F-7 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2020 2021 2022 Operating activities Net income $ 344,606 $ 499,949 $ 198,026 Adjustments to reconcile net income to net cash provided by operating activities: Distributions from unconsolidated subsidiaries 35,390 37,002 21,911 Depreciation and amortization 205,659 202,645 205,825 Provision for expected credit losses 604 236 174 Equity in earnings of unconsolidated subsidiaries (29,440) (44,428) (26,407) Gain on sale of assets and businesses (22,563) (2,409) (2,714) Stock compensation expense 27,250 30,940 37,755 Amortization of debt discount, premium and issuance costs 2,184 2,217 2,272 Deferred income taxes (14,715) 5,055 7,521 Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable (116,601) 23,101 (52,183) Other current assets (18,775) (2,418) (4,866) Other assets 17,587 (7,196) 16,491 Accounts payable 27,325 53,392 (48,042) Accrued expenses 168,839 (73,159) 12,839 Government advances 318,116 (241,185) (83,790) Unearned government assistance 82,607 (82,514) 13 Net cash provided by operating activities 1,028,073 401,228 284,825 Investing activities Business combinations, net of cash acquired (20,808) (81,911) (26,987) Purchases of property and equipment (146,440) (180,537) (190,372) Investment in businesses (31,425) (20,967) (17,323) Proceeds from sale of assets and businesses 83,320 26,821 8,343 Net cash used in investing activities (115,353) (256,594) (226,339) Financing activities Borrowings on revolving facilities 470,000 160,000 1,120,000 Payments on revolving facilities (470,000) — (835,000) Payments on term loans (39,843) — — Borrowings of other debt 40,108 33,013 25,666 Principal payments on other debt (48,381) (39,668) (35,594) Dividends paid to common stockholders — (50,600) (64,589) Repurchase of common stock (16,034) (79,476) (195,528) Increase (decrease) in overdrafts — 42,353 (10,392) Proceeds from issuance of non-controlling interests 7,564 20,732 9,530 Distributions to and purchases of non-controlling interests (38,589) (73,081) (43,107) Purchase of membership interests of Concentra Group Holdings Parent (Note 2) (576,366) (660,658) (5,876) Net cash used in financing activities (671,541) (647,385) (34,890) Net increase (decrease) in cash and cash equivalents 241,179 (502,751) 23,596 Cash and cash equivalents at beginning of period 335,882 577,061 74,310 Cash and cash equivalents at end of period $ 577,061 $ 74,310 $ 97,906 Supplemental information: Cash paid for interest, excluding $19,584 received under the interest rate cap contract for the year ended December 31, 2022 $ 155,236 $ 132,203 $ 183,453 Cash paid for taxes 108,890 181,184 32,290 Non-cash investing and financing activities: Liabilities for purchases of property and equipment $ 24,480 $ 23,441 $ 51,529 The accompanying notes are an integral part of these consolidated financial statements.
F-7 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2021 2022 2023 Operating activities Net income $ 499,949 $ 198,026 $ 299,731 Adjustments to reconcile net income to net cash provided by operating activities: Distributions from unconsolidated subsidiaries 37,002 21,911 23,417 Depreciation and amortization 202,645 205,825 208,742 Provision for expected credit losses 236 174 1,030 Equity in earnings of unconsolidated subsidiaries (44,428) (26,407) (40,813) Loss on extinguishment of debt — — 175 Gain on sale of assets and businesses (2,409) (2,714) (57) Stock compensation expense 30,940 37,755 43,809 Amortization of debt discount, premium and issuance costs 2,217 2,272 2,647 Deferred income taxes 5,055 7,521 (16,119) Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable 23,101 (52,183) 1,156 Other current assets (2,418) (4,866) (29,374) Other assets (7,196) 16,491 10,031 Accounts payable 53,392 (48,042) (6,412) Accrued expenses (73,159) 12,839 84,095 Government advances (241,185) (83,790) — Unearned government assistance (82,514) 13 — Net cash provided by operating activities 401,228 284,825 582,058 Investing activities Business combinations, net of cash acquired (81,911) (26,987) (29,567) Purchases of property, equipment, and other assets (180,537) (190,372) (229,200) Investment in businesses (20,967) (17,323) (9,873) Proceeds from sale of assets and businesses 26,821 8,343 163 Net cash used in investing activities (256,594) (226,339) (268,477) Financing activities Borrowings on revolving facilities 160,000 1,120,000 905,000 Payments on revolving facilities — (835,000) (1,070,000) Proceeds from term loans — — 2,092,232 Payments on term loans — — (2,113,952) Borrowings of other debt 33,013 25,666 31,399 Principal payments on other debt (39,668) (35,594) (46,946) Dividends paid to common stockholders (50,600) (64,589) (63,904) Repurchase of common stock (79,476) (195,528) (12,759) Increase (decrease) in overdrafts 42,353 (10,392) (1,687) Proceeds from issuance of non-controlling interests 20,732 9,530 22,935 Distributions to and purchases of non-controlling interests (73,081) (43,107) (63,531) Purchase of membership interests of Concentra Group Holdings Parent (Note 2) (660,658) (5,876) (6,268) Net cash used in financing activities (647,385) (34,890) (327,481) Net increase (decrease) in cash and cash equivalents (502,751) 23,596 (13,900) Cash and cash equivalents at beginning of period 577,061 74,310 97,906 Cash and cash equivalents at end of period $ 74,310 $ 97,906 $ 84,006 Supplemental information: Cash paid for interest, excluding amounts received of $19,584 and $82,818 under the interest rate cap contract for the years ended December 31, 2022 and 2023, respectively. $ 132,203 $ 183,453 $ 272,261 Cash paid for taxes 181,184 32,290 88,510 Non-cash investing and financing activities: Liabilities for purchases of property and equipment $ 23,441 $ 51,529 $ 18,403 The accompanying notes are an integral part of these consolidated financial statements.
Segment Information (Continued) For the Year Ended December 31, 2021 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Other Total (in thousands) Revenue $ 2,246,772 $ 849,340 $ 1,084,361 $ 1,732,041 $ 292,001 $ 6,204,515 Adjusted EBITDA 267,993 184,704 138,275 389,616 (33,229) 947,359 Total assets 2,304,116 1,194,136 1,348,316 2,275,345 238,258 7,360,171 Capital expenditures 65,690 13,003 36,301 46,787 18,756 180,537 For the Year Ended December 31, 2022 Critical Illness Recovery Hospitals Rehabilitation Hospitals Outpatient Rehabilitation Concentra Other Total (in thousands) Revenue $ 2,234,132 $ 916,763 $ 1,125,282 $ 1,724,359 $ 333,002 $ 6,333,538 Adjusted EBITDA 111,344 198,034 101,860 334,337 (98,712) 646,863 Total assets 2,484,542 1,200,767 1,371,123 2,281,647 327,214 7,665,293 Capital expenditures 79,524 14,426 40,677 45,983 9,762 190,372 A reconciliation of Adjusted EBITDA to income before income taxes is as follows: For the Year Ended December 31, 2020 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Other Total (in thousands) Adjusted EBITDA $ 342,427 $ 153,203 $ 79,164 $ 252,892 $ (27,120) Depreciation and amortization (51,531) (27,727) (29,009) (87,865) (9,527) Stock compensation expense — — — (2,512) (24,738) Income (loss) from operations $ 290,896 $ 125,476 $ 50,155 $ 162,515 $ (61,385) $ 567,657 Equity in earnings of unconsolidated subsidiaries 29,440 Gain on sale of businesses 12,387 Interest expense (153,011) Income before income taxes $ 456,473 For the Year Ended December 31, 2021 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Other Total (in thousands) Adjusted EBITDA $ 267,993 $ 184,704 $ 138,275 $ 389,616 $ (33,229) Depreciation and amortization (53,094) (27,677) (29,592) (82,210) (10,072) Stock compensation expense — — — (2,142) (28,798) Income (loss) from operations $ 214,899 $ 157,027 $ 108,683 $ 305,264 $ (72,099) $ 713,774 Equity in earnings of unconsolidated subsidiaries 44,428 Gain on sale of businesses 2,155 Interest income 5,350 Interest expense (135,985) Income before income taxes $ 629,722 F-28 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15.
For the Year Ended December 31, 2021 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Other Total (in thousands) Revenue $ 2,246,772 $ 849,340 $ 1,084,361 $ 1,732,041 $ 292,001 $ 6,204,515 Adjusted EBITDA 267,993 184,704 138,275 389,616 (33,229) 947,359 Total assets 2,304,116 1,194,136 1,348,316 2,275,345 238,258 7,360,171 Capital expenditures 65,690 13,003 36,301 46,787 18,756 180,537 For the Year Ended December 31, 2022 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Other Total (in thousands) Revenue $ 2,234,132 $ 916,763 $ 1,125,282 $ 1,724,359 $ 333,002 $ 6,333,538 Adjusted EBITDA 111,344 198,034 101,860 334,337 (98,712) 646,863 Total assets 2,484,542 1,200,767 1,371,123 2,281,647 327,214 7,665,293 Capital expenditures 79,524 14,426 40,677 45,983 9,762 190,372 For the Year Ended December 31, 2023 Critical Illness Recovery Hospitals Rehabilitation Hospitals Outpatient Rehabilitation Concentra Other Total (in thousands) Revenue $ 2,299,773 $ 979,585 $ 1,188,914 $ 1,838,081 $ 357,705 $ 6,664,058 Adjusted EBITDA 246,015 221,875 111,868 361,334 (133,667) 807,425 Total assets 2,496,886 1,233,888 1,380,447 2,330,206 248,204 7,689,631 Capital expenditures 93,036 21,922 38,776 69,340 6,126 229,200 A reconciliation of Adjusted EBITDA to income before income taxes is as follows: For the Year Ended December 31, 2021 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Other Total (in thousands) Adjusted EBITDA $ 267,993 $ 184,704 $ 138,275 $ 389,616 $ (33,229) Depreciation and amortization (53,094) (27,677) (29,592) (82,210) (10,072) Stock compensation expense — — — (2,142) (28,798) Income (loss) from operations $ 214,899 $ 157,027 $ 108,683 $ 305,264 $ (72,099) $ 713,774 Equity in earnings of unconsolidated subsidiaries 44,428 Gain on sale of businesses 2,155 Interest income 5,350 Interest expense (135,985) Income before income taxes $ 629,722 F-28 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15.
In May and July 2022, the DOJ requested certain data relating to all of the Company’s outpatient therapy clinics nationwide, and sought information about the Company’s ability to produce additional data relating to the physical therapy services furnished by the Company’s outpatient therapy clinics and Concentra. The Company is fully cooperating with the DOJ on this investigation.
In 2022 and 2023, the DOJ requested certain data relating to all of the Company’s outpatient therapy clinics nationwide, and sought information about the Company’s ability to produce additional data relating to the physical therapy services furnished by the Company’s outpatient therapy clinics and Concentra.
Estimated amortization expense of the Company’s finite-lived intangible assets for each of the five succeeding years is as follows: 2023 2024 2025 2026 2027 (in thousands) Amortization expense $ 30,562 $ 21,775 $ 15,196 $ 14,245 $ 13,530 9. Equity Method Investments The Company’s equity method investments consist principally of minority ownership interests in rehabilitation businesses.
Estimated amortization expense of the Company’s finite-lived intangible assets for each of the five succeeding years is as follows: 2024 2025 2026 2027 2028 (in thousands) Amortization expense $ 23,249 $ 16,535 $ 15,385 $ 14,441 $ 13,337 9. Equity Method Investments The Company’s equity method investments consist principally of minority ownership interests in rehabilitation businesses.
Refer to Note 1 – Organization and Significant Accounting Policies for the Company’s considerations regarding reference rate reform and the impact to its interest rate cap contract. 13.
Refer to Note 13 – Fair Value of Financial Instruments for information on the fair value of the Company’s interest rate cap contract and its balance sheet classification. Refer to Note 1 – Organization and Significant Accounting Policies for the Company’s considerations regarding reference rate reform and the impact to its interest rate cap contract. 13.
F-26 SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. Stock Repurchase Program Holdings’ board of directors has authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock. The program is in effect until December 31, 2023, unless extended or earlier terminated by the board of directors.
Stock Repurchase Program Holdings’ Board of Directors has authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock. The program is in effect until December 31, 2025, unless extended or earlier terminated by the Board of Directors.
F-36 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 22. CARES Act (Continued) Medicare Accelerated and Advance Payments Program The Company’s consolidated subsidiaries received approximately $325.0 million of advance payments under CMS’s Accelerated and Advance Payment Program, which was temporarily expanded by the CARES Act during the year ended December 31, 2020.
Medicare Accelerated and Advance Payments Program The Company’s consolidated subsidiaries received approximately $325.0 million of advance payments under CMS’s Accelerated and Advance Payment Program, which was temporarily expanded by the CARES Act during the year ended December 31, 2020.
December 31, 2021 December 31, 2022 Financial Instrument Level Carrying Value Fair Value Carrying Value Fair Value (in thousands) 6.250% senior notes Level 2 $ 1,238,684 $ 1,297,104 $ 1,235,607 $ 1,163,689 Credit facilities: Revolving facility Level 2 160,000 159,400 445,000 443,331 Term loan Level 2 2,090,090 2,087,661 2,094,290 2,056,110 The Company’s other financial instruments, which primarily consist of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short-term maturities of these instruments.
December 31, 2022 December 31, 2023 Financial Instrument Level Carrying Value Fair Value Carrying Value Fair Value (in thousands) 6.250% senior notes Level 2 $ 1,235,607 $ 1,163,689 $ 1,232,596 $ 1,228,063 Credit facilities: Revolving facility Level 2 445,000 443,331 280,000 278,600 Term loan Level 2 2,094,290 2,056,110 2,077,216 2,092,485 The Company’s other financial instruments, which primarily consist of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short-term maturities of these instruments. 14.
Transactions related to restricted stock awards are as follows: Shares Weighted Average Grant Date Fair Value (share amounts in thousands) Unvested balance, January 1, 2022 4,459 $ 23.54 Granted 1,642 28.41 Vested (1,381) 17.79 Forfeited (98) 23.61 Unvested balance, December 31, 2022 4,622 $ 26.99 For the years ended December 31, 2020, 2021, and 2022, the weighted average grant date fair values of restricted stock awards granted were $17.17, $38.59, and $28.41, respectively.
Transactions related to restricted stock awards are as follows: Shares Weighted Average Grant Date Fair Value (share amounts in thousands) Unvested balance, January 1, 2023 4,622 $ 26.99 Granted 1,651 29.06 Vested (1,750) 19.36 Forfeited (12) 26.75 Unvested balance, December 31, 2023 4,511 $ 30.71 For the years ended December 31, 2021, 2022, and 2023, the weighted average grant date fair values of restricted stock awards granted were $38.59, $28.41, and $29.06, respectively.
F-4 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Operations (in thousands, except per share amounts) For the Year Ended December 31, 2020 2021 2022 Revenue $ 5,531,713 $ 6,204,515 $ 6,333,538 Costs and expenses: Cost of services, exclusive of depreciation and amortization 4,710,372 5,285,149 5,600,161 General and administrative 138,037 146,975 153,035 Depreciation and amortization 205,659 202,645 205,825 Total costs and expenses 5,054,068 5,634,769 5,959,021 Other operating income 90,012 144,028 28,766 Income from operations 567,657 713,774 403,283 Other income and expense: Equity in earnings of unconsolidated subsidiaries 29,440 44,428 26,407 Gain on sale of businesses 12,387 2,155 — Interest income — 5,350 — Interest expense (153,011) (135,985) (169,111) Income before income taxes 456,473 629,722 260,579 Income tax expense 111,867 129,773 62,553 Net income 344,606 499,949 198,026 Less: Net income attributable to non-controlling interests 85,611 97,724 39,032 Net income attributable to Select Medical Holdings Corporation $ 258,995 $ 402,225 $ 158,994 Earnings per common share (Note 20): Basic and diluted $ 1.93 $ 2.98 $ 1.23 The accompanying notes are an integral part of these consolidated financial statements.
F-4 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Operations (in thousands, except per share amounts) For the Year Ended December 31, 2021 2022 2023 Revenue $ 6,204,515 $ 6,333,538 $ 6,664,058 Costs and expenses: Cost of services, exclusive of depreciation and amortization 5,285,149 5,600,161 5,732,017 General and administrative 146,975 153,035 170,193 Depreciation and amortization 202,645 205,825 208,742 Total costs and expenses 5,634,769 5,959,021 6,110,952 Other operating income 144,028 28,766 1,768 Income from operations 713,774 403,283 554,874 Other income and expense: Loss on early retirement of debt — — (14,692) Equity in earnings of unconsolidated subsidiaries 44,428 26,407 40,813 Gain on sale of businesses 2,155 — — Interest income 5,350 — — Interest expense (135,985) (169,111) (198,639) Income before income taxes 629,722 260,579 382,356 Income tax expense 129,773 62,553 82,625 Net income 499,949 198,026 299,731 Less: Net income attributable to non-controlling interests 97,724 39,032 56,240 Net income attributable to Select Medical Holdings Corporation $ 402,225 $ 158,994 $ 243,491 Earnings per common share (Note 19): Basic and diluted $ 2.98 $ 1.23 $ 1.91 The accompanying notes are an integral part of these consolidated financial statements.
