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What changed in SELECT MEDICAL HOLDINGS CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of SELECT MEDICAL HOLDINGS CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+439 added−447 removedSource: 10-K (2026-02-19) vs 10-K (2025-02-20)

Top changes in SELECT MEDICAL HOLDINGS CORP's 2025 10-K

439 paragraphs added · 447 removed · 339 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

115 edited+19 added−37 removed110 unchanged
Biggest changeF-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, 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 loss (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 Net income attributable to Select Medical Holdings Corporation 214,038 214,038 214,038 Net income attributable to non-controlling interests — 73,264 73,264 Cash dividends declared for common stockholders ($0.50 per share) (64,617) (64,617) (64,617) Issuance of restricted stock 1,728 2 (2) — — Forfeitures of unvested restricted stock (69) 0 0 71 71 71 Vesting of restricted stock 100,599 100,599 100,599 Repurchase of common shares (1,065) (1) (18,176) (19,728) (37,905) (37,905) Issuance of non-controlling interests — 27,200 27,200 Non-controlling interests acquired in business combination — 13,009 13,009 Distributions to and purchases of non-controlling interests 394 394 (50,670) (50,276) Redemption value adjustment on non-controlling interests (1,947) (1,947) (1,947) Concentra Separation and Distribution 334,852 (109,656) 225,196 (16,644) 208,552 Other comprehensive loss (42,907) (42,907) (42,907) Other 129 129 129 Balance at December 31, 2024 128,963 $ 129 $ 911,080 $ 770,146 $ — $ 1,681,355 $ 305,573 $ 1,986,928 The accompanying notes are an integral part of these consolidated financial statements.
Biggest changeF-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, 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 loss (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 Net income attributable to Select Medical Holdings Corporation 214,038 214,038 214,038 Net income attributable to non-controlling interests — 73,264 73,264 Cash dividends declared for common stockholders ($0.50 per share) (64,617) (64,617) (64,617) Issuance of restricted stock 1,728 2 (2) — — Forfeitures of unvested restricted stock (69) 0 0 71 71 71 Vesting of restricted stock 100,599 100,599 100,599 Repurchase of common shares (1,065) (1) (18,176) (19,728) (37,905) (37,905) Issuance of non-controlling interests — 27,200 27,200 Non-controlling interests acquired in business combination — 13,009 13,009 Distributions to and purchases of non-controlling interests 394 394 (50,670) (50,276) Redemption value adjustment on non-controlling interests (1,947) (1,947) (1,947) Concentra Separation and Distribution 334,852 (109,656) 225,196 (16,644) 208,552 Other comprehensive loss (42,907) (42,907) (42,907) Other 129 129 129 Balance at December 31, 2024 128,963 $ 129 $ 911,080 $ 770,146 $ — $ 1,681,355 $ 305,573 $ 1,986,928 Net income attributable to Select Medical Holdings Corporation 146,219 146,219 146,219 Net income attributable to non-controlling interests — 62,898 62,898 Cash dividends declared for common stockholders ($0.25 per share) (31,435) (31,435) (31,435) Issuance of restricted stock 1,722 2 (2) — — Forfeitures of unvested restricted stock (28) 0 0 18 18 18 Vesting of restricted stock 16,684 16,684 16,684 Repurchase of common shares (6,640) (7) (52,970) (47,928) (100,905) (100,905) Issuance of non-controlling interests — 15,904 15,904 Distributions to and purchases of non-controlling interests 56 56 (73,028) (72,972) Redemption value adjustment on non-controlling interests (4) (4) (4) Other comprehensive loss (6,404) (6,404) (6,404) Balance at December 31, 2025 124,017 $ 124 $ 874,848 $ 837,016 $ (6,404) $ 1,705,584 $ 311,347 $ 2,016,931 The accompanying notes are an integral part of these consolidated financial statements.
Acquisitions and Dispositions (Continued) During the year ended December 31, 2023, the Company made acquisitions consisting of critical illness recovery hospital, rehabilitation hospital, and outpatient rehabilitation businesses. The consideration given for these acquired businesses consisted principally of $23.6 million of cash and the issuance of $9.0 million of non-controlling interests.
Acquisitions and Dispositions (Continued) Acquisitions During the year ended December 31, 2023, the Company made acquisitions consisting of critical illness recovery hospital, rehabilitation hospital, and outpatient rehabilitation businesses. The consideration given for these acquired businesses consisted principally of $23.6 million of cash and the issuance of $9.0 million of non-controlling interests.
The general range of useful lives is as follows: Land improvements 5 – 25 years Leasehold improvements 1 – 20 years Buildings 40 years Building improvements 5 – 40 years Furniture and equipment 1 – 20 years The Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets or asset groups may not be recoverable.