Intangible Assets Goodwill The following table shows changes in the carrying amounts of goodwill by reporting unit for the years ended December 31, 2021 and 2022: Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Total (in thousands) Balance as of January 1, 2021 $ 1,084,761 $ 432,753 $ 646,433 $ 1,215,067 $ 3,379,014 Acquisition of businesses 46,679 9,402 7,692 8,645 72,418 Sale of businesses — — — (2,520) (2,520) Balance as of December 31, 2021 1,131,440 442,155 654,125 1,221,192 3,448,912 Acquisition of businesses 6,505 — 10,853 4,679 22,037 Measurement period adjustment 13,251 — — — 13,251 Balance as of December 31, 2022 $ 1,151,196 $ 442,155 $ 664,978 $ 1,225,871 $ 3,484,200 F-20 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8.
Intangible Assets Goodwill The following table shows changes in the carrying amounts of goodwill by reporting unit for the years ended December 31, 2022 and 2023: Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Total (in thousands) Balance as of January 1, 2022 $ 1,131,440 $ 442,155 $ 654,125 $ 1,221,192 $ 3,448,912 Acquisition of businesses 6,505 — 10,853 4,679 22,037 Measurement period adjustment 13,251 — — — 13,251 Balance as of December 31, 2022 1,151,196 442,155 664,978 1,225,871 3,484,200 Acquisition of businesses 6,606 16,185 2,305 3,874 28,970 Balance as of December 31, 2023 $ 1,157,802 $ 458,340 $ 667,283 $ 1,229,745 $ 3,513,170 F-20 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8.
The consideration given for these acquired businesses consisted principally of $89.7 million of cash and the issuan ce of $23.6 million of n on-controlling interests. The Company allocated the purchase price of these acquired businesses to assets acquired, principally cash, accounts receivable, property and equipment, and operating lease right-of-use assets, and liabilities assumed based on their estimated fair values.
The Company allocated the purchase price of these acquired businesses to assets acquired, principally cash, accounts receivable, property and equipment, and operating lease right-of-use assets, and liabilities assumed based on their estimated fair values.
CMS recouped $241.2 million and $83.8 million of Medicare payments during the years ended December 31, 2021 and 2022, respectively. The Company does not have any unpaid advances outstanding at December 31, 2022. Employer Payroll Tax Deferral From April 2020 through December 31, 2020, the Company deferred payment on $106.2 million payroll taxes owed, as allowed by the CARES Act.
The Company does not have any unpaid advances outstanding at December 31, 2023. Employer Payroll Tax Deferral From April 2020 through December 31, 2020, the Company deferred payment on $106.2 million payroll taxes owed, as allowed by the CARES Act.
These amounts were recognized as other operating income and interest income, respectively, during the year ended December 31, 2021. 22. CARES Act Provider Relief Funds On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted.
These amounts were recognized as other operating income and interest income, respectively, during the year ended December 31, 2021. F-37 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 21. CARES Act Provider Relief Funds On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted.
The changes in the Company’s valuation allowance were recognized as a result of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized.
The changes in the Company’s valuation allowance were recognized as a result of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. F-33 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 18.
Segment Information (Continued) For the Year Ended December 31, 2022 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Other Total (in thousands) Adjusted EBITDA $ 111,344 $ 198,034 $ 101,860 $ 334,337 $ (98,712) Depreciation and amortization (61,565) (27,814) (32,663) (73,667) (10,116) Stock compensation expense — — — (2,141) (35,614) Income (loss) from operations $ 49,779 $ 170,220 $ 69,197 $ 258,529 $ (144,442) $ 403,283 Equity in earnings of unconsolidated subsidiaries 26,407 Interest expense (169,111) Income before income taxes $ 260,579 16.
Segment Information (Continued) For the Year Ended December 31, 2022 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Other Total (in thousands) Adjusted EBITDA $ 111,344 $ 198,034 $ 101,860 $ 334,337 $ (98,712) Depreciation and amortization (61,565) (27,814) (32,663) (73,667) (10,116) Stock compensation expense — — — (2,141) (35,614) Income (loss) from operations $ 49,779 $ 170,220 $ 69,197 $ 258,529 $ (144,442) $ 403,283 Equity in earnings of unconsolidated subsidiaries 26,407 Interest expense (169,111) Income before income taxes $ 260,579 For the Year Ended December 31, 2023 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Concentra Other Total (in thousands) Adjusted EBITDA $ 246,015 $ 221,875 $ 111,868 $ 361,334 $ (133,667) Depreciation and amortization (63,865) (28,055) (35,210) (73,051) (8,561) Stock compensation expense — — — (651) (43,158) Income (loss) from operations $ 182,150 $ 193,820 $ 76,658 $ 287,632 $ (185,386) $ 554,874 Loss on early retirement of debt (14,692) Equity in earnings of unconsolidated subsidiaries 40,813 Interest expense (198,639) Income before income taxes $ 382,356 16.
Changes in the fair value of the interest rate cap, net of tax, are recognized in other comprehensive income and are reclassified out of accumulated other comprehensive income or loss and into interest expense when the hedged interest obligations affect earnings.
Changes in the fair value of the interest rate cap, net of tax, are recognized in other comprehensive income and are reclassified out of accumulated other comprehensive income or loss and into interest expense when the hedged interest obligations affect earnings. F-25 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12.
Intangible Assets (Continued) Identifiable Intangible Assets The following table provides the gross carrying amounts, accumulated amortization, and net carrying amounts for the Company’s identifiable intangible assets: December 31, 2021 2022 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in thousands) Indefinite-lived intangible assets: Trademarks $ 166,698 $ — $ 166,698 $ 166,698 $ — $ 166,698 Certificates of need 21,478 — 21,478 22,827 — 22,827 Accreditations 1,874 — 1,874 1,836 — 1,836 Finite-lived intangible assets: Trademarks 5,000 (5,000) — 5,000 (5,000) — Customer relationships 304,289 (141,111) 163,178 310,279 (170,265) 140,014 Non-compete agreements 36,746 (15,095) 21,651 36,729 (16,442) 20,287 Total identifiable intangible assets $ 536,085 $ (161,206) $ 374,879 $ 543,369 $ (191,707) $ 351,662 The Company’s accreditations and trademarks have renewal terms and the costs to renew these intangible assets are expensed as incurred.
Intangible Assets (Continued) Identifiable Intangible Assets The following table provides the gross carrying amounts, accumulated amortization, and net carrying amounts for the Company’s identifiable intangible assets: December 31, 2022 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in thousands) Indefinite-lived intangible assets: Trademarks $ 166,698 $ — $ 166,698 $ 166,698 $ — $ 166,698 Certificates of need 22,827 — 22,827 26,183 — 26,183 Accreditations 1,836 — 1,836 1,836 — 1,836 Finite-lived intangible assets: Trademarks 5,000 (5,000) — 5,000 (5,000) — Customer relationships 310,279 (170,265) 140,014 317,571 (200,312) 117,259 Non-compete agreements 36,729 (16,442) 20,287 38,262 (20,322) 17,940 Total identifiable intangible assets $ 543,369 $ (191,707) $ 351,662 $ 555,550 $ (225,634) $ 329,916 The Company’s accreditations and trademarks have renewal terms and the costs to renew these intangible assets are expensed as incurred.
Summarized combined financial information of the rehabilitation businesses in which the Company has a minority ownership interest is as follows: December 31, 2021 2022 (in thousands) Current assets $ 181,838 $ 195,712 Non-current assets 356,278 381,533 Total assets $ 538,116 $ 577,245 Current liabilities $ 89,953 $ 82,626 Non-current liabilities 103,484 108,629 Equity 344,679 385,990 Total liabilities and equity $ 538,116 $ 577,245 For the Year Ended December 31, 2020 2021 2022 (in thousands) Revenues $ 562,031 $ 587,445 $ 624,348 Cost of services and other operating expenses 496,739 503,880 566,014 Net income 72,172 87,528 57,811 10.
Summarized combined financial information of the rehabilitation businesses in which the Company has a minority ownership interest is as follows: December 31, 2022 2023 (in thousands) Current assets $ 195,712 $ 229,920 Non-current assets 381,533 523,762 Total assets $ 577,245 $ 753,682 Current liabilities $ 82,626 $ 91,614 Non-current liabilities 108,629 225,209 Equity 385,990 436,859 Total liabilities and equity $ 577,245 $ 753,682 For the Year Ended December 31, 2021 2022 2023 (in thousands) Revenues $ 587,445 $ 624,348 $ 702,040 Cost of services and other operating expenses 503,880 566,014 621,107 Net income 87,528 57,811 81,122 10.
The following table outlines the changes in accumulated other comprehensive income (loss), net of tax, during the periods presented: For the Year Ended December 31, 2020 2021 2022 (in thousands) Balance as of January 1 $ — $ (2,027) $ 12,282 Gain (loss) on interest rate cap contract (2,027) 14,270 90,730 Amounts reclassified from accumulated other comprehensive income (loss) — 39 (14,410) Balance as of December 31 $ (2,027) $ 12,282 $ 88,602 The effects on net income of amounts reclassified from accumulated other comprehensive income (loss) are as follows: For the Year Ended December 31, Statement of Operations 2020 2021 2022 (in thousands) Gains (losses) included in interest expense $ — $ (51) $ 19,086 Income tax benefit (expense) — 12 (4,676) Amounts reclassified from accumulated other comprehensive income (loss) $ — $ (39) $ 14,410 F-25 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12.
Interest Rate Cap (Continued) The following table outlines the changes in accumulated other comprehensive income (loss), net of tax, during the periods presented: For the Year Ended December 31, 2021 2022 2023 (in thousands) Balance as of January 1 $ (2,027) $ 12,282 $ 88,602 Gain on interest rate cap contract 14,270 90,730 15,783 Amounts reclassified from accumulated other comprehensive income (loss) 39 (14,410) (61,478) Balance as of December 31 $ 12,282 $ 88,602 $ 42,907 The effects on net income of amounts reclassified from accumulated other comprehensive income (loss) are as follows: For the Year Ended December 31, Statement of Operations 2021 2022 2023 (in thousands) Gains (losses) included in interest expense $ (51) $ 19,086 $ 80,766 Income tax benefit (expense) 12 (4,676) (19,288) Amounts reclassified from accumulated other comprehensive income (loss) $ (39) $ 14,410 $ 61,478 The Company expects that approximately $56.4 million of estimated pre-tax gains will be reclassified from accumulated other comprehensive income into interest expense within the next twelve months.
The Company’s total lease cost is as follows: For the Year Ended December 31, 2020 2021 2022 Unrelated Parties Related Parties Total Unrelated Parties Related Parties Total Unrelated Parties Related Parties Total (in thousands) Operating lease cost $ 278,945 $ 7,118 $ 286,063 $ 283,595 $ 7,186 $ 290,781 $ 299,077 $ 7,245 $ 306,322 Finance lease cost: Amortization of right-of-use assets 452 — 452 647 — 647 1,488 — 1,488 Interest on lease liabilities 1,011 — 1,011 1,142 — 1,142 1,335 — 1,335 Short-term lease cost — — — 269 — 269 74 — 74 Variable lease cost 49,409 580 49,989 52,666 426 53,092 57,335 462 57,797 Sublease income (9,814) — (9,814) (8,955) — (8,955) (7,803) — (7,803) Total lease cost $ 320,003 $ 7,698 $ 327,701 $ 329,364 $ 7,612 $ 336,976 $ 351,506 $ 7,707 $ 359,213 Supplemental cash flow information related to leases is as follows: For the Year Ended December 31, 2020 2021 2022 (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 280,263 $ 294,576 $ 308,085 Operating cash flows for finance leases 1,011 1,142 1,335 Financing cash flows for finance leases 140 616 1,472 Right-of-use assets obtained in exchange for lease liabilities: Operating leases 256,697 284,657 340,845 Finance leases 1,220 4,545 495 Supplemental balance sheet information related to leases is as follows: December 31, 2021 2022 Unrelated Parties Related Parties Total Unrelated Parties Related Parties Total Operating Leases (in thousands) Operating lease right-of-use assets $ 1,052,603 $ 26,151 $ 1,078,754 $ 1,136,014 $ 33,726 $ 1,169,740 Current operating lease liabilities $ 222,865 $ 6,469 $ 229,334 $ 231,595 $ 5,189 $ 236,784 Non-current operating lease liabilities 894,104 22,436 916,540 977,645 30,749 1,008,394 Total operating lease liabilities $ 1,116,969 $ 28,905 $ 1,145,874 $ 1,209,240 $ 35,938 $ 1,245,178 F-18 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6.
The Company’s total lease cost is as follows: For the Year Ended December 31, 2021 2022 2023 Unrelated Parties Related Parties Total Unrelated Parties Related Parties Total Unrelated Parties Related Parties Total (in thousands) Operating lease cost $ 283,595 $ 7,186 $ 290,781 $ 299,077 $ 7,245 $ 306,322 $ 310,000 $ 7,335 $ 317,335 Finance lease cost: Amortization of right-of-use assets 647 — 647 1,488 — 1,488 1,572 — 1,572 Interest on lease liabilities 1,142 — 1,142 1,335 — 1,335 1,405 — 1,405 Short-term lease cost 269 — 269 74 — 74 — — — Variable lease cost 52,666 426 53,092 57,335 462 57,797 64,920 84 65,004 Sublease income (8,955) — (8,955) (7,803) — (7,803) (6,725) — (6,725) Total lease cost $ 329,364 $ 7,612 $ 336,976 $ 351,506 $ 7,707 $ 359,213 $ 371,172 $ 7,419 $ 378,591 Supplemental cash flow information related to leases is as follows: For the Year Ended December 31, 2021 2022 2023 (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 294,576 $ 308,085 $ 317,256 Operating cash flows for finance leases 1,142 1,335 1,239 Financing cash flows for finance leases 616 1,472 1,617 Right-of-use assets obtained in exchange for lease liabilities: Operating leases 284,657 340,845 270,153 Finance leases 4,545 495 — Supplemental balance sheet information related to leases is as follows: December 31, 2022 2023 Unrelated Parties Related Parties Total Unrelated Parties Related Parties Total Operating Leases (in thousands) Operating lease right-of-use assets $ 1,136,014 $ 33,726 $ 1,169,740 $ 1,159,025 $ 29,591 $ 1,188,616 Current operating lease liabilities $ 231,595 $ 5,189 $ 236,784 $ 239,807 $ 5,593 $ 245,400 Non-current operating lease liabilities 977,645 30,749 1,008,394 1,000,583 25,284 1,025,867 Total operating lease liabilities $ 1,209,240 $ 35,938 $ 1,245,178 $ 1,240,390 $ 30,877 $ 1,271,267 F-18 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6.
The senior notes are unconditionally guaranteed on a joint and several basis by each of Select’s direct or indirect existing and future domestic restricted subsidiaries, other than certain non-guarantor subsidiaries. F-24 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11.
The senior notes are unconditionally guaranteed on a joint and several basis by each of Select’s direct or indirect existing and future domestic restricted subsidiaries, other than certain non-guarantor subsidiaries. Select is able to redeem some or all of the notes prior to maturity.
Stock compensation expense recognized by the Company is as follows: For the Year Ended December 31, 2020 2021 2022 (in thousands) Stock compensation expense: Included in general and administrative $ 22,053 $ 24,598 $ 30,555 Included in cost of services 5,197 6,342 7,200 Total $ 27,250 $ 30,940 $ 37,755 F-30 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 18.
Stock-based Compensation (Continued) Stock compensation expense recognized by the Company is as follows: For the Year Ended December 31, 2021 2022 2023 (in thousands) Stock compensation expense: Included in general and administrative $ 24,598 $ 30,555 $ 36,041 Included in cost of services 6,342 7,200 7,768 Total $ 30,940 $ 37,755 $ 43,809 Future stock compensation expense based on current stock-based awards is estimated to be as follows: 2024 2025 2026 2027 (in thousands) Stock compensation expense $ 40,830 $ 25,019 $ 10,884 $ 1,418 F-31 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 18.
GAAP, the Company accounted for the payments it received in accordance with International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistanc e. Under the Company’s accounting policy, payments are recognized as other operating income when it is probable that it has complied with the terms and conditions of the payments.
Under the Company’s accounting policy, payments are recognized as other operating income when it is probable that it has complied with the terms and conditions of the payments.