The general range of useful lives is as follows: Land improvements 2 – 25 years Leasehold improvements 1 – 20 years Buildings 40 years Building improvements 5 – 40 years Furniture and equipment 1 – 20 years The Company’s long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets or asset groups may not be recoverable.
The transaction price is variable in nature and the Company recognizes revenue in amounts which are commensurate with the level of services provided during the period. The Company’s transaction price is determined such that the amount of cumulative revenue recognized will not be subject to significant reversal in future periods. 2.
The transaction price is variable in nature and the Company recognizes revenue in amounts which are commensurate with the level of services provided during the period. The Company’s transaction price is determined such that the amount of cumulative revenue recognized will not be subject to significant reversal in future periods.
The inability of any of the Company’s critical illness recovery hospitals, rehabilitation hospitals, or outpatient rehabilitation clinics to comply with Medicare regulations can result in the Company receiving significantly less Medicare payments than the Company currently receives for the services it provides to its patients. F-19 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4.
The inability of any of the Company’s critical illness recovery hospitals, rehabilitation hospitals, or outpatient rehabilitation clinics to comply with Medicare regulations can result in the Company receiving significantly less Medicare payments than the Company currently receives for the services it provides to its patients. F-17 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4.
At December 31, 2024, 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 % The Company provides contracted services, principally employee leasing services, and charges management fees to related parties affiliated through its equity method investments.
At December 31, 2025, 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 % The Company provides contracted services, principally employee leasing services, and charges management fees to related parties affiliated through its equity method investments.
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, 2023 and 2024, 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, 2024 and 2025, provisions for losses for professional liability risks retained by the Company have been discounted at 3%.
Earnings per Share The following table sets forth the income attributable to the Company from continuing operations, net of tax, and the Company’s common shares outstanding, and its participating securities outstanding. There were no contractual dividends paid for the years ended December 31, 2022, 2023, and 2024.
Earnings per Share The following table sets forth the income attributable to the Company from continuing operations, net of tax, and the Company’s common shares outstanding, and its participating securities outstanding. There were no contractual dividends paid for the years ended December 31, 2023, 2024, and 2025.
Revenues from providing services to patients covered under the Medicare program represented approximately 31%, 31%, and 29% of the Company’s total revenue for the years ended December 31, 2022, 2023, and 2024, respectively. As a provider of services under the Medicare program, the Company is subject to extensive regulations.
Revenues from providing services to patients covered under the Medicare program represented approximately 31%, 29%, and 29% of the Company’s total revenue for the years ended December 31, 2023, 2024, and 2025, respectively. As a provider of services under the Medicare program, the Company is subject to extensive regulations.
At December 31, 2024, 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, 2025, 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.
As of December 31, 2024, the term loan borrowings bear interest at a rate that is indexed to one-month Term SOFR plus 2.00%. As of December 31, 2024, the revolving facility borrowings bear interest either at a rate indexed to one-month Adjusted Term SOFR plus 2.25% or the Alternative Base Rate plus 1.25%.
As of December 31, 2025, the term loan borrowings bear interest at a rate that is indexed to one-month Term SOFR plus 2.00%. As of December 31, 2025, the revolving facility borrowings bear interest either at a rate indexed to one-month Adjusted Term SOFR plus 2.25% or the Alternative Base Rate plus 1.25%.
Estimated amortization expense of the Company’s finite-lived intangible assets for each of the five succeeding years is as follows: 2025 2026 2027 2028 2029 (in thousands) Amortization expense $ 1,613 $ 1,613 $ 1,613 $ 1,613 $ 1,613 7. 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: 2026 2027 2028 2029 2030 (in thousands) Amortization expense $ 1,613 $ 1,613 $ 1,613 $ 1,613 $ 1,607 7. Equity Method Investments The Company’s equity method investments consist principally of minority ownership interests in rehabilitation businesses.
In connection with the Company’s spin-off of Concentra, employees of the Company holding any unvested restricted shares of the Company’s common stock on November 4, 2024 received accelerated vesting with respect to one-third of their unvested awards, applied ratably to each unvested tranche of such awards.
Stock-based Compensation (Continued) In connection with the Company’s spin-off of Concentra, employees of the Company holding any unvested restricted shares of the Company’s common stock on November 4, 2024 received accelerated vesting with respect to one-third of their unvested awards, applied ratably to each unvested tranche of such awards.
The lawsuit, filed in May 2021 and amended in October 2021 and July 2024, was brought by Kathleen Kane, a physical therapist formerly employed in the Company’s outpatient division, against Select Medical Corporation, Select Physical Therapy Holdings, Inc. and Select Employment Services, Inc.
The lawsuit, filed in May 2021 and amended by a first amended complaint in October 2021 and by a second amended complaint in July 2024, was brought by Kathleen Kane, a physical therapist formerly employed in the Company’s outpatient division, against Select Medical Corporation, Select Physical Therapy Holdings, Inc., and Select Employment Services, Inc.