Subsequent Events On February 16, 2023, the Company’s board of directors declared a cash dividend of $0.125 per share. The dividend will be payable on or about March 15, 2023, to stockholders of record as of the close of business on March 3, 2023. On February 21, 2023, Select entered into Amendment No. 6 to the credit agreement.
On February 13, 2024, the Company’s Board of Directors declared a cash dividend of $0.125 per share. The dividend will be payable on or about March 13, 2024, to stockholders of record as of the close of business on March 1, 2024.
On August 24, 2020, the Company and Select Specialty Hospital – Oklahoma City, Inc. (“SSH–Oklahoma City”) received civil investigative demands (“CIDs”) from the U.S. Attorney’s Office for the Western District of Oklahoma seeking responses to interrogatories and the production of various documents principally relating to the documentation, billing and reviews of medical services furnished to patients at SSH-Oklahoma City.
Attorney’s Office for the Western District of Oklahoma seeking responses to interrogatories and the production of various documents principally relating to the documentation, billing and reviews of medical services furnished to patients at SSH-Oklahoma City.
Property and Equipment The Company’s property and equipment consists of the following: December 31, 2021 2022 (in thousands) Land $ 95,912 $ 96,630 Leasehold improvements 620,367 726,165 Buildings 574,916 579,223 Furniture and equipment 728,072 790,410 Construction-in-progress 79,722 88,932 Total property and equipment 2,098,989 2,281,360 Accumulated depreciation (1,137,522) (1,279,920) Property and equipment, net $ 961,467 $ 1,001,440 Depreciation expense was $178.0 million, $173.2 million, and $174.8 million for the years ended December 31, 2020, 2021, and 2022, respectively. 8.
Property and Equipment The Company’s property and equipment consists of the following: December 31, 2022 2023 (in thousands) Land $ 96,630 $ 96,492 Leasehold improvements 726,165 824,986 Buildings 579,223 589,690 Furniture and equipment 790,410 879,429 Construction-in-progress 88,932 58,102 Total property and equipment 2,281,360 2,448,699 Accumulated depreciation (1,279,920) (1,425,138) Property and equipment, net $ 1,001,440 $ 1,023,561 Depreciation expense was $173.2 million, $174.8 million, and $177.1 million for the years ended December 31, 2021, 2022, and 2023, respectively. 8.
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Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
54 edited+53 added−17 removed123 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
54 edited+53 added−17 removed123 unchanged
2022 filing
2023 filing
The healthcare industry is subject to extensive federal, state, and local laws and regulations relating to: (i) facility and professional licensure, including certificates of need; (ii) conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral; (iii) addition of facilities and services and enrollment of newly developed facilities in the Medicare program; (iv) payment for services; and (v) safeguarding protected health information. 34 Table of Contents Both federal and state regulatory agencies inspect, survey, and audit our facilities to review our compliance with these laws and regulations.
The healthcare industry is subject to extensive federal, state, and local laws and regulations relating to: (i) facility and professional licensure, including certificates of need; (ii) conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral; (iii) addition of facilities and services and enrollment of newly developed facilities in the Medicare program; (iv) payment for services; and (v) safeguarding protected health information. 36 Table of Contents Both federal and state regulatory agencies inspect, survey, and audit our facilities to review our compliance with these laws and regulations.
This influence may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest. 42 Table of Contents Risks Related to Our Capital Structure Our substantial indebtedness may limit the amount of cash flow available to invest in the ongoing needs of our business.
This influence may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest. 45 Table of Contents Risks Related to Our Capital Structure Our substantial indebtedness may limit the amount of cash flow available to invest in the ongoing needs of our business.
In addition, the Indenture requires us, among other things, to provide financial and current reports to holders of the notes or file such reports electronically with the SEC. 43 Table of Contents Our inability to comply with any of these covenants could result in a default under our credit facilities or our Indenture.
In addition, the Indenture requires us, among other things, to provide financial and current reports to holders of the notes or file such reports electronically with the SEC. 46 Table of Contents Our inability to comply with any of these covenants could result in a default under our credit facilities or our Indenture.
The loss of the services of certain of these individuals could disrupt significant aspects of our business, could prevent us from successfully executing our business strategy, and could have a material adverse effect on our results of operations. In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.
The loss of the services of certain of these individuals could disrupt significant aspects of our business, could prevent us from successfully executing our business strategy, and could have a material adverse effect on our results of operations. 43 Table of Contents In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.
For our Concentra center operations, we currently maintain insurance coverages under a combination of policies with a total annual aggregate limit of up to $19.0 million for professional malpractice liability and $19.0 million for general liability insurance.
For our Concentra center operations, we currently maintain insurance coverages under a combination of policies with a total annual aggregate limit of up to $29.0 million for professional malpractice liability and $29.0 million for general liability insurance.
If our rehabilitation hospitals fail to comply with the 60% Rule or admissions to IRFs are limited due to changes to the diagnosis codes on the presumptive compliance list, our revenue and profitability may decline. As of December 31, 2022, we operated 31 rehabilitation hospitals, all of which were certified by Medicare as IRFs.
If our rehabilitation hospitals fail to comply with the 60% Rule or admissions to IRFs are limited due to changes to the diagnosis codes on the presumptive compliance list, our revenue and profitability may decline. As of December 31, 2023, we operated 33 rehabilitation hospitals, all of which were certified by Medicare as IRFs.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Changes.” 36 Table of Contents As a result of post-payment reviews of claims we submit to Medicare for our services, we may incur additional costs and may be required to repay amounts already paid to us.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Regulatory Changes.” As a result of post-payment reviews of claims we submit to Medicare for our services, we may incur additional costs and may be required to repay amounts already paid to us.
Numerous state and federal laws and regulations address privacy and information security concerns resulting from our access to our patients’ and employees’ personal information. 37 Table of Contents Our information technology systems and those of our vendors that process, maintain, and transmit such data are subject to computer viruses, cyber attacks, or breaches.
Numerous state and federal laws and regulations address privacy and information security concerns resulting from our access to our patients’ and employees’ personal information. Our information technology systems and those of our vendors that process, maintain, and transmit such data are subject to computer viruses, cyber attacks, or breaches.
If we are unable to successfully cultivate and maintain strong relationships with these physicians, our hospitals’ admissions and our facilities’ and clinics’ businesses may decrease, and our revenue may decline. 40 Table of Contents Our business operations could be significantly disrupted if we lose key members of our management team.
If we are unable to successfully cultivate and maintain strong relationships with these physicians, our hospitals’ admissions and our facilities’ and clinics’ businesses may decrease, and our revenue may decline. Our business operations could be significantly disrupted if we lose key members of our management team.
CMS has issued temporary waivers in response to the COVID-19 pandemic that allow IRFs, IRF units and hospitals and units applying to be classified as IRFs to exclude patients admitted solely to respond to the public health emergency from the 60% Rule.
CMS issued temporary waivers in response to the COVID-19 pandemic that allowed IRFs, IRF units and hospitals and units applying to be classified as IRFs to exclude patients admitted solely to respond to the public health emergency from the 60% Rule.
In the calendar year 2022 physician fee schedule final rule, CMS also adopted its plan to transition the MIPS program to MVPs. CMS will begin the transition to MVPs in 2023 with an initial set of MVPs in which reporting is voluntary.
In the calendar year 2022 physician fee schedule final rule, CMS also adopted its plan to transition the MIPS program to MVPs. CMS began the transition to MVPs in 2023 with an initial set of MVPs in which reporting is voluntary.
Our credit facilities also require us to maintain a leverage ratio (based upon the ratio of indebtedness to consolidated EBITDA as defined in the agreements governing our credit facilities), which is tested quarterly. Failure to comply with any of these covenants would result in an event of default under our credit facilities.
Our revolving facility also requires us to maintain a leverage ratio (based upon the ratio of indebtedness to consolidated EBITDA as defined in the agreements governing our credit facilities), which is tested quarterly. Failure to comply with any of these covenants would result in an event of default under our credit facilities.
If our critical illness recovery hospitals fail to maintain their certifications as LTCHs or if our facilities operated as HIHs fail to qualify as hospitals separate from their host hospitals, our revenue and profitability may decline. As of December 31, 2022, we operated 103 critical illness recovery hospitals, all of which are currently certified by Medicare as LTCHs.
If our critical illness recovery hospitals fail to maintain their certifications as LTCHs or if our facilities operated as HIHs fail to qualify as hospitals separate from their host hospitals, our revenue and profitability may decline. As of December 31, 2023, we operated 107 critical illness recovery hospitals, all of which are currently certified by Medicare as LTCHs.
Furthermore, the ability of our subsidiaries to make such payments of interest, dividends, distributions, loans, or advances may be contested by taxing authorities in the relevant jurisdictions. Despite our substantial level of indebtedness, we and our subsidiaries may be able to incur additional indebtedness. This could further exacerbate the risks described above.
Furthermore, the ability of our subsidiaries to make such payments of interest, dividends, distributions, loans, or advances may be contested by taxing authorities in the relevant jurisdictions. Despite our substantial level of indebtedness, we and our subsidiaries may be able to incur additional indebtedness. This could further exacerbate the risks described above, especially in the current rising interest rate environment.
A reduction in workforce may also lead to declines in workers’ compensation claims, which may adversely affect Concentra’s business. Approximately 59% of Concentra’s revenue was generated from the treatment of workers’ compensation claims in 2022. Inflation has increased throughout the U.S. economy.
A reduction in workforce may also lead to declines in workers’ compensation claims, which may adversely affect Concentra’s business. Approximately 60% of Concentra’s revenue was generated from the treatment of workers’ compensation claims in 2023. Inflation has increased throughout the U.S. economy.
Our outpatient rehabilitation clinics receive payments from the Medicare program under the Medicare physician fee schedule. In the calendar year 2023 physician fee schedule final rule, CMS announced that Medicare payments for the therapy specialty are expected to decrease 1% in 2023.
Our outpatient rehabilitation clinics receive payments from the Medicare program under the Medicare physician fee schedule. In the calendar year 2024 physician fee schedule final rule, CMS announced that Medicare payments for the therapy specialty are expected to decrease 3% in 2024.
A joint venture involves the combining of corporate cultures and mission. As a result, we may not be able to successfully operate a joint venture, and therefore, we may not be able to realize the intended benefits. If we fail to successfully execute a joint venture relationship, our financial condition and results of operations may be materially adversely affected.
As a result, we may not be able to successfully operate a joint venture, and therefore, we may not be able to realize the intended benefits. If we fail to successfully execute a joint venture relationship, our financial condition and results of operations may be materially adversely affected.
Additionally, the cost of attracting, training, and retaining qualified healthcare personnel may be higher than historical trends and, as a result, our profitability could decline. While we have historically experienced some level of ordinary course employee turnover, the impact of the COVID-19 pandemic and resulting actions have exacerbated labor shortages and increased employee turnover.
Additionally, the cost of attracting, training, and retaining qualified healthcare personnel may be higher than historical trends and, as a result, our profitability could decline. 34 Table of Contents While we have historically experienced some level of ordinary course employee turnover, the continuing impact of the COVID-19 pandemic and its aftermath have exacerbated labor shortages and increased employee turnover.
The IMPACT Act requires the submission of standardized data by certain healthcare providers. Specifically, the IMPACT Act requires, among other significant activities, that LTCHs, IRFs, SNFs, and HHAs report standardized patient assessment data to CMS for cross-setting quality measures, resource use measures, and standardized patient assessment data elements.
Specifically, the IMPACT Act requires, among other significant activities, that LTCHs, IRFs, SNFs, and HHAs report standardized patient assessment data to CMS for cross-setting quality measures, resource use measures, and standardized patient assessment data elements.
As of December 31, 2022, we were required to maintain our leverage ratio (the ratio of total indebtedness to consolidated EBITDA for the prior four consecutive fiscal quarters) at less than 7.00 to 1.00. At December 31, 2022, our leverage ratio was 5.96 to 1.00.
As of December 31, 2023, we were required to maintain our leverage ratio (the ratio of total indebtedness to consolidated EBITDA for the prior four consecutive fiscal quarters) at less than 7.00 to 1.00. At December 31, 2023, our leverage ratio was 4.54 to 1.00.
In addition, these acquisitions involve risks that the acquired businesses will not perform in accordance with expectations; that we may become liable for unforeseen financial or business liabilities of the acquired businesses, including liabilities for failure to comply with healthcare regulations; that the expected synergies associated with acquisitions will not be achieved; and that business judgments concerning the value, strengths, and weaknesses of businesses acquired will prove incorrect, which could have a material adverse effect on our financial condition and results of operations. 39 Table of Contents Future joint ventures may use significant resources, may be unsuccessful, and could expose us to unforeseen liabilities.
In addition, these acquisitions involve risks that the acquired businesses will not perform in accordance with expectations; that we may become liable for unforeseen financial or business liabilities of the acquired businesses, including liabilities for failure to comply with healthcare regulations; that the expected synergies associated with acquisitions will not be achieved; and that business judgments concerning the value, strengths, and weaknesses of businesses acquired will prove incorrect, which could have a material adverse effect on our financial condition and results of operations.
Difficulties in attracting and retaining qualified healthcare personnel can limit our ability to staff our facilities. It has also led us to use agency clinical staff in our facilities, which can increase our costs and lower our margins.
The market for qualified healthcare professionals is highly competitive. Difficulties in attracting and retaining qualified healthcare personnel can limit our ability to staff our facilities. It has also led us to use agency clinical staff in our facilities, which can increase our costs and lower our margins.
Also, these restrictions do not prevent us or our subsidiaries from incurring obligations that do not constitute indebtedness. As of December 31, 2022, we had $148.5 million of availability under our revolving facility (as defined below) (after giving effect to $445.0 million of outstanding borrowings and $56.5 million of outstanding letters of credit).
Also, these restrictions do not prevent us or our subsidiaries from incurring obligations that do not constitute indebtedness. As of December 31, 2023, we had $434.2 million of availability under our revolving facility (as defined below) (after giving effect to $280.0 million of outstanding borrowings and $55.8 million of outstanding letters of credit).
We have a substantial amount of indebtedness. As of December 31, 2022, we had approximately $3,879.6 million of total indebtedness. Our indebtedness could have important consequences to you.
We have a substantial amount of indebtedness. As of December 31, 2023, we had approximately $3,658.0 million of total indebtedness. Our indebtedness could have important consequences to you.
While we make significant efforts to address any information security issues and vulnerabilities with respect to the companies we acquire, we may still inherit risks of security breaches or other compromises when we integrate these companies within our business. 38 Table of Contents Quality reporting requirements may negatively impact Medicare reimbursement.
While we make significant efforts to address any information security issues and vulnerabilities with respect to the companies we acquire, we may still inherit risks of security breaches or other compromises when we integrate these companies within our business. Quality reporting requirements may negatively impact Medicare reimbursement. The IMPACT Act requires the submission of standardized data by certain healthcare providers.
If an IRF does not demonstrate compliance with the 60% Rule by either the presumptive method or through a review of medical records, then the facility’s classification as an IRF may be terminated at the start of its next cost reporting period causing the facility to be paid as a general acute care hospital under IPPS.
IRFs that fail to demonstrate compliance with the 60% Rule using this presumptive test may demonstrate compliance through a second step involving an audit of the facility’s medical records to assess compliance. 38 Table of Contents If an IRF does not demonstrate compliance with the 60% Rule by either the presumptive method or through a review of medical records, then the facility’s classification as an IRF may be terminated at the start of its next cost reporting period causing the facility to be paid as a general acute care hospital under IPPS.
The bonus payment for APM participation is intended to encourage participation and testing of new APMs and to promote the alignment of incentives across payors. Providers in facility-based outpatient therapy settings are excluded from MIPS eligibility and therefore not subject to this payment adjustment.
As required under the Consolidated Appropriations Act, 2023, the bonus payment will be 3.5% in 2025. The bonus payment for APM participation is intended to encourage participation and testing of new APMs and to promote the alignment of incentives across payors. Providers in facility-based outpatient therapy settings are excluded from MIPS eligibility and therefore not subject to this payment adjustment.
Our critical illness recovery hospitals and our rehabilitation hospitals are highly dependent on nurses, our outpatient rehabilitation division is highly dependent on therapists for patient care, and Concentra is highly dependent upon the ability of its affiliated professional groups to recruit and retain qualified physicians and other licensed providers. The market for qualified healthcare professionals is highly competitive.
Our critical illness recovery hospitals and our rehabilitation hospitals are highly dependent on nurses, our outpatient rehabilitation division is highly dependent on therapists for patient care, and Concentra is highly dependent upon the ability of its affiliated professional groups to recruit and retain qualified physicians and other licensed providers to provide services to our existing occupation health centers and onsite health clinics.
If we cannot renew or extend a significant number of our existing leases, or if the terms for lease renewal or extension offered by landlords on a significant number of leases are unacceptable to us, then the loss of multiple leases close in time could materially and adversely affect our business, financial condition, and results of operations.
If we cannot renew or extend a significant number of our existing leases, or if the terms for lease renewal or extension offered by landlords on a significant number of leases are unacceptable to us, then the loss of multiple leases close in time could materially and adversely affect our business, financial condition, and results of operations. 39 Table of Contents Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable information.
CMS has issued temporary waivers that exempt LTCHs from the 25 day average length of stay requirement for all cost reporting periods that include the COVID-19 pandemic health emergency. When such waivers are lifted, LTCHs will again be required to comply with this rule.
CMS issued temporary waivers that exempt LTCHs from the 25 day average length of stay requirement for all cost reporting periods that include the COVID-19 pandemic public health emergency. Medicare cost reporting periods for our LTCHs that begin after May 11, 2023, will again be required to comply with this rule.
The COVID-19 pandemic has had an impact on our business and results of operations, financial position, and cash flows. Prolonged volatility or significant disruption of global financial markets due in part to the COVID-19 pandemic could have a negative impact on our business and overall financial position.
Public health threats, such as the ongoing effects of COVID-19 or any other pandemic, may have an impact on our business and results of operations, financial position, and cash flows. Prolonged volatility or significant disruption of global financial markets due in part to a public health threat could have a negative impact on our business and overall financial position.
At this time, it is unclear the impact that the transition to MVPs will have on our business and operating results, however, any resulting administrative burden or decrease in reimbursement rates may reduce our future revenue and profitability.
In addition, MVP participants would select certain quality measures and improvement activities and then report data for such measures and activities. At this time, it is unclear the impact that the transition to MVPs will have on our business and operating results, however, any resulting administrative burden or decrease in reimbursement rates may reduce our future revenue and profitability.
Though we cannot predict the degree to which we will be affected by future union activity, there may be legislative or executive actions that could result in increased union activity. 33 Table of Contents The ongoing effects of the COVID-19 pandemic creates uncertainties about our future operating results and financial conditions.
Though we cannot predict the degree to which we will be affected by future union activity, there may be legislative or executive actions that could result in increased union activity. Public health threats such as a global pandemic, or widespread outbreak of infectious disease, similar to the COVID-19 pandemic, may create uncertainties about our future operating results and financial conditions.
The security regulations require healthcare providers to implement administrative, physical and technical practices to protect the security of individually identifiable health information that is maintained or transmitted electronically.
The regulations also provide patients with significant new rights related to understanding and controlling how their health information is used or disclosed. The security regulations require healthcare providers to implement administrative, physical and technical practices to protect the security of individually identifiable health information that is maintained or transmitted electronically.
After CMS issued the final rule, Congress passed the Health Extenders, Improving Access to Medicare, Medicaid, and CHIP, and Strengthening Public Health Act of 2022, which provided a one-time 2.5% increase in payments in calendar year 2023 to offset some of the 4.5% cut to payments for therapy and other services paid under the physician fee schedule that otherwise would have occurred in calendar year 2023. 35 Table of Contents In addition, the Medicare Access and CHIP Reauthorization Act of 2015 requires that payments under the physician fee schedule be adjusted starting in 2019 based on performance in a MIPS and additional incentives for participation in APMs.
Congress passed the Health Extenders, Improving Access to Medicare, Medicaid, and CHIP, and Strengthening Public Health Act of 2022, which provided a one-time 2.5% increase in payments in calendar year 2023 to offset some of the 4.5% cut to payments for therapy and other services paid under the physician fee schedule that otherwise would have occurred in calendar year 2023, and a one-time 1.25% increase in payments in calendar year 2024.
We are subject to risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest.
We may be unable to refinance our debt on terms favorable to us or at all, which would negatively impact our business and financial condition. We are subject to risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest.
If we fail to compete effectively with other hospitals, clinics, occupational health centers, and healthcare providers in the local areas we serve, our revenue and profitability may decline. The healthcare business is highly competitive, and we compete with other hospitals, rehabilitation clinics, occupational health centers, and other healthcare providers for patients.
The healthcare business is highly competitive, and we compete with other hospitals, rehabilitation clinics, occupational health centers, and other healthcare providers for patients.
In addition, there can be no assurance that any increases in Medicare reimbursement rates established by CMS will fully reflect increases in our operating costs. We conduct business in a heavily regulated industry, and changes in regulations, new interpretations of existing regulations, or violations of regulations may result in increased costs or sanctions that reduce our revenue and profitability.
We conduct business in a heavily regulated industry, and changes in regulations, new interpretations of existing regulations, or violations of regulations may result in increased costs or sanctions that reduce our revenue and profitability.
Although we maintain cyber liability insurance to protect us from losses related to cyber attacks and breaches, not every risk or liability can be insured, and for risks that are insurable, our policy limits and terms of coverage may not be sufficient to cover all actual losses or liabilities incurred.
Although we maintain cyber liability insurance to protect us from losses related to cyber attacks and breaches, not every risk or liability can be insured, and for risks that are insurable, our policy limits and terms of coverage may not be sufficient to cover all actual losses or liabilities incurred. 40 Table of Contents Furthermore, while our information technology systems are maintained with safeguards protecting against cyber attacks, including intrusion protection, firewalls, and malware detection, these safeguards do not ensure that a significant cyber attack could not occur.
Other factors and uncertainties include, but are not limited to increased operational costs associated with operating during a pandemic; evolving macroeconomic factors, including general economic uncertainty, increased labor costs, and recessionary pressures; capital and other resources needed to respond to the pandemic; along with the severity and duration of the pandemic, including whether there are additional outbreaks or spikes in the number of COVID-19 cases, future mutations or related strains of the virus in areas in which we operate.
Other factors and uncertainties include, but are not limited to, adverse impacts on patient volumes and revenue, increased operational costs associated with operating during and after a pandemic; evolving macroeconomic factors, including general economic uncertainty, increased labor costs, and recessionary pressures; capital and other resources needed to respond to a pandemic; along with the severity and duration of a pandemic.
As part of our growth strategy, we have partnered and may partner with large healthcare systems to provide post-acute care services. These joint ventures have included and may involve significant cash expenditures, debt incurrence, additional operating losses and expenses, and compliance risks that could have a material adverse effect on our financial condition and results of operations.
These joint ventures have included and may involve significant cash expenditures, debt incurrence, additional operating losses and expenses, and compliance risks that could have a material adverse effect on our financial condition and results of operations. A joint venture involves the combining of corporate cultures and mission.
Risks Related to Our Business Adverse economic conditions including an inflationary economic environment in the U.S. or globally could adversely affect us. Our business is exposed to fluctuating market conditions, including rising interest rates.
In addition, there can be no assurance that any increases in Medicare reimbursement rates established by CMS will fully reflect increases in our operating costs. Adverse economic conditions including an inflationary economic environment in the U.S. or globally could adversely affect us. Our business is exposed to fluctuating market conditions, including rising interest rates.
Because of improvements in workplace safety, greater access to health insurance, and the continued transition from a manufacturing-based economy to a service-based economy, workers are generally healthier and less prone to injuries. Increases in employer-sponsored wellness and health promotion programs have led to fitter and healthier employees who may be less likely to injure themselves on the job.
If the frequency of workplace injuries and illnesses decline, Concentra’s results may be negatively affected. Because of improvements in workplace safety, greater access to health insurance, and the continued transition from a manufacturing-based economy to a service-based economy, workers are generally healthier and less prone to injuries.
We are also subject to lawsuits under federal and state whistleblower statutes designed to combat fraud and abuse in the healthcare industry. These whistleblower lawsuits are not covered by insurance and can involve significant monetary damages and award bounties to private plaintiffs who successfully bring the suits.
Many of these actions involve large claims and significant defense costs and sometimes, as in the case of wage and hour class actions, are not covered by insurance. We are also subject to lawsuits under federal and state whistleblower statutes designed to combat fraud and abuse in the healthcare industry.
Revenues from providing services to patients covered under the Medicare program represented approximately 25%, 23%, and 23% of our revenue for the years ended December 31, 2020, 2021, and 2022, respectively. In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program.
In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program.
The department released final regulations containing privacy standards in December 2000 and published revisions to the final regulations in August 2002. The privacy regulations extensively regulate the use and disclosure of individually identifiable health information. The regulations also provide patients with significant new rights related to understanding and controlling how their health information is used or disclosed.
HIPAA required the United States Department of Health and Human Services to adopt standards to protect the privacy and security of individually identifiable health information. The department released final regulations containing privacy standards in December 2000 and published revisions to the final regulations in August 2002. The privacy regulations extensively regulate the use and disclosure of individually identifiable health information.
We also maintain additional types of liability insurance covering claims which, due to their nature or amount, are not covered by or not fully covered by our professional and general liability insurance policies. Our insurance policies also do not generally cover punitive damages and are subject to various deductibles and policy limits.
We also maintain additional types of liability insurance covering claims which, due to their nature or amount, are not covered by or not fully covered by the applicable professional malpractice and general liability insurance policies, including workers compensation, property and casualty, directors and officers, cyber liability insurance, and employment practices liability insurance coverages.
In the calendar year 2023 physician fee schedule final rule, CMS revised the initial set of MVPs and added five new MVPs. Beginning in 2026, multispecialty groups must form subgroups to report MVPs. CMS plans to develop more MVPs from 2024 to 2027 and is considering that MVP reporting would become mandatory in 2028.
Beginning in 2026, multispecialty groups must form subgroups to report MVPs. CMS plans to develop more MVPs from 2024 to 2027 and is considering that MVP reporting would become mandatory in 2028. Each MVP would include population health claims-based measures and require clinicians to report on the Promoting Interoperability performance category measures.
A joint venture is operated through a board of directors that contains representatives of Select and other parties to the joint venture. We may not control the board of certain joint ventures and, as a result, such joint ventures may take certain actions that could have adverse effects on our financial condition and results of operations.
We may not control the board of certain joint ventures and, as a result, such joint ventures may take certain actions that could have adverse effects on our financial condition and results of operations. 42 Table of Contents If we fail to compete effectively with other hospitals, clinics, occupational health centers, and healthcare providers in the local areas we serve, our revenue and profitability may decline.
We review our insurance program annually and may make adjustments to the amount of insurance coverage and self-insured retentions in future years. See “Business—Government Regulations—Other Healthcare Regulations” 41 Table of Contents Concentration of ownership among our existing executives and directors may prevent new investors from influencing significant corporate decisions.
See “Business—Government Regulations—Other Healthcare Regulations” 44 Table of Contents Concentration of ownership among our existing executives and directors may prevent new investors from influencing significant corporate decisions. Our executives and directors, beneficially own, in the aggregate, approximately 17.53% of Holdings’ outstanding common stock as of February 1, 2024.
The collection of data for these quality and resource use measures, and the use of these data in the discharge planning process at hospitals, has the potential to affect admission patterns at our LTCHs and IRFs. We may be adversely affected by negative publicity which can result in increased governmental and regulatory scrutiny and possibly adverse regulatory changes.
The collection of data for these quality and resource use measures, and the use of these data in the discharge planning process at hospitals, has the potential to affect admission patterns at our LTCHs and IRFs. 41 Table of Contents CMS has increased several quality reporting program data completion thresholds for certain provider types.
If Concentra loses several significant employer customers or payor contracts, its results may be adversely affected. Concentra’s results may decline if it loses several significant employer customers or payor contracts. One or more of Concentra’s significant employer customers could be acquired. Additionally, Concentra could lose significant employer customers or payor contracts due to competitive pricing pressures or other reasons.
Concentra’s results may decline if we lose several significant employer customers, payor relationships, or ability to participate in networks. One or more of Concentra’s significant employer customers, payors, or networks could be acquired.
In addition, to the extent new debt is added to us and our subsidiaries’ current debt levels, the substantial leverage risks described above would increase. Changes in the method of determining London Interbank Offered Rate (“LIBOR”), or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to our debt.
In addition, to the extent new debt is added to us and our subsidiaries’ current debt levels, the substantial leverage risks described above would increase. Further, the U.S. Federal Reserve has raised, and has indicated its intent to continue raising, certain benchmark interest rates in an effort to combat inflation.
A decline in workplace injuries and illness may cause the number of workers’ compensation claims to decrease, which may adversely affect Concentra’s business. If there are changes in the rates or methods of Medicare reimbursements for our services, our revenue and profitability could decline.
Increases in employer-sponsored wellness and health promotion programs have led to fitter and healthier employees who may be less likely to injure themselves on the job. A decline in workplace injuries and illness may cause the number of workers’ compensation claims to decrease, which may adversely affect Concentra’s business.
Removed
Moreover, a shortage in labor due to quarantined employees, employees choosing not to return to work, and increased labor costs could result from the latest variants of COVID-19. Our hospitals may experience increased operating costs resulting from shortages of medical supplies, including personal protective equipment, and supply chain disruptions.
Added
Risks Related to Our Business If there are changes in the rates or methods of Medicare reimbursements for our services, our revenue and profitability could decline. Revenues from providing services to patients covered under the Medicare program represented approximately 23%, 23%, and 22% of our revenue for the years ended December 31, 2021, 2022, and 2023, respectively.
Removed
The loss of several significant employer customers or payor contracts could cause a material decline in Concentra’s profitability and operating performance. If the frequency of workplace injuries and illnesses decline, Concentra’s results may be negatively affected.
Added
As a result of the COVID-19 pandemic and its aftermath, our hospitals have experienced and continue to experience more variable demand for its services as well as increases in costs relating to less efficient operating procedures, increased cost of supplies, and increased salaries, wages and benefits.
Removed
Each MVP would include population health claims-based measures and require clinicians to report on the Promoting Interoperability performance category measures. In addition, MVP participants would select certain quality measures and improvement activities and then report data for such measures and activities.
Added
Unfavorable global economic conditions brought about by material global crises, military conflicts or war, geopolitical and trade disputes or other factors, may adversely affect our business and financial results.
Removed
IRFs that fail to demonstrate compliance with the 60% Rule using this presumptive test may demonstrate compliance through a second step involving an audit of the facility’s medical records to assess compliance.
Added
Our business may be sensitive to global economic conditions, which can be adversely affected by political and military conflict, trade and other international disputes, significant natural disasters (including as a result of climate change) or other events that disrupt macroeconomic conditions.
Removed
When such waivers are lifted, our IRFs will again be required to comply with the requirements of the 60% Rule.
Added
For example, trade policies and geopolitical disputes (including as a result of China-Taiwan relations) and other international conflicts can result in tariffs, sanctions and other measures that restrict international trade, and may adversely affect our business. Countries may also adopt other measures, such as controls on imports or exports of goods, technology or data, that could adversely impact our operations.
Removed
Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable information. HIPAA required the United States Department of Health and Human Services to adopt standards to protect the privacy and security of individually identifiable health information.
Added
Further, military conflicts or wars (such as the ongoing conflicts between Russia and Ukraine and Israel and Palestine) can cause exacerbated volatility and disruptions to various aspects of the global economy.
Removed
Furthermore, while our information technology systems are maintained with safeguards protecting against cyber attacks, including intrusion protection, firewalls, and malware detection, these safeguards do not ensure that a significant cyber attack could not occur.
Added
The uncertain nature, magnitude, and duration of hostilities stemming from such conflicts, including the potential effects of sanctions and counter-sanctions, or retaliatory cyber-attacks on the world economy and markets, have contributed to increased market volatility and uncertainty, which could have an adverse impact on macroeconomic factors that affect our business and operations, such as worldwide supply chain issues.
Removed
Significant legal actions could subject us to substantial uninsured liabilities. Physicians, hospitals, and other healthcare providers have become subject to an increasing number of legal actions alleging malpractice, product liability, or related legal theories. Many of these actions involve large claims and significant defense costs.
Added
It is not possible to predict the short and long-term implications of military conflicts or wars or geopolitical tensions which could include further sanctions, uncertainty about economic and political stability, increases in inflation rate and energy prices, cyber-attacks, supply chain challenges and adverse effects on currency exchange rates and financial markets.
Removed
See “Legal Proceedings” and Note 21 – Commitments and Contingencies in our audited consolidated financial statements.
Added
If Concentra loses several significant employer customers, payor partners, or relationships with workers’ compensation provider networks and employer services networks, its results may be adversely affected. Concentra has strong and longstanding relationships with major employer customers, payors, workers’ compensation provider networks and third-party employer services networks.
Removed
Our executives and directors, beneficially own, in the aggregate, approximately 19.14% of Holdings’ outstanding common stock as of February 1, 2023.
Added
As employer customers, payor partners and networks make strategic business decisions in response to market conditions, financial pressure, competitive pricing pressures or other reasons, they may choose 35 Table of Contents to discontinue their relationship with us. The loss of several significant employer customers, payor or network relationships could cause a material decline in Concentra’s profitability and operating performance.
Removed
Amounts drawn under our credit facilities bear interest rates at the election of the borrower, in relation to LIBOR or an alternate base rate.