At this time, the Company is unable to predict the timing and outcome of this matter. F-38 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 20. Commitments and Contingencies (Continued) Physical Therapy Billing. On October 7, 2021, the Company received a letter from a Trial Attorney at the U.S.
At this time, the Company is unable to predict the timing and outcome of this matter. F-36 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 19. Commitments and Contingencies (Continued) Physical Therapy Billing. On October 7, 2021, the Company received a letter from a Trial Attorney at the U.S.
At December 31, 2024, the accreditations and trademarks have a weighted average time until next renewal of 1.5 years and 5.8 years, respectively. The Company’s finite-lived intangible assets amortize over their estimated useful lives. Amortization expense was $1.8 million, $1.6 million, and $1.6 million for the years ended December 31, 2022, 2023, and 2024, respectively.
At December 31, 2025, the accreditations and trademarks have a weighted average time until next renewal of 1.5 years and 5.4 years, respectively. The Company’s finite-lived intangible assets amortize over their estimated useful lives. Amortization expense was $1.6 million for the years ended December 31, 2023, 2024, and 2025.
The Company does not measure its indebtedness at fair value in its consolidated balance sheets. The fair value of the credit facilities is based on quoted market prices for this debt in the syndicated loan market. The fair value of the senior notes is based on quoted market prices.
Fair Value of Financial Instruments (Continued) The Company does not measure its indebtedness at fair value in its consolidated balance sheets. The fair value of the credit facilities is based on quoted market prices for this debt in the syndicated loan market. The fair value of the senior notes is based on quoted market prices.
Holdings and Select and its subsidiaries are collectively referred to as the “Company.” The Company is, based on number of facilities, one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics in the United States. As of December 31, 2024, the Company had operations in 40 states and the District of Columbia.
Holdings and Select and its subsidiaries are collectively referred to as the “Company.” The Company is, based on number of facilities, one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics in the United States. As of December 31, 2025, the Company had operations in 39 states and the District of Columbia.
The Company’s interest rate cap contract was recorded at its fair value in the consolidated balance sheets on a recurring basis. The fair value of the interest rate cap contract was based upon a model-derived valuation using observable market inputs, such as interest rates and interest rate volatility, and the strike price (Level 2).
The Company’s interest rate cap contract is recorded at its fair value in the consolidated balance sheets on a recurring basis. The fair value of the interest rate cap contract is based upon a model-derived valuation using observable market inputs, such as interest rates and interest rate volatility, and the strike price.
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 $518.1 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 $607.9 million.
The Company recognized goodwill of $8.0 million, $38.4 million, and $1.7 million in our critical illness recovery hospital, rehabilitation hospital, and outpatient rehabilitation reporting units, respectively. 3. Credit Risk and Payor Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash balances and accounts receivable.
The Company recognized goodwill of $7.8 million, $20.5 million, and $0.8 million in our critical illness recovery hospital, rehabilitation hospital, and outpatient rehabilitation reporting units, respectively. 3. Credit Risk and Payor Concentrations Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash balances and accounts receivable.
F-30 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15.
F-15 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.
Organization and Significant Accounting Policies (Continued) Revenue earned from providing services to patients is variable in nature, as the Company is required to make judgments which impact the transaction price, such as a patient’s condition and length of stay. These factors, among others, impact the payment the Company expects to receive for providing services.
Revenue earned from providing services to patients is variable in nature, as the Company is required to make judgments which impact the transaction price, such as a patient’s condition and length of stay. These factors, among others, impact the payment the Company expects to receive for providing services.
Because of the diversity in the Company’s non-governmental third-party payor base, as well as their geographic dispersion, accounts receivable due from the Medicare program represent the Company’s only significant concentration of credit risk. Approximately 22% and 21% of the Company’s accounts receivable is due from Medicare at December 31, 2023 and 2024, respectively.
Because of the diversity in the Company’s non-governmental third-party payor base, as well as their geographic dispersion, accounts receivable due from the Medicare program represent the Company’s only significant concentration of credit risk. Approximately 21% of the Company’s accounts receivable is due from Medicare at both December 31, 2024 and 2025.
Organization and Significant Accounting Policies (Continued) 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.
Income Taxes (Continued) At December 31, 2023 and 2024, the Company’s net deferred tax liabilities of approximately $98.9 million and $54.4 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, 2024 and 2025, the Company’s net deferred tax liabilities of approximately $54.4 million and $83.1 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.
Revenue generated from contracted services provided and management fees charged to related parties affiliated through the Company’s equity method investments was $374.1 million, $402.8 million, and $430.3 million for the years ended December 31, 2022, 2023, and 2024, respectively. F-23 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7.
Revenue generated from contracted services provided and management fees charged to related parties affiliated through the Company’s equity method investments was $402.8 million, $430.3 million, and $455.2 million for the years ended December 31, 2023, 2024, and 2025, respectively. F-21 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7.
The Company had receivables from related parties of $17.8 million and $2.2 million, which are included as part of other current assets and other assets in the consolidated balance sheet, respectively, as of December 31, 2024. 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 had receivables from related parties of $25.6 million and $2.4 million, which are included as part of Other current assets and Other assets in the Consolidated Balance Sheet, respectively, as of December 31, 2025. 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-41
(2) Valuation allowance deductions relate to the disposition of certain subsidiaries. F-38
Expense Disaggregation In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) , which is intended to improve the disclosures of expenses by providing more detailed information about the types of expenses in commonly presented expense captions.
Recent Accounting Guidance Not Yet Adopted Expense Disaggregation In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) , which is intended to improve the disclosures of expenses by providing more detailed information about the types of expenses in commonly presented expense captions.
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, 2024 $ 14,493 $ 737 $ — $ — $ 15,230 Year ended December 31, 2023 $ 16,858 $ (2,365) $ — $ — $ 14,493 Year ended December 31, 2022 $ 13,688 $ 3,170 $ — $ — $ 16,858 _______________________________________________________________________________ (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, 2025 $ 15,230 $ 1,414 $ — $ — $ 16,644 Year ended December 31, 2024 $ 14,493 $ 737 $ — $ — $ 15,230 Year ended December 31, 2023 $ 16,858 $ (2,365) $ — $ — $ 14,493 _______________________________________________________________________________ (1) Includes valuation allowance reserves resulting from business combinations.
Interest Rate Cap The Company had an interest rate derivative to mitigate its 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.
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. The Company’s objective in using an interest rate derivative is to mitigate its exposure to increases in interest rates.
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 $135.6 million and $145.4 million at December 31, 2023 and 2024, 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 $145.4 million and $147.5 million at December 31, 2024 and 2025, respectively.
At this time, the Company is unable to predict the timing and outcome of this matter. 21. Subsequent Events On February 13, 2025, the Company’s Board of Directors declared a cash dividend of $0.0625 per share.
At this time, the Company is unable to predict the timing and outcome of this matter. 20. Subsequent Events On February 12, 2026, the Company’s Board of Directors declared a cash dividend of $0.0625 per share.
Equity Method Investments (Continued) The Company had receivables from related parties affiliated through its equity method investments 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.
Equity Method Investments (Continued) The Company had receivables from related parties affiliated through its equity method investments of $17.8 million and $2.2 million, which are included as part of Other current assets and Other assets in the Consolidated Balance Sheet, respectively, as of December 31, 2024.
Acquisitions and Dispositions (Continued) Certain key selected financial information included in Income from discontinued operations, net of tax, for Concentra is as follows: For the Year Ended December 31, 2022 2023 2024 Revenue $ 1,724,359 $ 1,838,081 $ 1,738,411 Costs and expenses: Cost of services, exclusive of depreciation and amortization 1,392,475 1,477,648 1,374,783 General and administrative — — 1,620 Depreciation and amortization 73,667 73,051 61,028 Total costs and expenses 1,466,142 1,550,699 1,437,431 Other operating income 312 250 284 Income from operations 258,529 287,632 301,264 Other income and expense: Equity in earnings of unconsolidated subsidiaries (1,577) (526) (3,676) Interest expense (1) (31,641) (44,474) (59,513) Income from discontinued operations before income taxes 225,311 242,632 238,075 Income tax expense 45,830 53,372 56,756 Income from discontinued operations, net of tax 179,481 189,260 181,319 Less: Net income attributable to non-controlling interests 5,516 4,796 18,152 Income from discontinued operations, net of tax, attributable to Select Medical Holdings Corporation’s common stockholders $ 173,965 $ 184,464 $ 163,167 _______________________________________________________________________________ (1) For the years ended December 31, 2022, 2023, and 2024, interest expense includes allocated interest expense of $31.1 million, $44.3 million, and $22.0 million, respectively.
Certain key selected financial information included in Income from discontinued operations, net of tax, for Concentra is as follows: For the Year Ended December 31, 2023 2024 Revenue $ 1,838,081 $ 1,738,411 Costs and expenses: Cost of services, exclusive of depreciation and amortization 1,477,648 1,374,783 General and administrative — 1,620 Depreciation and amortization 73,051 61,028 Total costs and expenses 1,550,699 1,437,431 Other operating income 250 284 Income from operations 287,632 301,264 Other income and expense: Equity in earnings of unconsolidated subsidiaries (526) (3,676) Interest expense (1) (44,474) (59,513) Income from discontinued operations before income taxes 242,632 238,075 Income tax expense 53,372 56,756 Income from discontinued operations, net of tax 189,260 181,319 Less: Net income attributable to non-controlling interests 4,796 18,152 Income from discontinued operations, net of tax, attributable to Select Medical Holdings Corporation’s common stockholders $ 184,464 $ 163,167 _______________________________________________________________________________ (1) For the years ended December 31, 2023 and 2024, interest expense includes allocated interest expense of $44.3 million and $22.0 million, respectively.