Added
CMS finalized a record increase to the high cost outlier fixed loss amount for LTCH-PPS standard Federal payment rate cases in FY 2024 and, unless there are significant reforms, the fixed loss amount will likely increase again in FY 2025, which will result in fewer cases qualifying for high cost outlier payments and often lower payments for the cases that do qualify.
Removed
On March 5, 2021, the Financial Conduct Authority (“FCA”) in the U.K. announced that all LIBOR settings will either cease to be provided or no longer be representative (i) immediately after December 31, 2021, in the case of the one-week and two-month USD LIBOR terms and all sterling, euro, Swiss franc and Japanese yen settings, and (ii) immediately after June 30, 2023, in the case of the one-, three-, six-, and 12-month USD LIBOR terms.
Added
Under the LTCH-PPS, CMS makes additional payments to LTCHs for high cost outlier cases that have extraordinarily high costs relative to the costs of most discharges. Each year, CMS sets a fixed loss amount that represents the maximum loss an LTCH will incur for a case before qualifying for a high cost outlier payment.
Removed
At this time, no consensus exists as to what rate or rates will become accepted alternatives to LIBOR, although the U.S. Federal Reserve, in connection with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, recommended replacing LIBOR with alternative reference rates based on the Secured Overnight Financing Rate.
Added
For each case, CMS determines the high cost outlier threshold, which is an amount equal to the LTCH-PPS adjusted Federal payment for the case, plus the fixed loss amount. Payments for qualifying high cost outlier cases are based on 80% of the estimated cost of the case above the high cost outlier threshold.
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Item 2. Properties
Properties — owned and leased real estate
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Item 2. Properties
Properties — owned and leased real estate
5 edited+0 added−0 removed0 unchanged
2022 filing
2023 filing
Item 2. Properties. We currently lease most of our consolidated facilities, including critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, occupational health centers, and our corporate headquarters. We own 23 of our critical illness recovery hospitals, nine of our rehabilitation hospitals, one of our outpatient rehabilitation clinics, and nine of our Concentra occupational health centers throughout the United States.
Item 2. Properties. We currently lease most of our consolidated facilities, including critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, occupational health centers, and our corporate headquarters. We own 21 of our critical illness recovery hospitals, nine of our rehabilitation hospitals, one of our outpatient rehabilitation clinics, and nine of our Concentra occupational health centers throughout the United States.
As of December 31, 2022, our corporate headquarters is approximately 292,173 square feet and is located in Mechanicsburg, Pennsylvania.
As of December 31, 2023, our corporate headquarters is approximately 292,173 square feet and is located in Mechanicsburg, Pennsylvania.
As of December 31, 2022, we leased 80 of our critical illness recovery hospitals, 11 of our rehabilitation hospitals, 1,621 of our outpatient rehabilitation clinics, and 531 of our Concentra occupational health centers. We lease our corporate headquarters from companies owned by a related party affiliated with us through common ownership or management.
As of December 31, 2023, we leased 86 of our critical illness recovery hospitals, 12 of our rehabilitation hospitals, 1,632 of our outpatient rehabilitation clinics, and 535 of our Concentra occupational health centers. We lease our corporate headquarters from companies owned by a related party affiliated with us through common ownership or management.
(2) Our Concentra segment also had operations in New York and the District of Columbia.
(2) Our Concentra segment also had operations in New York.
The following is a list by state of the number of facilities we operated as of December 31, 2022. 46 Table of Contents Critical Illness Recovery Hospitals (1) Rehabilitation Hospitals (1) Outpatient Rehabilitation Clinics (1) Concentra Occupational Health Centers (2) Total Facilities Alabama 1 — 26 — 27 Alaska — — 12 1 13 Arizona 3 4 62 16 85 Arkansas 2 — 1 2 5 California 1 1 97 101 200 Colorado — — 50 26 76 Connecticut — — 63 10 73 Delaware 1 — 12 1 14 District of Columbia — — 5 — 5 Florida 12 2 129 31 174 Georgia 4 1 71 15 91 Hawaii — — — 1 1 Illinois — — 80 17 97 Indiana 3 — 35 14 52 Iowa 2 — 27 3 32 Kansas 2 — 15 4 21 Kentucky 2 — 71 8 81 Louisiana — 2 2 3 7 Maine — — 35 7 42 Maryland — — 68 12 80 Massachusetts — — 23 2 25 Michigan 10 — 41 18 69 Minnesota 1 — 28 6 35 Mississippi 4 — 1 — 5 Missouri 3 3 104 15 125 Nebraska 1 — 2 3 6 Nevada — 1 20 8 29 New Hampshire — — 5 3 8 New Jersey 3 4 169 24 200 New Mexico — — — 4 4 North Carolina 2 — 43 8 53 Ohio 15 5 109 17 146 Oklahoma 2 — 30 8 40 Oregon — — 4 4 8 Pennsylvania 9 2 225 32 268 Rhode Island — — — 2 2 South Carolina 2 — 25 5 32 South Dakota 1 — — — 1 Tennessee 6 — 21 9 36 Texas 3 5 145 53 206 Utah — — — 6 6 Vermont — — — 2 2 Virginia 1 1 44 8 54 Washington — — 14 16 30 West Virginia 4 — 6 — 10 Wisconsin 3 — 8 15 26 Total Company 103 31 1,928 540 2,602 _______________________________________________________________________________ (1) Includes managed critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics, respectively.
The following is a list by state of the number of facilities we operated as of December 31, 2023. 50 Table of Contents Critical Illness Recovery Hospitals (1) Rehabilitation Hospitals (1) Outpatient Rehabilitation Clinics (1) Concentra Occupational Health Centers (2) Total Facilities Alabama 1 — 21 — 22 Alaska — — 14 1 15 Arizona 4 4 61 16 85 Arkansas 2 — 1 2 5 California 1 1 100 101 203 Colorado — — 49 26 75 Connecticut — — 62 10 72 Delaware 1 — 12 3 16 District of Columbia — — 4 — 4 Florida 12 2 127 31 172 Georgia 4 1 70 15 90 Hawaii — — — 1 1 Illinois — — 84 17 101 Indiana 3 1 39 14 57 Iowa 2 — 26 3 31 Kansas 2 — 15 4 21 Kentucky 2 — 71 8 81 Louisiana — 2 2 3 7 Maine — — 35 7 42 Maryland — — 62 13 75 Massachusetts — — 22 2 24 Michigan 10 — 39 19 68 Minnesota 1 — 28 6 35 Mississippi 4 — 1 — 5 Missouri 3 3 108 15 129 Nebraska 1 — 2 3 6 Nevada — 1 20 7 28 New Hampshire — — 7 3 10 New Jersey 3 4 170 24 201 New Mexico — — — 4 4 North Carolina 2 — 45 8 55 Ohio 15 6 108 18 147 Oklahoma 2 — 30 8 40 Oregon — — 4 4 8 Pennsylvania 9 2 224 32 267 Rhode Island — — — 2 2 South Carolina 2 — 25 5 32 South Dakota 1 — — — 1 Tennessee 7 — 21 9 37 Texas 3 5 152 53 213 Utah — — — 6 6 Vermont — — — 2 2 Virginia 3 1 45 9 58 Washington — — 14 16 30 West Virginia 4 — 6 — 10 Wisconsin 3 — 7 14 24 Total Company 107 33 1,933 544 2,617 _______________________________________________________________________________ (1) Includes managed critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics, respectively.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
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2023 filing
Item 3. Legal Proceedings. Refer to the “Litigation” section contained within Note 21 – Commitments and Contingencies of the notes to our consolidated financial statements included herein. 47 Table of Contents Item 4. Mine Safety Disclosures. None. 48 Table of Contents PART II
Item 3. Legal Proceedings. Refer to the “Litigation” section contained within Note 20 – Commitments and Contingencies of the notes to our consolidated financial statements included herein. 51 Table of Contents Item 4. Mine Safety Disclosures. None. 52 Table of Contents PART II
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
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Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
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2022 filing
2023 filing
On August 16, 2022, Congress passed the Inflation Reduction Act of 2022, which enacted a 1% excise tax on stock repurchases that exceed $1.0 million, effective January 1, 2023. The following table provides information regarding repurchases of our common stock during the three months ended December 31, 2022.
On August 16, 2022, Congress passed the Inflation Reduction Act of 2022, which enacted a 1% excise tax on stock repurchases that exceed $1.0 million, effective January 1, 2023. The following table provides information regarding repurchases of our common stock during the three months ended December 31, 2023.
The program will remain in effect until December 31, 2023, unless further extended or earlier terminated by the board of directors. Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate.
The program will remain in effect until December 31, 2025, unless further extended or earlier terminated by the Board of Directors. Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate.
As of that date, there were 131 registered holders of record. This does not reflect beneficial stockholders who hold their stock in nominee or “street” name through brokerage firms.
As of that date, there were 133 registered holders of record. This does not reflect beneficial stockholders who hold their stock in nominee or “street” name through brokerage firms.
Securities Authorized For Issuance Under Equity Compensation Plans For information regarding securities authorized for issuance under equity compensation plans, see Part III “Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” 49 Table of Contents Stock Performance Graph The graph below compares the cumulative total stockholder return on $100 invested at the close of the market on December 31, 2017, with dividends being reinvested on the date paid through and including the market close on December 31, 2022 with the cumulative total return of the same time period on the same amount invested in the Standard & Poor’s 500 Index (S&P 500) and the S&P Health Care Services Select Industry Index (SPSIHP).
Securities Authorized For Issuance Under Equity Compensation Plans For information regarding securities authorized for issuance under equity compensation plans, see Part III “Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” 53 Table of Contents Stock Performance Graph The graph below compares the cumulative total stockholder return on $100 invested at the close of the market on December 31, 2018, with dividends being reinvested on the date paid through and including the market close on December 31, 2023, with the cumulative total return of the same time period on the same amount invested in the Standard & Poor’s 500 Index (S&P 500) and the S&P Health Care Services Select Industry Index (SPSIHP).
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Select Medical Holdings Corporation common stock is quoted on the New York Stock Exchange under the symbol “SEM.” Holders At the close of business on February 1, 2023, Holdings had 127,173,871 shares of common stock issued and outstanding.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Select Medical Holdings Corporation common stock is quoted on the New York Stock Exchange under the symbol “SEM.” Holders At the close of business on February 1, 2024, Holdings had 128,361,492 shares of common stock issued and outstanding.
Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs October 1 – October 31, 2022 (1) 74,543 $ 25.68 — $ 399,677,961 November 1 – November 31, 2022 — — — 399,677,961 December 1 – December 31, 2022 — — — 399,677,961 Total 74,543 $ 25.68 — $ 399,677,961 _______________________________________________________________________________ (1) The shares purchased represent common stock surrendered to us to satisfy tax withholding obligations associated with the vesting of restricted shares issued to employees, pursuant to the provisions of our equity incentive plans. 51 Table of Contents Item 6. [Reserved] 52 Table of Contents
Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs October 1 – October 31, 2023 (1) 73,673 $ 22.61 — $ 399,677,961 November 1 – November 31, 2023 (1) 1,940 22.56 — 399,677,961 December 1 – December 31, 2023 — — — 399,677,961 Total 75,613 $ 22.61 — $ 399,677,961 _______________________________________________________________________________ (1) The shares purchased represent common stock surrendered to us to satisfy tax withholding obligations associated with the vesting of restricted shares issued to employees, pursuant to the provisions of our equity incentive plans. 55 Table of Contents Item 6. [Reserved] 56 Table of Contents
Dividend Policy Holdings’ board of directors declared the following dividends during the year ended December 31, 2022: Declaration Date Record Date Payment Date Dividend Per Share Amount (in thousands) February 17, 2022 March 4, 2022 March 16, 2022 $ 0.125 $ 16,691 May 5, 2022 May 19, 2022 June 1, 2022 $ 0.125 $ 16,108 August 2, 2022 August 16, 2022 September 2, 2022 $ 0.125 $ 15,893 November 2, 2022 November 16, 2022 November 29, 2022 $ 0.125 $ 15,897 There is no assurance that future dividends will be declared.
Dividend Policy Holdings’ Board of Directors declared the following dividends during the year ended December 31, 2023: Declaration Date Record Date Payment Date Dividend Per Share Amount (in thousands) February 16, 2023 March 3, 2023 March 15, 2023 $ 0.125 $ 15,897 May 3, 2023 May 18, 2023 May 31, 2023 $ 0.125 $ 15,924 August 2, 2023 August 15, 2023 September 1, 2023 $ 0.125 $ 16,035 November 2, 2023 November 15, 2023 November 28, 2023 $ 0.125 $ 16,048 There is no assurance that future dividends will be declared.
The chart below the graph sets forth the actual numbers depicted on the graph. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Select Medical Holdings Corporation (SEM) $ 100.00 $ 86.97 $ 132.24 $ 156.71 $ 168.44 $ 145.19 S&P Health Care Services Select Industry Index (SPSIHP) $ 100.00 $ 102.35 $ 121.19 $ 161.19 $ 176.41 $ 141.01 S&P 500 $ 100.00 $ 93.76 $ 120.84 $ 140.49 $ 178.27 $ 143.61 50 Table of Contents Purchases of Equity Securities by the Issuer Holdings’ board of directors authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock.
The chart below the graph sets forth the actual numbers depicted on the graph. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Select Medical Holdings Corporation (SEM) $ 100.00 $ 152.05 $ 180.20 $ 193.68 $ 166.94 $ 161.08 S&P Health Care Services Select Industry Index (SPSIHP) $ 100.00 $ 118.40 $ 157.48 $ 172.35 $ 137.77 $ 144.10 S&P 500 $ 100.00 $ 128.88 $ 149.83 $ 190.13 $ 153.16 $ 190.27 54 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers Holdings’ Board of Directors authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
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Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
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2022 filing
2023 filing
Fiscal Year 2023 . On August 10, 2022, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2023 (affecting discharges and cost reporting periods beginning on or after October 1, 2022, through September 30, 2023). Certain errors in the final rule were corrected in documents published November 4, 2022, and December 13, 2022.
On August 10, 2022, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2023 (affecting discharges and cost reporting periods beginning on or after October 1, 2022, through September 30, 2023). Certain errors in the final rule were corrected in documents published November 4, 2022, and December 13, 2022.
Insurance Risk Programs Under a number of our insurance programs, which include our employee health insurance, workers’ compensation, and professional malpractice liability insurance programs, we are liable for a portion of our losses before we can attempt to recover from the applicable insurance carrier.
Insurance Risk Programs Under a number of our insurance programs, which include our employee health insurance, workers’ compensation, and professional malpractice liability, we are liable for a portion of our losses before we can attempt to recover from the applicable insurance carrier.
The principal uses of cash were $195.5 million for repurchases of common stock, $64.6 million of dividend payments to common stockholders, and $43.1 million for distributions to and purchases of non-controlling interests. We had net borrowings of $285.0 million under our revolving facility. Financing activities used $647.4 million of cash flows for the year ended December 31, 2021.
The principal use of cash were $195.5 million for repurchases of common stock, $64.6 million of dividend payments to common stockholders, and $43.1 million for distributions to and purchases of non-controlling interests. We had net borrowings of $285.0 million under our revolving facility. Financing activities used $647.4 million of cash flows for the year ended December 31, 2021.
LTCHs are exempt from the greater-than-25-day average length of stay requirement for all cost reporting periods that include the COVID-19 public health emergency period. Hospitals seeking LTCH classification can exclude patient stays from the greater-than-25-day average length of stay requirement where the patient was admitted or discharged to meet the demands of the COVID-19 public health emergency. iii.
LTCHs are exempt from the greater-than-25-day average length of stay requirement for all cost reporting periods that include the COVID-19 public health emergency period. Hospitals seeking LTCH classification could exclude patient stays from the greater-than-25-day average length of stay requirement where the patient was admitted or discharged to meet the demands of the COVID-19 public health emergency. iii.
The common stock repurchase program will remain in effect until December 31, 2023, unless further extended or earlier terminated by the board of directors. Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate.
The common stock repurchase program will remain in effect until December 31, 2025, unless further extended or earlier terminated by the Board of Directors. Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
On the last day of each calendar quarter, Select is required to pay each lender a commitment fee in respect of any unused commitments under the revolving facility, which is currently 0.50% per annum and subject to adjustment based on Select’s leverage ratio, as specified in the credit agreement.
Each calendar quarter, Select is required to pay each lender a commitment fee in respect of any unused commitments under the revolving facility, which is currently 0.50% per annum and subject to adjustment based on Select’s leverage ratio, as specified in the credit agreement.
In addition to our development activities, we may grow through opportunistic acquisitions. 74 Table of Contents Liquidity We believe our internally generated cash flows and borrowing capacity under our revolving facility will allow us to finance our operations in both the short and long term.