Long-Term Debt and Notes Payable (Continued) Borrowings under the credit facilities are guaranteed by Holdings and substantially all of Select’s current domestic subsidiaries, other than certain non-guarantor subsidiaries, and will be guaranteed by substantially all of Select’s future domestic subsidiaries.
Borrowings under the credit facilities are guaranteed by Holdings and substantially all of Select’s current domestic subsidiaries, other than certain non-guarantor subsidiaries, and will be guaranteed by substantially all of Select’s future domestic subsidiaries.
As of December 31, 2024, Holdings has capacity to issue 4,266,900 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, 2025, Holdings has capacity to issue 2,572,291 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.
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 5,995,000 awards, as adjusted for cancelled or forfeited awards through December 31, 2024.
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 6,022,665 awards, as adjusted for cancelled or forfeited awards through December 31, 2025.
Equity method investments of $316.0 million and $320.9 million are presented as part of other assets in the consolidated balance sheets as of December 31, 2023 and 2024, respectively.
Equity method investments of $320.9 million and $346.4 million are presented as part of Other assets in the Consolidated Balance Sheets as of December 31, 2024 and 2025, respectively.
These liabilities were $66.3 million and $59.0 million as of December 31, 2023 and 2024, respectively, and are included as part of accrued other in the consolidated balance sheets.
These liabilities were $59.0 million and $57.9 million as of December 31, 2024 and 2025, respectively, and are included as part of Accrued other in the Consolidated Balance Sheets.
The Company recorded a liability of $132.1 million and $141.6 million related to these programs at December 31, 2023 and 2024, respectively.
The Company recorded a liability of $141.6 million and $143.6 million related to these programs at December 31, 2024 and 2025, respectively.
F-14 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1.
F-33 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 17.
Long-Term Debt and Notes Payable As of December 31, 2024, the Company’s long-term debt and notes payable are as follows: Principal Outstanding Unamortized Premium (Discount) Unamortized Issuance Costs Carrying Value Fair Value (in thousands) 6.250% senior notes due 2032 $ 550,000 $ — $ (10,637) $ 539,363 $ 528,000 Credit facilities: Revolving facility 105,000 — — 105,000 102,900 Term loan 1,050,000 (2,693) (5,646) 1,041,661 1,051,313 Other debt, including finance leases 26,282 — (491) 25,791 25,791 Total debt $ 1,731,282 $ (2,693) $ (16,774) $ 1,711,815 $ 1,708,004 F-26 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12.
Long-Term Debt and Notes Payable (Continued) As of December 31, 2024, the Company’s long-term debt and notes payable are as follows: Principal Outstanding Unamortized Discount Unamortized Issuance Costs Carrying Value Fair Value (in thousands) 6.250% senior notes due 2032 $ 550,000 $ — $ (10,637) $ 539,363 $ 528,000 Credit facilities: Revolving facility 105,000 — — 105,000 102,900 Term loan 1,050,000 (2,693) (5,646) 1,041,661 1,051,313 Other debt, including finance leases 26,282 — (491) 25,791 25,791 Total debt $ 1,731,282 $ (2,693) $ (16,774) $ 1,711,815 $ 1,708,004 Credit Facilities On March 6, 2017, Select entered into a senior secured credit agreement (the “credit agreement”).
F-37 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 20. Commitments and Contingencies Construction Commitments At December 31, 2024, the Company had outstanding commitments under construction contracts related to new construction, improvements, and renovations totaling approximately $158.0 million.
F-35 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 19. Commitments and Contingencies Construction Commitments At December 31, 2025, the Company had outstanding commitments under construction contracts related to new construction, improvements, and renovations totaling approximately $101.6 million.
Basic and Diluted EPS For the Year Ended December 31, 2022 2023 2024 (in thousands) Income from continuing operations, net of tax $ 18,545 $ 110,471 $ 129,987 Less: net income attributable to non-controlling interests 33,516 51,444 64,514 Income from continuing operations, net of tax, attributable to Select Medical’s common stockholders (14,971) 59,027 65,473 Less: distributed and undistributed net income attributable to participating securities (528) 2,127 2,319 Distributed and undistributed income from continuing operations, net of tax, attributable to common shares $ (14,443) $ 56,900 $ 63,154 The following tables set forth the computation of EPS under the two-class method: For the Year Ended December 31, 2022 Income from Continuing Operations, Net of Tax, Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ (14,443) 124,628 $ (0.12) Participating securities (528) 4,557 (0.12) Total Company $ (14,971) For the Year Ended December 31, 2023 Income from Continuing Operations, Net of Tax, Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ 56,900 123,105 $ 0.46 Participating securities 2,127 4,601 0.46 Total Company $ 59,027 For the Year Ended December 31, 2024 Income from Continuing Operations, Net of Tax, Allocation Shares (1) Basic EPS (in thousands, except for per share amounts) Common shares $ 63,154 124,614 $ 0.51 Participating securities 2,319 4,576 $ 0.51 Total Company $ 65,473 _______________________________________________________________________________ (1) Represents the weighted average share count outstanding during the period.
Basic and Diluted EPS For the Year Ended December 31, 2023 2024 2025 (in thousands) Income from continuing operations, net of tax $ 110,471 $ 129,987 $ 214,533 Less: net income attributable to non-controlling interests 51,444 64,514 68,314 Income from continuing operations, net of tax, attributable to Select Medical’s common stockholders 59,027 65,473 146,219 Less: distributed and undistributed net income attributable to participating securities 2,127 2,319 3,354 Distributed and undistributed income from continuing operations, net of tax, attributable to common shares $ 56,900 $ 63,154 $ 142,865 The following tables set forth the computation of EPS under the two-class method: For the Year Ended December 31, 2023 Income from Continuing Operations, Net of Tax, Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ 56,900 123,105 $ 0.46 Participating securities 2,127 4,601 0.46 Total Company $ 59,027 For the Year Ended December 31, 2024 Income from Continuing Operations, Net of Tax, Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ 63,154 124,614 $ 0.51 Participating securities 2,319 4,576 0.51 Total Company $ 65,473 For the Year Ended December 31, 2025 Income from Continuing Operations, Net of Tax, Allocation Shares (1) Basic and Diluted EPS (in thousands, except for per share amounts) Common shares $ 142,865 122,647 $ 1.16 Participating securities 3,354 2,879 $ 1.16 Total Company $ 146,219 _______________________________________________________________________________ (1) Represents the weighted average share count outstanding during the period.
F-7 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2022 2023 2024 Operating activities Net income $ 198,026 $ 299,731 $ 296,704 Adjustments to reconcile net income to net cash provided by operating activities: Distributions from unconsolidated subsidiaries 21,911 23,417 39,178 Depreciation and amortization 205,825 208,742 203,894 Provision for expected credit losses 174 1,030 4,279 Equity in earnings of unconsolidated subsidiaries (26,407) (40,813) (60,228) Loss on extinguishment of debt — 175 19,038 Gain on sale of assets and businesses (2,714) (57) (1,063) Stock compensation expense 37,755 43,809 100,670 Amortization of debt discount, premium and issuance costs 2,272 2,647 2,963 Deferred income taxes 7,521 (16,119) (32,434) Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable (52,183) 1,156 (95,845) Other current assets (4,866) (29,374) 18,072 Other assets 16,491 10,031 12,933 Accounts payable (48,042) (6,412) (16,789) Accrued expenses 12,852 84,095 26,492 Government advances (83,790) — — Net cash provided by operating activities 284,825 582,058 517,864 Investing activities Business combinations, net of cash acquired (26,987) (29,567) (13,097) Purchases of property, equipment, and other assets (190,372) (229,200) (222,177) Investment in businesses (17,323) (9,873) — Proceeds from sale of assets and businesses 8,343 163 4,263 Net cash used in investing activities (226,339) (268,477) (231,011) Financing activities Borrowings on revolving facilities 1,120,000 905,000 1,240,000 Payments on revolving facilities (835,000) (1,070,000) (1,415,000) Proceeds from term loans, net of issuance costs — 2,092,232 1,880,052 Payments on term loans — (2,113,952) (2,092,485) Payment on senior notes, including call premium — — (1,237,764) Proceeds from senior notes, net of issuance costs — — 1,176,598 Borrowings of other debt 25,666 31,399 24,892 Principal payments on other debt (35,594) (46,946) (65,280) Dividends paid to common stockholders (64,589) (63,904) (64,617) Repurchase of common stock (195,528) (12,759) (37,905) Decrease in overdrafts (10,392) (1,687) (4,471) Proceeds from issuance of non-controlling interests 9,530 22,935 15,713 Distributions to and purchases of non-controlling interests (43,107) (63,531) (60,001) Purchase of membership interests of Concentra Group Holdings Parent (5,876) (6,268) — Proceeds from Concentra initial public offering — — 511,198 Cash transferred to Concentra at separation — — (182,095) Net cash used in financing activities (34,890) (327,481) (311,165) Net increase (decrease) in cash and cash equivalents 23,596 (13,900) (24,312) Cash and cash equivalents at beginning of period 74,310 97,906 84,006 Cash and cash equivalents at end of period $ 97,906 $ 84,006 $ 59,694 Supplemental information: Cash paid for interest, excluding amounts received of $19,584, $82,818, and $68,069 under the interest rate cap contract for the years ended December 31, 2022, 2023 and 2024, respectively. $ 183,453 $ 272,261 $ 256,229 Cash paid for taxes 32,290 88,510 133,187 Non-cash investing and financing activities: Liabilities for purchases of property and equipment $ 51,529 $ 18,403 $ 21,784 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, 2023 2024 2025 Operating activities Net income $ 299,731 $ 296,704 $ 214,533 Adjustments to reconcile net income to net cash provided by operating