In addition to our development activities, we may grow through opportunistic acquisitions. 75 Table of Contents Liquidity We believe our internally generated cash flows and borrowing capacity under our revolving facility will allow us to finance our operations in both the short and long term.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read this discussion together with the consolidated financial statements and accompanying notes included elsewhere herein. This section of this 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read this discussion together with the consolidated financial statements and accompanying notes included elsewhere herein. This section of this 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Overview We began operations in 1997 and, based on number of facilities, are one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States. As of December 31, 2022, we had operations in 46 states and the District of Columbia.
Overview We began operations in 1997 and, based on number of facilities, are one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States. As of December 31, 2023, we had operations in 46 states and the District of Columbia.
Waiver of the IRF 3-hour rule so that IRF services provided during the public health emergency period do not need to meet the coverage requirement that patients receive at least 3 hours of therapy a day or 15 hours of therapy per week. vi.
Waiver of the IRF 3-hour rule so that IRF services provided during the public health emergency period did not need to meet the coverage requirement that patients receive at least 3 hours of therapy a day or 15 hours of therapy per week. vi.
This waiver also allows hospitals to change the status of their current provider-based department locations to meet patient needs as part of the state or local pandemic plan. vii. The HHS Secretary waived sanctions under the physician self-referral law (i.e., Stark law) for certain types of remuneration and referral arrangements that are related to a COVID-19 purpose.
This waiver allowed hospitals to change the status of their current provider-based department locations to meet patient needs as part of the state or local pandemic plan. vii. The HHS Secretary waived sanctions under the physician self-referral law (i.e., Stark law) for certain types of remuneration and referral arrangements that are related to a COVID-19 purpose.
The amounts payable within the next twelve months are recorded in accrued other in the consolidated balance sheet as of December 31, 2022. The remaining amounts are recorded in other non-current liabilities. vi. Other current liabilities recorded in the consolidated balance sheet as of December 31, 2022, such as accounts payable and accrued expenses, which are not specifically identified above.
The amounts payable within the next twelve months are recorded in accrued other in the consolidated balance sheet as of December 31, 2023. The remaining amounts are recorded in other non-current liabilities. vi. Other current liabilities recorded in the consolidated balance sheet as of December 31, 2023, such as accounts payable and accrued expenses, which are not specifically identified above.
Medicare will not require out-of-state physician and non-physician practitioners to be licensed in the state where they are providing services when they are licensed in another state, subject to certain conditions and state or local licensure requirements. v.
Medicare did not require out-of-state physician and non-physician practitioners to be licensed in the state where they are providing services when they are licensed in another state, subject to certain conditions and state or local licensure requirements. v.
In the Health Extenders, Improving Access to Medicare, Medicaid, and CHIP, and Strengthening Public Health Act of 2022, Congress extended several telehealth flexibilities that were scheduled to expire 151 days after the end of the COVID-19 public health emergency, including the expansion of permitted originating sites for telehealth, expansion of eligible practitioners for furnishing telehealth, and coverage of audio-only telehealth services.
In the Health Extenders, Improving Access to Medicare, Medicaid, and CHIP, and Strengthening Public Health Act of 2022, Congress 61 Table of Contents extended several telehealth flexibilities that were scheduled to expire 151 days after the end of the COVID-19 public health emergency, including the expansion of permitted originating sites for telehealth, expansion of eligible practitioners for furnishing telehealth, and coverage of audio-only telehealth services.
IRFs, IRF units, and hospitals and units applying to be classified as IRFs, can exclude patients admitted solely to respond to the emergency from the calculation of the “60 percent rule” thresholds to receive payment as an IRF. ii.
IRFs, IRF units, and hospitals and units applying to be classified as IRFs, could exclude patients admitted solely to respond to the emergency from the calculation of the “60 percent rule” thresholds to receive payment as an IRF. ii.
Our annual assessment did not indicate that goodwill impairment was likely for any of our reporting units. We did not identify any goodwill impairment events during the quarter ended December 31, 2022.
Our annual assessment did not indicate that goodwill impairment was likely for any of our reporting units. We did not identify any goodwill impairment events during the quarter ended December 31, 2023.
We cannot predict our ability to pass along cost increases to our customers. Recent Accounting Pronouncements Refer to Note 1 – Organization and Significant Accounting Policies of the notes to our consolidated financial statements included herein for information regarding recent accounting pronouncements. 75 Table of Contents
We cannot predict our ability to pass along cost increases to our customers. 76 Table of Contents Recent Accounting Pronouncements Refer to Note 1 – Organization and Significant Accounting Policies of the notes to our consolidated financial statements included herein for information regarding recent accounting pronouncements. 77 Table of Contents
Medicare payments to our rehabilitation hospitals are made in accordance with IRF-PPS. Fiscal Year 2021. On August 10, 2020, CMS published the final rule updating policies and payment rates for the IRF-PPS for fiscal year 2021 (affecting discharges and cost reporting periods beginning on or after October 1, 2020 through September 30, 2021).
Medicare payments to our rehabilitation hospitals are made in accordance with IRF-PPS. Fiscal Year 2022. On August 4, 2021, CMS published the final rule updating policies and payment rates for the IRF-PPS for fiscal year 2022 (affecting discharges and cost reporting periods beginning on or after October 1, 2021 through September 30, 2022).
The program is governed by the Social Security Act of 1965 and is administered primarily by the Department of Health and Human Services and CMS. Revenues from providing services to patients covered under the Medicare program represented approximately 25%, 23%, and 23% of our revenue for the years ended December 31, 2020, 2021, and 2022, respectively.
The program is governed by the Social Security Act of 1965 and is administered primarily by the Department of Health and Human Services and CMS. Revenues from providing services to patients covered under the Medicare program represented approximately 23%, 23%, and 22% of our revenue for the years ended December 31, 2021, 2022, and 2023, respectively.
Many requirements under the hospital conditions of participation (“CoPs”) are waived during the emergency period to give hospitals more flexibility in treating COVID-19 patients. vi. Hospitals can operate temporary expansion locations without meeting the provider-based entity requirements or certain requirements in the physical environment CoP for hospitals during the emergency.
Many requirements under the hospital conditions of participation (“CoPs”) were waived during the emergency period to give hospitals more flexibility in treating COVID-19 patients. vi. Hospitals could operate temporary expansion locations without meeting the provider-based entity requirements or certain requirements in the physical environment CoP for hospitals during the emergency.
It provides additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 public health emergency.
It provided additional waivers, reimbursement, grants and other funds to assist health care providers during the COVID-19 public health emergency.
Total assets include certain non-consolidating joint ventures and minority investments in other healthcare related businesses. (2) For the years ended December 31, 2022, 2021, and 2020, we recognized other operating income of $28.8 million, $144.0 million, and $90.0 million, respectively.
Total assets include certain non-consolidating joint ventures and minority investments in other healthcare related businesses. (2) For the years ended December 31, 2023, 2022, and 2021, we recognized other operating income of $1.8 million, $28.8 million, and $144.0 million, respectively.
Medicare payments to our critical illness recovery hospitals are made in accordance with LTCH-PPS. Fiscal Year 2021. On September 18, 2020, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2021 (affecting discharges and cost reporting periods beginning on or after October 1, 2020 through September 30, 2021).
Medicare payments to our critical illness recovery hospitals are made in accordance with LTCH-PPS. Fiscal Year 2022. On August 13, 2021, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2022 (affecting discharges and cost reporting periods beginning on or after October 1, 2021, through September 30, 2022).
Interest payments on principal not subject to the provisions of the interest rate cap agreement were calculated using a rate of 6.2%. Our interest rate cap contract is discussed further in Item 7A. “ Quantitative and Qualitative Disclosures about Market Risk .” iii.
Interest payments on principal not subject to the provisions of the interest rate cap agreement were calculated using a rate of 8.3%. Our interest rate cap contract is discussed further in Item 7A. “ Quantitative and Qualitative Disclosures about Market Risk .” iii.
The second waives application of the site neutral payment rate so that all LTCH cases admitted during the emergency period will be paid the LTCH-PPS standard federal rate. 59 Table of Contents v.
The second waives application of the site neutral payment rate so that all LTCH cases admitted during the emergency period will be paid the LTCH-PPS standard federal rate. v.
Under this authority, CMS issued a number of blanket waivers that excuse health care providers or suppliers from specific program requirements. The following blanket waivers, while in effect, may impact our results of operations: i.
Under this authority, CMS issued a number of blanket waivers that excuse health care providers or suppliers from specific program requirements. The following blanket waivers, while in effect, impacted our operations: i.
Broader waiver authority for HHS under section 1135 of the Social Security Act to issue additional telehealth waivers. The CARES Act also provides for a 20% increase in the payment weight for Medicare payments to hospitals paid under the IPPS for treating COVID-19 patients.
Broader waiver authority for HHS under section 1135 of the Social Security Act to issue additional telehealth waivers. 62 Table of Contents The CARES Act also provided for a 20% increase in the payment weight for Medicare payments to hospitals paid under the IPPS for treating COVID-19 patients.
Debt payments, including finance lease payments – Our expected principal payments total $3,878.2 million, with $44.4 million payable within the next twelve months. We intend to refinance our long-term indebtedness before it matures. Refer to Note 11 – Long-Term Debt and Notes Payable of the notes to our consolidated financial statements included herein for additional information. ii.
Debt payments, including finance lease payments – Our expected principal payments total $3,665.7 million, with $70.3 million payable within the next twelve months. We intend to refinance our long-term indebtedness before it matures. Refer to Note 11 – Long-Term Debt and Notes Payable of the notes to our consolidated financial statements included herein for additional information. ii.
As of December 31, 2022, Select’s leverage ratio (its ratio of total indebtedness to consolidated EBITDA for the prior four consecutive fiscal quarters), which is required to be maintained at less than 7.00 to 1.00 under the terms of the revolving facility, was 5.96 to 1.00.
As of December 31, 2023, Select’s leverage ratio (its ratio of total indebtedness to consolidated EBITDA for the prior four consecutive fiscal quarters), which is required to be maintained at less than 7.00 to 1.00 under the terms of the revolving facility, was 4.54 to 1.00.
We also recorded insurance proceeds receivable of $14.5 million and $13.1 million at December 31, 2021 and 2022, respectively, for liabilities which exceed our deductibles and self-insured retention limits and are recoverable through our insurance policies. 63 Table of Contents Goodwill We operate four reporting units which include the critical illness recovery hospital reporting unit, the rehabilitation hospital reporting unit, the outpatient rehabilitation reporting unit, and the Concentra reporting unit.
We also recorded insurance proceeds receivable of $13.1 million and $11.6 million at December 31, 2022 and 2023, respectively, for liabilities which exceed our deductibles and self-insured retention limits and are recoverable through our insurance policies. 65 Table of Contents Goodwill We operate four reporting units which include the critical illness recovery hospital reporting unit, the rehabilitation hospital reporting unit, the outpatient rehabilitation reporting unit, and the Concentra reporting unit.
We monitor these programs quarterly and revise our estimates as necessary to take into account additional information. We recorded a liability of $173.5 million and $192.3 million for our estimated losses under these insurance programs at December 31, 2021 and 2022, respectively.
We monitor these programs quarterly and revise our estimates as necessary to take into account additional information. We recorded a liability of $192.3 million and $179.1 million for our estimated losses under these insurance programs at December 31, 2022 and 2023, respectively.
At December 31, 2022, Select had $1,225.0 million of 6.250% senior notes outstanding (excluding unamortized premium and debt issuance costs of $10.6 million).
At December 31, 2023, Select had $1,225.0 million of 6.250% senior notes outstanding (excluding unamortized premium and debt issuance costs of $7.6 million).
The standard federal rate also includes an area wage budget neutrality factor of 1.0004304. As a result of the CARES Act, all LTCH cases are paid at the standard federal rate during the public health emergency.
The standard federal rate also included an area wage budget neutrality factor of 1.0004304. As a result of the CARES Act, LTCH cases were paid at the standard federal rate during the public health emergency.
The standard federal rate for fiscal year 2023 is $46,433, an increase from the standard federal rate applicable during fiscal year 2022 of $44,714. The update to the standard federal rate for fiscal year 2023 includes a market basket increase of 4.1%, less a productivity adjustment of 0.3%.
The standard federal rate for fiscal year 2023 was set at $46,433, an increase from the standard federal rate applicable during fiscal year 2022 of $44,714. The update to the standard federal rate for fiscal year 2023 included a market basket increase of 4.1%, less a productivity adjustment of 0.3%.
Operating lease payments – Our expected operating lease payments total $1,636.8 million, with $299.6 million payable within the next twelve months. Refer to Note 6 – Leases of the notes to our consolidated financial statements included herein for additional information. iv.
Operating lease payments – Our expected operating lease payments total $1,670.1 million, with $313.2 million payable within the next twelve months. Refer to Note 6 – Leases of the notes to our consolidated financial statements included herein for additional information. iv.
Purchase, construction, and other commitments – Our expected payments related to purchase, construction, and other obligations total $289.6 million, with $106.6 million payable within the next twelve months. Our purchase obligations primarily relate to software licensing and support agreements which specify all significant contractual terms and are legally binding and enforceable.
Purchase, construction, and other commitments – Our expected payments related to purchase, construction, and other obligations total $225.7 million, with $120.2 million payable within the next twelve months. Our purchase obligations primarily relate to software licensing and support agreements which specify all significant contractual terms and are legally binding and enforceable.
Of this total, we earned approximately 35% of our revenue from our critical illness recovery hospital segment, approximately 14% from our rehabilitation hospital segment, approximately 18% from our outpatient rehabilitation segment, and approximately 27% from our Concentra segment.
Of this total, we earned approximately 35% of our revenue from our critical illness recovery hospital segment, approximately 15% from our rehabilitation hospital segment, approximately 18% from our outpatient rehabilitation segment, and approximately 28% from our Concentra segment.
We have recorded total goodwill of $3.5 billion at December 31, 2022, of which $1.2 billion related to our critical illness recovery hospital reporting unit, $442.2 million related to our rehabilitation hospital reporting unit, $665.0 million related to our outpatient rehabilitation reporting unit, and $1.2 billion related to the Concentra reporting unit. 64 Table of Contents Operating Statistics The following table sets forth operating statistics for each of our segments for the periods presented.
We have recorded total goodwill of $3.5 billion at December 31, 2023, of which $1.2 billion related to our critical illness recovery hospital reporting unit, $458.3 million related to our rehabilitation hospital reporting unit, $667.3 million related to our outpatient rehabilitation reporting unit, and $1.2 billion related to the Concentra reporting unit. 66 Table of Contents Operating Statistics The following table sets forth operating statistics for each of our segments for the periods presented.
The impact of this income on the operating results of our segments and other activities is outlined within the tables presented under “ Summary Financial Results. ” N/M Not meaningful. 68 Table of Contents Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 For the year ended December 31, 2022, we had revenue of $6,333.5 million and income from operations of $403.3 million, as compared to revenue of $6,204.5 million and income from operations of $713.8 million for the year ended December 31, 2021.
The impact of this income on the operating results of our segments and other activities is outlined within the tables presented under “ Summary Financial Results. ” N/M Not meaningful. 70 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 For the year ended December 31, 2023, we had revenue of $6,664.1 million and income from operations of $554.9 million, as compared to revenue of $6,333.5 million and income from operations of $403.3 million for the year ended December 31, 2022.
The fixed-loss amount for high cost outlier cases paid under LTCH-PPS was set at $33,015, an increase from the fixed-loss amount in the 2021 fiscal year of $27,195. The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $30,988, an increase from the fixed-loss amount in the 2021 fiscal year of $29,064.
The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $30,988, an increase from the fixed-loss amount in the 2021 fiscal year of $29,064. Fiscal Year 2023 .
Interest payments for the revolving facility were calculated using 6.4%, the interest rate in effect at December 31, 2022. Interest payments on the portion of the term loan which is subject to the provisions of our interest rate cap agreement were calculated using a rate of 3.6%.
Interest payments for the revolving facility were calculated using 8.1%, the interest rate in effect at December 31, 2023. Interest payments on the portion of the term loan which is subject to the provisions of our interest rate cap agreement were calculated using a rate of 4.2%.
Our reportable segments include the critical illness recovery hospital segment, the rehabilitation hospital segment, the outpatient rehabilitation segment, and the Concentra segment. We had revenue of $6,333.5 million for the year ended December 31, 2022.
Our reportable segments include the critical illness recovery hospital segment, the rehabilitation hospital segment, the outpatient rehabilitation segment, and the Concentra segment. We had revenue of $6,664.1 million for the year ended December 31, 2023.
In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the PTA provides skilled therapy alongside the physical therapist, the CQ modifier is not required.
Modifiers to Identify Services of Physical Therapy Assistants or Occupational Therapy Assistants In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the PTA provides skilled therapy alongside the physical therapist, the CQ modifier is not required.
Interest payments – Our expected interest payments on the 6.250% senior notes, term loan, and revolving facility total $502.7 million, with $183.4 million payable within the next twelve months. Interest payments for the 6.250% senior notes were calculated using the stated interest rate.
Interest payments – Our expected interest payments on the 6.250% senior notes, term loan, and revolving facility total $756.3 million, with $210.6 million payable within the next twelve months. Interest payments for the 6.250% senior notes were calculated using the stated interest rate.
CMS increased the outlier threshold amount for fiscal year 2023 to $12,526 from $9,491 established in the final rule for fiscal year 2022. Medicare Reimbursement of Outpatient Rehabilitation Clinic Services The Medicare program reimburses outpatient rehabilitation providers based on the MPFS.
CMS decreased the outlier threshold amount for fiscal year 2024 to $10,423 from $12,526 established in the final rule for fiscal year 2023. Medicare Reimbursement of Outpatient Rehabilitation Clinic Services The Medicare program reimburses outpatient rehabilitation providers based on the MPFS.
Our construction commitments are described further in Note 21 – Commitments and Contingencies. v. Insurance liabilities – Our expected payments related to our insurance liabilities, including those for workers’ compensation and professional malpractice liabilities, total $192.3 million, with $88.3 million payable within the next twelve months.
Our construction commitments are described further in Note 20 – Commitments and Contingencies. v. Insurance liabilities – Our expected payments related to our insurance liabilities, including those for workers’ compensation and professional malpractice liabilities, total $179.1 million, with $73.7 million payable within the next twelve months.
If any one of the above assumptions or judgments used to estimate the fair value of our reporting units fail to materialize, the resulting decline in our estimated fair value could result in an impairment charge to the goodwill associated with any one of the reporting units.
If any one of the above assumptions or judgments used to estimate the fair value of the reporting unit fails to materialize, the resulting decline in our estimated fair value could result in an impairment charge to the goodwill associated with the critical illness recovery hospital reporting unit.
Our cost of services, a major component of which is labor expense, was $5,600.2 million, or 88.4% of revenue, for the year ended December 31, 2022, compared to $5,285.1 million, or 85.2% of revenue, for the year ended December 31, 2021.
Our cost of services, a major component of which is labor expense, was $5,732.0 million, or 86.0% of revenue, for the year ended December 31, 2023, compared to $5,600.2 million, or 88.4% of revenue, for the year ended December 31, 2022.
The cash outflows were offset in part by proceeds received from the sale of assets and business of $26.8 million. For the year ended December 31, 2020, the principal uses of cash were $146.4 million for purchases of property and equipment and $52.2 million for investments in and acquisitions of businesses.
For the year ended December 31, 2022, the principal uses of cash were $190.4 million for purchases of property and equipment and $44.3 million for investments in and acquisitions of businesses. The cash outflows were offset in part by proceeds received from the sale of assets and business of $8.3 million.
CMS recouped $83.8 million and $241.2 million of these payments during the years ended December 31, 2022 and 2021, respectively. During the years ended December 31, 2022, 2021, and 2020, we received $23.8 million, $43.1 million, and $172.6 million of payments under the Provider Relief Fund.
During the years ended December 31, 2022 and 2021, respectively, CMS recouped $83.8 million and $241.2 million of advance payments under the Accelerated and Advance Payment Program. During the years ended December 31, 2022 and 2021, we received $23.8 million and $43.1 million of payments under the Provider Relief Fund.
For the year ended December 31, 2022, Adjusted EBITDA was $646.9 million, with an Adjusted EBITDA margin of 10.2%, as compared to Adjusted EBITDA of $947.4 million and an Adjusted EBITDA margin of 15.3% in the prior year.
For the year ended December 31, 2023, Adjusted EBITDA was $807.4 million, with an Adjusted EBITDA margin of 12.1%, as compared to Adjusted EBITDA of $646.9 million and an Adjusted EBITDA margin of 10.2% in the prior year.
Income from Operations For the year ended December 31, 2022, we had income from operations of $403.3 million, compared to $713.8 million for the year ended December 31, 2021.
Income from Operations For the year ended December 31, 2023, we had income from operations of $554.9 million, compared to $403.3 million for the year ended December 31, 2022.
For the Year Ended December 31, 2020 2021 2022 Critical illness recovery hospital data: Number of consolidated hospitals—start of period (1) 100 99 104 Number of hospitals acquired 1 6 2 Number of hospital start-ups — — 1 Number of hospitals closed/sold (2) (1) (4) Number of consolidated hospitals—end of period (1) 99 104 103 Available licensed beds (3) 4,362 4,518 4,386 Admissions (3)(4) 37,456 37,921 36,594 Patient days (3)(5) 1,111,756 1,133,039 1,127,911 Average length of stay (days) (3)(6) 30 30 31 Revenue per patient day (3)(7) $ 1,858 $ 1,972 $ 1,973 Occupancy rate (3)(8) 71 % 71 % 69 % Percent patient days—Medicare (3)(9) 45 % 38 % 39 % Rehabilitation hospital data: Number of consolidated hospitals—start of period (1) 19 19 20 Number of hospitals acquired 1 1 — Number of hospital start-ups — — — Number of hospitals closed/sold (1) — — Number of consolidated hospitals—end of period (1) 19 20 20 Number of unconsolidated hospitals managed—end of period (2) 11 10 11 Total number of hospitals (all)—end of period 30 30 31 Available licensed beds (3) 1,311 1,361 1,391 Admissions (3)(4) 25,081 28,868 29,736 Patient days (3)(5) 370,833 414,701 430,547 Average length of stay (days) (3)(6) 15 14 15 Revenue per patient day (3)(7) $ 1,793 $ 1,868 $ 1,953 Occupancy rate (3)(8) 78 % 83 % 85 % Percent patient days—Medicare (3)(9) 48 % 49 % 48 % Outpatient rehabilitation data: Number of consolidated clinics—start of period 1,461 1,503 1,572 Number of clinics acquired 17 33 30 Number of clinic start-ups 55 53 44 Number of clinics closed/sold (30) (17) (24) Number of consolidated clinics—end of period 1,503 1,572 1,622 Number of unconsolidated clinics managed—end of period 285 309 306 Total number of clinics (all)—end of period 1,788 1,881 1,928 Number of visits (3)(10) 7,593,344 9,193,624 9,573,980 Revenue per visit (3)(11) $ 104 $ 102 $ 103 65 Table of Contents For the Year Ended December 31, 2020 2021 2022 Concentra data: Number of consolidated centers—start of period 521 517 518 Number of centers acquired 6 6 21 Number of center start-ups 1 2 4 Number of centers closed/sold (11) (7) (3) Number of consolidated centers—end of period 517 518 540 Number of onsite clinics operated—end of period 134 134 147 Number of visits (3)(10) 10,627,904 12,052,724 12,579,468 Revenue per visit (3)(11) $ 123 $ 125 $ 127 _______________________________________________________________________________ (1) Represents the number of hospitals included in our consolidated financial results at the end of each period presented.
For the Year Ended December 31, 2021 2022 2023 Critical illness recovery hospital data: Number of consolidated hospitals—start of period (1) 99 104 103 Number of hospitals acquired 6 2 2 Number of hospital start-ups — 1 4 Number of hospitals closed/sold (1) (4) (2) Number of consolidated hospitals—end of period (1) 104 103 107 Available licensed beds (3) 4,518 4,386 4,538 Admissions (3)(4) 37,921 36,594 36,225 Patient days (3)(5) 1,133,039 1,127,911 1,108,492 Average length of stay (days) (3)(6) 30 31 31 Revenue per patient day (3)(7) $ 1,972 $ 1,973 $ 2,067 Occupancy rate (3)(8) 71 % 69 % 68 % Percent patient days—Medicare (3)(9) 38 % 39 % 38 % Rehabilitation hospital data: Number of consolidated hospitals—start of period (1) 19 20 20 Number of hospitals acquired 1 — 1 Number of hospital start-ups — — — Number of hospitals closed/sold — — — Number of consolidated hospitals—end of period (1) 20 20 21 Number of unconsolidated hospitals managed—end of period (2) 10 11 12 Total number of hospitals (all)—end of period 30 31 33 Available licensed beds (3) 1,361 1,391 1,479 Admissions (3)(4) 28,868 29,736 31,627 Patient days (3)(5) 414,701 430,547 446,145 Average length of stay (days) (3)(6) 14 15 14 Revenue per patient day (3)(7) $ 1,868 $ 1,953 $ 2,017 Occupancy rate (3)(8) 83 % 85 % 85 % Percent patient days—Medicare (3)(9) 49 % 48 % 49 % Outpatient rehabilitation data: Number of consolidated clinics—start of period 1,503 1,572 1,622 Number of clinics acquired 33 30 16 Number of clinic start-ups 53 44 37 Number of clinics closed/sold (17) (24) (42) Number of consolidated clinics—end of period 1,572 1,622 1,633 Number of unconsolidated clinics managed—end of period 309 306 300 Total number of clinics (all)—end of period 1,881 1,928 1,933 Number of visits (3)(10) 9,193,624 9,573,980 10,657,558 Revenue per visit (3)(11) $ 102 $ 103 $ 100 67 Table of Contents For the Year Ended December 31, 2021 2022 2023 Concentra data: Number of consolidated centers—start of period 517 518 540 Number of centers acquired 6 21 4 Number of center start-ups 2 4 3 Number of centers closed/sold (7) (3) (3) Number of consolidated centers—end of period 518 540 544 Number of onsite clinics operated—end of period 134 147 150 Number of visits (3)(10) 12,052,724 12,579,468 12,777,632 Revenue per visit (3)(11) $ 125 $ 127 $ 135 _______________________________________________________________________________ (1) Represents the number of hospitals included in our consolidated financial results at the end of each period presented.
For dates of service on and after January 1, 2022, CMS will pay for physical therapy and occupational therapy services provided by PTAs and OTAs at 85% of the otherwise applicable Part B payment amount. CMS also modified the de minimis standard for calendar year 2022.
For dates of service on and after January 1, 2022, CMS pays for physical therapy and occupational therapy services provided by PTAs and OTAs at 85% of the otherwise applicable Part B payment amount.
Investing activities used $226.3 million, $256.6 million, and $115.4 million of cash flows for the years ended December 31, 2022, 2021, and 2020, respectively. For the year ended December 31, 2022, the principal uses of cash were $190.4 million for purchases of property and equipment and $44.3 million for investments in and acquisitions of businesses.
Investing activities used $268.5 million, $226.3 million, and $256.6 million of cash flows for the years ended December 31, 2023, 2022, and 2021, respectively. For the year ended December 31, 2023, the principal uses of cash were $229.2 million for purchases of property and equipment, and other assets, and $39.4 million for investments in and acquisitions of businesses.
At December 31, 2022, Select had outstanding borrowings under its credit facilities consisting of a $2,103.4 million term loan (excluding unamortized original issue discounts and debt issuance costs of $9.1 million).
At December 31, 2023, Select had outstanding borrowings under its credit facilities consisting of a $2,092.5 million term loan (excluding unamortized original issue discounts and debt issuance costs of $15.3 million).
Specifically, CMS will allow a timed service to be billed without the CQ or CO modifier when a PTA or OTA participates in providing care, but the physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes.
CMS allows a timed service to be billed without the CQ or CO modifier when a PTA or OTA participates in providing care, but the physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes. This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute midpoint.
The one-month LIBOR rate was 4.39% at December 31, 2022 , compared to 0.10% at December 31, 2021 . The one-month LIBOR rate first exceeded 1.0% in June 2022 and the interest rate cap has since mitigated our exposure to increases in the one-month LIBOR rate .
The Term SOFR rate was 5.35% at December 31, 2023 , compared to the one-month LIBOR rate of 4.39% at December 31, 2022 . The one-month LIBOR rate first exceeded 1.0% in June 2022 and the interest rate cap has since mitigated our exposure to increases in the one-month LIBOR and Term SOFR rates on the term loan .
For the Year Ended December 31, 2020 2021 2022 Cash flows provided by operating activities $ 1,028,073 $ 401,228 $ 284,825 Cash flows used in investing activities (115,353) (256,594) (226,339) Cash flows used in financing activities (671,541) (647,385) (34,890) Net increase (decrease) in cash and cash equivalents 241,179 (502,751) 23,596 Cash and cash equivalents at beginning of period 335,882 577,061 74,310 Cash and cash equivalents at end of period $ 577,061 $ 74,310 $ 97,906 Operating activities provided $284.8 million, $401.2 million, and $1,028.1 million of cash flows during the years ended December 31, 2022, 2021, and 2020, respectively.
For the Year Ended December 31, 2021 2022 2023 Cash flows provided by operating activities $ 401,228 $ 284,825 $ 582,058 Cash flows used in investing activities (256,594) (226,339) (268,477) Cash flows used in financing activities (647,385) (34,890) (327,481) Net increase (decrease) in cash and cash equivalents (502,751) 23,596 (13,900) Cash and cash equivalents at beginning of period 577,061 74,310 97,906 Cash and cash equivalents at end of period $ 74,310 $ 97,906 $ 84,006 Operating activities provided $582.1 million, $284.8 million, and $401.2 million of cash flows during the years ended December 31, 2023, 2022, and 2021, respectively.
On August 4, 2021, CMS published the final rule updating policies and payment rates for the IRF-PPS for fiscal year 2022 (affecting discharges and cost reporting periods beginning on or after October 1, 2021 through September 30, 2022).
On August 2, 2023, CMS published the final rule updating policies and payment rates for the IRF-PPS for fiscal year 2024 (affecting discharges and cost reporting periods beginning on or after October 1, 2023, through September 30, 2024). Certain errors in the final rule were corrected in a document published on October 4, 2023.
Adjusted EBITDA increased 7.2% to $198.0 million for the year ended December 31, 2022, compared to $184.7 million for the year ended December 31, 2021. Our Adjusted EBITDA margin for the rehabilitation hospital segment was 21.6% for the year ended December 31, 2022, compared to 21.7% for the year ended December 31, 2021.
Adjusted EBITDA increased 12.0% to $221.9 million for the year ended December 31, 2023, compared to $198.0 million for the year ended December 31, 2022. Our Adjusted EBITDA margin for the rehabilitation hospital segment was 22.6% for the year ended December 31, 2023, compared to 21.6% for the year ended December 31, 2022.
Such repurchases or exchanges, if any, may be funded from operating cash flows or other sources and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Effects of Inflation The healthcare industry is labor intensive and our largest expenses are labor related costs.
Such repurchases or exchanges, if any, may be funded from operating cash flows or other sources and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Adjusted EBITDA Critical Illness Recovery Hospital Segment. Adjusted EBITDA was $111.3 million for the year ended December 31, 2022, compared to $268.0 million for the year ended December 31, 2021. Our Adjusted EBITDA margin for the critical illness recovery hospital segment was 5.0% for the year ended December 31, 2022, compared to 11.9% for the year ended December 31, 2021.
Adjusted EBITDA increased 121.0% to $246.0 million for the year ended December 31, 2023, compared to $111.3 million for the year ended December 31, 2022. Our Adjusted EBITDA margin for the critical illness recovery hospital segment was 10.7% for the year ended December 31, 2023, compared to 5.0% for the year ended December 31, 2022.
As of December 31, 2022, we had cash and cash equivalents of $97.9 million and $148.5 million of availability under our revolving facility, after giving effect to $445.0 million of outstanding borrowings and $56.5 million of outstanding letters of credit. Our material cash requirements from known contractual and other obligations include: i.
As of December 31, 2023, we had cash and cash equivalents of $84.0 million and $434.2 million of availability under our revolving facility, after giving effect to $280.0 million of outstanding borrowings and $55.8 million of outstanding letters of credit. Our material cash requirements from known contractual and other obligations include: i.
We operated 103 critical illness recovery hospitals in 28 states, 31 rehabilitation hospitals in 12 states, 1,928 outpatient rehabilitation clinics in 39 states and the District of Columbia, 540 occupational health centers in 41 states, and 147 onsite clinics at employer worksites as of December 31, 2022.
We operated 107 critical illness recovery hospitals in 28 states, 33 rehabilitation hospitals in 13 states, 1,933 outpatient rehabilitation clinics in 39 states and the District of Columbia, 544 occupational health centers in 41 states, and 150 onsite clinics at employer worksites as of December 31, 2023.
The fixed-loss amount for high cost outlier cases paid under LTCH-PPS is $38,518, an increase from the fixed-loss amount in the 2022 fiscal year of $33,015.
The fixed-loss amount for high cost outlier cases paid under LTCH-PPS was set at $38,518, an increase from the fixed-loss amount in the 2022 fiscal year of $33,015. The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $38,788, an increase from the fixed-loss amount in the 2022 fiscal year of $30,988.