activities: Distributions from unconsolidated subsidiaries 23,417 39,178 52,970 Depreciation and amortization 208,742 203,894 140,303 Provision for expected credit losses 1,030 4,279 2,362 Equity in earnings of unconsolidated subsidiaries (40,813) (60,228) (54,521) Loss on extinguishment of debt 175 19,038 — (Gain) loss on sale or disposal of assets (57) (1,063) 8 Stock compensation expense 43,809 100,670 16,702 Amortization of debt discount, premium and issuance costs 2,647 2,963 3,136 Deferred income taxes (16,119) (32,434) 30,652 Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable 1,156 (95,845) (45,185) Other current assets (29,374) 18,072 413 Other assets 10,031 12,933 (8,808) Accounts payable (6,412) (16,789) (854) Accrued expenses 84,095 26,492 (5,244) Net cash provided by operating activities 582,058 517,864 346,467 Investing activities Business combinations, net of cash acquired (29,567) (13,097) (9,197) Purchases of property, equipment, and other assets (229,200) (222,177) (229,225) Investment in businesses (9,873) — (1,455) Proceeds from sales and exchanges of assets and sale of business 163 4,263 23,391 Net cash used in investing activities (268,477) (231,011) (216,486) Financing activities Borrowings on revolving facilities 905,000 1,240,000 1,290,000 Payments on revolving facilities (1,070,000) (1,415,000) (1,295,000) Proceeds from term loans, net of issuance costs 2,092,232 1,880,052 — Payments on term loans (2,113,952) (2,092,485) (10,500) Payment on senior notes, including call premium — (1,237,764) — Proceeds from senior notes, net of issuance costs — 1,176,598 — Borrowings of other debt 31,399 24,892 101,218 Principal payments on other debt (46,946) (65,280) (34,328) Dividends paid to common stockholders (63,904) (64,617) (31,435) Repurchase of common stock (12,759) (37,905) (100,077) Decrease in overdrafts (1,687) (4,471) (9,052) Proceeds from issuance of non-controlling interests 22,935 15,713 15,904 Distributions to and purchases of non-controlling interests (63,531) (60,001) (89,882) Purchase of membership interests of Concentra Group Holdings Parent (6,268) — — Proceeds from Concentra initial public offering — 511,198 — Cash transferred to Concentra at separation — (182,095) — Net cash used in financing activities (327,481) (311,165) (163,152) Net decrease in cash and cash equivalents (13,900) (24,312) (33,171) Cash and cash equivalents at beginning of period 97,906 84,006 59,694 Cash and cash equivalents at end of period $ 84,006 $ 59,694 $ 26,523 Supplemental information: Cash paid for interest, excluding amounts received of $82,818 and $68,069 under the interest rate cap contract for the years ended December 31, 2023 and 2024, respectively. $ 272,261 $ 256,229 $ 120,624 Cash paid for taxes 88,510 133,187 26,022 Non-cash investing and financing activities: Liabilities for purchases of property and equipment $ 18,403 $ 21,784 $ 36,268 The accompanying notes are an integral part of these consolidated financial statements.
Direct internal and external costs of developing software for internal use, including programming and enhancements, are capitalized and depreciated over the estimated useful lives once the software is placed in service. Capitalized software costs are included within furniture and equipment. Software training costs, maintenance, and repairs are expensed as incurred.
Maintenance and repairs of property and equipment are expensed as incurred. Improvements that increase the estimated useful life of an asset are capitalized. Direct internal and external costs of developing software for internal use, including programming and enhancements, are capitalized and depreciated over the estimated useful lives once the software is placed in service.
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, 2023 2024 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in thousands) Indefinite-lived intangible assets: Trademarks $ 61,798 $ — $ 61,798 $ 61,798 $ — $ 61,798 Certificates of need 26,183 — 26,183 26,393 — 26,393 Accreditations 1,836 — 1,836 1,775 — 1,775 Finite-lived intangible assets: Non-compete agreements 31,179 (15,849) 15,330 31,735 (18,518) 13,217 Total identifiable intangible assets $ 120,996 $ (15,849) $ 105,147 $ 121,701 $ (18,518) $ 103,183 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, 2024 2025 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount (in thousands) Indefinite-lived intangible assets: Trademarks $ 61,798 $ — $ 61,798 $ 61,798 $ — $ 61,798 Certificates of need 26,393 — 26,393 26,318 — 26,318 Accreditations 1,775 — 1,775 1,775 — 1,775 Finite-lived intangible assets: Non-compete agreements 31,735 (18,518) 13,217 29,133 (18,224) 10,909 Total identifiable intangible assets $ 121,701 $ (18,518) $ 103,183 $ 119,024 $ (18,224) $ 100,800 The Company’s accreditations and trademarks have renewal terms and the costs to renew these intangible assets are expensed as incurred.