For purposes of this computation for our Concentra segment, patient service revenue does not include onsite clinics or revenues generated from COVID-19 screening and testing services. 66 Table of Contents Results of Operations The following table outlines selected operating data as a percentage of revenue for the periods indicated: For the Year Ended December 31, 2020 2021 2022 Revenue 100.0 % 100.0 % 100.0 % Costs and expenses: Cost of services, exclusive of depreciation and amortization (1) 85.2 85.2 88.4 General and administrative 2.5 2.4 2.4 Depreciation and amortization 3.6 3.2 3.3 Total costs and expenses 91.3 90.8 94.1 Other operating income 1.6 2.3 0.5 Income from operations 10.3 11.5 6.4 Equity in earnings of unconsolidated subsidiaries 0.5 0.7 0.4 Gain on sale of businesses 0.2 0.0 — Interest income — 0.1 — Interest expense (2.7) (2.2) (2.7) Income before income taxes 8.3 10.1 4.1 Income tax expense 2.1 2.0 1.0 Net income 6.2 8.1 3.1 Net income attributable to non-controlling interests 1.5 1.6 0.6 Net income attributable to Select Medical Holdings Corporation 4.7 % 6.5 % 2.5 % _______________________________________________________________________________ (1) Cost of services includes salaries, wages and benefits, operating supplies, lease and rent expense, and other operating costs. 67 Table of Contents The following table summarizes selected financial data by segment for the periods indicated: Year Ended December 31, 2020 2021 2022 % Change 2020 – 2021 % Change 2021 – 2022 (in thousands, except percentages) Revenue: Critical illness recovery hospital $ 2,077,499 $ 2,246,772 $ 2,234,132 8.1 % (0.6) % Rehabilitation hospital 734,673 849,340 916,763 15.6 7.9 Outpatient rehabilitation 919,913 1,084,361 1,125,282 17.9 3.8 Concentra 1,501,434 1,732,041 1,724,359 15.4 (0.4) Other (1) 298,194 292,001 333,002 (2.1) 14.0 Total Company $ 5,531,713 $ 6,204,515 $ 6,333,538 12.2 % 2.1 % Income (loss) from operations: (2) Critical illness recovery hospital $ 290,896 $ 214,899 $ 49,779 (26.1) % (76.8) % Rehabilitation hospital 125,476 157,027 170,220 25.1 8.4 Outpatient rehabilitation 50,155 108,683 69,197 116.7 (36.3) Concentra 162,515 305,264 258,529 87.8 (15.3) Other (1) (61,385) (72,099) (144,442) N/M N/M Total Company $ 567,657 $ 713,774 $ 403,283 25.7 % (43.5) % Adjusted EBITDA: (2) Critical illness recovery hospital $ 342,427 $ 267,993 $ 111,344 (21.7) % (58.5) % Rehabilitation hospital 153,203 184,704 198,034 20.6 7.2 Outpatient rehabilitation 79,164 138,275 101,860 74.7 (26.3) Concentra 252,892 389,616 334,337 54.1 (14.2) Other (1) (27,120) (33,229) (98,712) N/M N/M Total Company $ 800,566 $ 947,359 $ 646,863 18.3 % (31.7) % Adjusted EBITDA margins: (2) Critical illness recovery hospital 16.5 % 11.9 % 5.0 % Rehabilitation hospital 20.9 21.7 21.6 Outpatient rehabilitation 8.6 12.8 9.1 Concentra 16.8 22.5 19.4 Other (1) N/M N/M N/M Total Company 14.5 % 15.3 % 10.2 % Total assets: Critical illness recovery hospital $ 2,213,892 $ 2,304,116 $ 2,484,542 Rehabilitation hospital 1,148,617 1,194,136 1,200,767 Outpatient rehabilitation 1,302,110 1,348,316 1,371,123 Concentra 2,400,646 2,275,345 2,281,647 Other (1) 590,134 238,258 327,214 Total Company $ 7,655,399 $ 7,360,171 $ 7,665,293 Purchases of property and equipment: Critical illness recovery hospital $ 49,726 $ 65,690 $ 79,524 Rehabilitation hospital 7,571 13,003 14,426 Outpatient rehabilitation 28,876 36,301 40,677 Concentra 50,114 46,787 45,983 Other (1) 10,153 18,756 9,762 Total Company $ 146,440 $ 180,537 $ 190,372 _______________________________________________________________________________ (1) Other includes our corporate administration and shared services, as well as employee leasing services with our non-consolidating subsidiaries.
For purposes of this computation for our Concentra segment, patient service revenue does not include onsite clinics or revenues generated from COVID-19 screening and testing services. 68 Table of Contents Results of Operations The following table outlines selected operating data as a percentage of revenue for the periods indicated: For the Year Ended December 31, 2021 2022 2023 Revenue 100.0 % 100.0 % 100.0 % Costs and expenses: Cost of services, exclusive of depreciation and amortization (1) 85.2 88.4 86.0 General and administrative 2.4 2.4 2.6 Depreciation and amortization 3.2 3.3 3.1 Total costs and expenses 90.8 94.1 91.7 Other operating income 2.3 0.5 — Income from operations 11.5 6.4 8.3 Loss on early retirement of debt — — (0.2) Equity in earnings of unconsolidated subsidiaries 0.7 0.4 0.6 Gain on sale of businesses 0.0 — — Interest income 0.1 — — Interest expense (2.2) (2.7) (3.0) Income before income taxes 10.1 4.1 5.7 Income tax expense 2.0 1.0 1.2 Net income 8.1 3.1 4.5 Net income attributable to non-controlling interests 1.6 0.6 0.8 Net income attributable to Select Medical Holdings Corporation 6.5 % 2.5 % 3.7 % _______________________________________________________________________________ (1) Cost of services includes salaries, wages and benefits, operating supplies, lease and rent expense, and other operating costs. 69 Table of Contents The following table summarizes selected financial data by segment for the periods indicated: Year Ended December 31, 2021 2022 2023 % Change 2021 – 2022 % Change 2022 – 2023 (in thousands, except percentages) Revenue: Critical illness recovery hospital $ 2,246,772 $ 2,234,132 $ 2,299,773 (0.6) % 2.9 % Rehabilitation hospital 849,340 916,763 979,585 7.9 6.9 Outpatient rehabilitation 1,084,361 1,125,282 1,188,914 3.8 5.7 Concentra 1,732,041 1,724,359 1,838,081 (0.4) 6.6 Other (1) 292,001 333,002 357,705 14.0 7.4 Total Company $ 6,204,515 $ 6,333,538 $ 6,664,058 2.1 % 5.2 % Income (loss) from operations: (2) Critical illness recovery hospital $ 214,899 $ 49,779 $ 182,150 (76.8) % 265.9 % Rehabilitation hospital 157,027 170,220 193,820 8.4 13.9 Outpatient rehabilitation 108,683 69,197 76,658 (36.3) 10.8 Concentra 305,264 258,529 287,632 (15.3) 11.3 Other (1) (72,099) (144,442) (185,386) N/M N/M Total Company $ 713,774 $ 403,283 $ 554,874 (43.5) % 37.6 % Adjusted EBITDA: (2) Critical illness recovery hospital $ 267,993 $ 111,344 $ 246,015 (58.5) % 121.0 % Rehabilitation hospital 184,704 198,034 221,875 7.2 12.0 Outpatient rehabilitation 138,275 101,860 111,868 (26.3) 9.8 Concentra 389,616 334,337 361,334 (14.2) 8.1 Other (1) (33,229) (98,712) (133,667) N/M N/M Total Company $ 947,359 $ 646,863 $ 807,425 (31.7) % 24.8 % Adjusted EBITDA margins: (2) Critical illness recovery hospital 11.9 % 5.0 % 10.7 % Rehabilitation hospital 21.7 21.6 22.6 Outpatient rehabilitation 12.8 9.1 9.4 Concentra 22.5 19.4 19.7 Other (1) N/M N/M N/M Total Company 15.3 % 10.2 % 12.1 % Total assets: Critical illness recovery hospital $ 2,304,116 $ 2,484,542 $ 2,496,886 Rehabilitation hospital 1,194,136 1,200,767 1,233,888 Outpatient rehabilitation 1,348,316 1,371,123 1,380,447 Concentra 2,275,345 2,281,647 2,330,206 Other (1) 238,258 327,214 248,204 Total Company $ 7,360,171 $ 7,665,293 $ 7,689,631 Purchases of property, equipment and other assets: Critical illness recovery hospital $ 65,690 $ 79,524 $ 93,036 Rehabilitation hospital 13,003 14,426 21,922 Outpatient rehabilitation 36,301 40,677 38,776 Concentra 46,787 45,983 69,340 Other (1) 18,756 9,762 6,126 Total Company $ 180,537 $ 190,372 $ 229,200 _______________________________________________________________________________ (1) Other includes our corporate administration and shared services, as well as employee leasing services with our non-consolidating subsidiaries.
The cash outflows were offset in part by proceeds received from the sale of assets of $8.3 million. For the year ended December 31, 2021, the principal uses of cash were $180.5 million for purchases of property and equipment and $102.9 million for investments in and acquisitions of businesses.
For the year ended December 31, 2021, the principal uses of cash were $180.5 million for purchases of property and equipment and $102.9 million for investments in and acquisitions of businesses. We also received proceeds from the sale of assets and business of $26.8 million. Financing activities used $327.5 million of cash flows for the year ended December 31, 2023.
At December 31, 2022, Select had $148.5 million of availability under its revolving facility after giving effect to $445.0 million of outstanding borrowings and $56.5 million of outstanding letters of credit.
At December 31, 2023, Select had $434.2 million of availability under its revolving facility after giving effect to $280.0 million of outstanding borrowings and $55.8 million of outstanding letters of credit.
Our patient days increased 3.8% to 430,547 days for the year ended December 31, 2022, compared to 414,701 days for the year ended December 31, 2021. Occupancy in our rehabilitation hospitals increased to 85% for the year ended December 31, 2022, compared to 83% for the year ended December 31, 2021. Outpatient Rehabilitation Segment.
Our patient days increased 3.6% to 446,145 days for the year ended December 31, 2023, compared to 430,547 days for the year ended December 31, 2022. Occupancy in our rehabilitation hospitals was 85% for the years ended December 31, 2023 and 2022. Outpatient Rehabilitation Segment.
Adjusted EBITDA was $334.3 million for the year ended December 31, 2022, compared to $389.6 million for the year ended December 31, 2021. Our Adjusted EBITDA margin for the Concentra segment was 19.4% for the year ended December 31, 2022, compared to 22.5% for the year ended December 31, 2021.
Adjusted EBITDA increased 8.1% to $361.3 million for the year ended December 31, 2023, compared to $334.3 million for the year ended December 31, 2022. Our Adjusted EBITDA margin for the Concentra segment was 19.7% for the year ended December 31, 2023, compared to 19.4% for the year ended December 31, 2022.
Also, when the same service (code) is furnished separately by the physical therapist and PTA, CMS will apply the de minimis standard to each 15-minute unit of codes, not on the total physical therapist and PTA time of the service, allowing the separate reporting, on two different claim lines, of the number of units to which the new modifiers apply and the number of units to which the modifiers do not apply.
Also, when the same service (code) is furnished separately by the physical therapist and PTA, CMS applies the de minimis standard to each 15-minute unit of codes, not on the total physical therapist and PTA time of the service.
Other Operating Income For the year ended December 31, 2022, we had other operating income of $28.8 million, compared to $144.0 million for the year ended December 31, 2021. The other operating income recognized is primarily related to the recognition of payments received under the Provider Relief Fund for health care related expenses and lost revenues attributable to COVID-19.
Other operating income during the year ended December 31, 2022, was $28.8 million, principally related to the recognition of payments received under the Provider Relief Fund for health care related expenses and lost revenues attributable to COVID-19. Revenue Critical Illness Recovery Hospital Segment.
These programs are described further in Note 22 – CARES Act of the notes to our consolidated financial statements. Our days sales outstanding was 55 days at December 31, 2022, 52 days at December 31, 2021, and 56 days at December 31, 2020. Our days sales outstanding will fluctuate based upon variability in our collection cycles and patient volumes.
The Accelerated and Advance Payment and Provider Relief Fund programs are described further in Note 21 – CARES Act. Our days sales outstanding was 52 days at December 31, 2023, 55 days at December 31, 2022, and 52 days at December 31, 2021. Our days sales outstanding will fluctuate based upon variability in our collection cycles and patient volumes.
The increase in our operating expenses relative to our revenue was principally attributable to the incurrence of additional labor costs and other operating expenses within our critical illness recovery hospital and outpatient rehabilitation segments, as explained further within the “ Adjusted EBITDA ” discussion.
The decrease in our operating expenses relative to our revenue was principally due to the decreased labor costs within our critical illness recovery hospital segment, as explained further within the “ Adjusted EBITDA ” discussion.
For the year ended December 31, 2021, we recognized interest income of $5.4 million related to the outcome of litigation with CMS. Income Taxes We recorded income tax expense of $62.6 million for the year ended December 31, 2022, which represented an effective tax rate of 24.0%.
Income Taxes We recorded income tax expense of $82.6 million for the year ended December 31, 2023, which represented an effective tax rate of 21.6%. We recorded income tax expense of $62.6 million for the year ended December 31, 2022, which represented an effective tax rate of 24.0%.
Holdings funds this program with cash on hand and borrowings under its revolving facility. During the year ended December 31, 2022, Holdings repurchased 7,883,195 shares at a cost of approximately $185.1 million, or $23.48 per share, which includes transaction costs.
Holdings funds this program with cash on hand and borrowings under its revolving facility. During the year ended December 31, 2023, Holdings did not repurchase shares under the program. Since the inception of the program through December 31, 2023, Holdings has repurchased 48,234,823 shares at a cost of approximately $600.3 million, or $12.45 per share, which includes transaction costs.
The standard federal rate also included an area wage budget neutrality factor of 1.0016837. The fixed-loss amount for high cost outlier cases paid under LTCH-PPS was set at $27,195, an increase from the fixed-loss amount in the 2020 fiscal year of $26,778.
The standard federal rate also includes an area wage budget neutrality factor of 1.0031599. The fixed-loss amount for high cost outlier cases paid under LTCH-PPS is $59,873, an increase from the fixed-loss amount in the 2023 fiscal year of $38,518.
Our operating expenses were $5,753.2 million, or 90.8% of revenue, for the year ended December 31, 2022, compared to $5,432.1 million, or 87.6% of revenue, for the year ended December 31, 2021.
Operating Expenses Our operating expenses consist principally of cost of services and general and administrative expenses. Our operating expenses were $5,902.2 million, or 88.6% of revenue, for the year ended December 31, 2023, compared to $5,753.2 million, or 90.8% of revenue, for the year ended December 31, 2022.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
4 edited+1 added−0 removed1 unchanged
2022 filing
2023 filing
Item 7A. Quantitative and Qualitative Disclosures about Market Risk. We are subject to interest rate risk in connection with our variable rate long-term indebtedness. Our principal interest rate exposure relates to the loans outstanding under our credit facilities, which bear interest rates that are indexed against LIBOR.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk. We are subject to interest rate risk in connection with our variable rate long-term indebtedness. Our principal interest rate exposure relates to the loans outstanding under our credit facilities, which bear interest rates that are indexed against Term SOFR.
As of December 31, 2022, Select had outstanding borrowings under its credit facilities consisting of a $2,103.4 million term loan (excluding unamortized original issue discount and debt issuance costs of $9.1 million) and $445.0 million of borrowings under its revolving facility.
As of December 31, 2023, Select had outstanding borrowings under its credit facilities consisting of a $2,092.5 million term loan (excluding unamortized original issue discount and debt issuance costs of $15.3 million) and $280.0 million of borrowings under its revolving facility.
In order to mitigate our exposure to rising interest rates, we entered into an interest rate cap transaction to limit our one-month LIBOR rate to 1.0% on $2.0 billion of principal outstanding under our term loan. The agreement applies to interest payments through September 30, 2024. The one-month LIBOR rate was 4.39% at December 31, 2022.
In order to mitigate our exposure to rising interest rates, we have an interest rate cap which limits the Term SOFR rate to 1.0% on $2.0 billion of principal outstanding under our term loan. The agreement applies to interest payments through September 30, 2024. The Term SOFR rate was 5.35% at December 31, 2023.
As of December 31, 2022, $103.4 million of our term loan borrowings were subject to variable interest rates. As of December 31, 2022, a 0.25% change in market interest rates would impact the interest expense on our variable rate debt by approximately $1.4 million. Item 8. Financial Statements and Supplementary Data.
As of December 31, 2023, a 0.25% change in market interest rates would impact the interest expense on our variable rate debt by approximately $2.2 million per year, which includes the impact of the expiration of the interest rate cap on September 30, 2024. Item 8. Financial Statements and Supplementary Data.
Added
As of December 31, 2023, $92.5 million of our term loan borrowings were subject to variable interest rates. Subsequent to the expiration of our interest rate cap on September 30, 2024, all of our term loan borrowings will be subject to variable interest rates.