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, 2022 2023 2024 Revenue $ 4,609,179 $ 4,825,977 $ 5,187,105 Costs and expenses: Cost of services, exclusive of depreciation and amortization 4,207,686 4,254,369 4,553,461 General and administrative 153,035 170,193 225,869 Depreciation and amortization 132,158 135,691 142,866 Total costs and expenses 4,492,879 4,560,253 4,922,196 Other operating income 28,454 1,518 3,406 Income from continuing operations before other income and expense 144,754 267,242 268,315 Other income and expense: Loss on early retirement of debt — (14,692) (28,845) Equity in earnings of unconsolidated subsidiaries 27,984 41,339 63,904 Interest expense (137,470) (154,165) (128,605) Income from continuing operations before income taxes 35,268 139,724 174,769 Income tax expense from continuing operations 16,723 29,253 44,782 Income from continuing operations, net of tax 18,545 110,471 129,987 Discontinued operations: Income from discontinued business 225,311 242,632 223,414 Income tax expense from discontinued business 45,830 53,372 56,697 Income from discontinued operations, net of tax 179,481 189,260 166,717 Net income 198,026 299,731 296,704 Less: Net income attributable to non-controlling interests 39,032 56,240 82,666 Net income attributable to Select Medical Holdings Corporation $ 158,994 $ 243,491 $ 214,038 Net income attributable to Select Medical Holdings Corporation’s common stockholders: Income (loss) from continuing operations, net of tax $ (14,971) $ 59,027 $ 65,473 Income from discontinued operations, net of tax 173,965 184,464 148,565 Net income attributable to Select Medical Holdings Corporation’s common stockholders $ 158,994 $ 243,491 $ 214,038 Earnings (loss) per common share (Note 19): Continuing operations - basic and diluted $ (0.12) $ 0.46 $ 0.51 Discontinued operations - basic and diluted 1.35 1.44 1.15 Total earnings per common share - basic and diluted $ 1.23 $ 1.91 (a) $ 1.66 ______________________________________________________________________________ (a) Does not total due to rounding.
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, 2023 2024 2025 Revenue $ 4,825,977 $ 5,187,105 $ 5,452,830 Costs and expenses: Cost of services, exclusive of depreciation and amortization 4,254,369 4,553,461 4,823,535 General and administrative 170,193 225,869 154,414 Depreciation and amortization 135,691 142,866 140,303 Total costs and expenses 4,560,253 4,922,196 5,118,252 Other operating income 1,518 3,406 1,592 Income from continuing operations before other income and expense 267,242 268,315 336,170 Other income and expense: Loss on early retirement of debt (14,692) (28,845) — Equity in earnings of unconsolidated subsidiaries 41,339 63,904 54,521 Interest expense (154,165) (128,605) (117,942) Income from continuing operations before income taxes 139,724 174,769 272,749 Income tax expense from continuing operations 29,253 44,782 58,216 Income from continuing operations, net of tax 110,471 129,987 214,533 Discontinued operations: Income from discontinued business 242,632 223,414 — Income tax expense from discontinued business 53,372 56,697 — Income from discontinued operations, net of tax 189,260 166,717 — Net income 299,731 296,704 214,533 Less: Net income attributable to non-controlling interests 56,240 82,666 68,314 Net income attributable to Select Medical Holdings Corporation $ 243,491 $ 214,038 $ 146,219 Net income attributable to Select Medical Holdings Corporation’s common stockholders: Income from continuing operations, net of tax $ 59,027 $ 65,473 $ 146,219 Income from discontinued operations, net of tax 184,464 148,565 — Net income attributable to Select Medical Holdings Corporation’s common stockholders $ 243,491 $ 214,038 $ 146,219 Earnings per common share (Note 18): Continuing operations - basic and diluted $ 0.46 $ 0.51 $ 1.16 Discontinued operations - basic and diluted 1.44 1.15 — Total earnings per common share - basic and diluted $ 1.91 (a) $ 1.66 $ 1.16 ______________________________________________________________________________ (a) Does not total due to rounding.
F-5 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Comprehensive Income (in thousands) For the Year Ended December 31, 2022 2023 2024 Net income $ 198,026 $ 299,731 $ 296,704 Other comprehensive income (loss), net of tax: Gain on interest rate cap contract 90,730 15,783 5,723 Reclassification adjustment for gains included in net income (14,410) (61,478) (48,630) Net change, net of tax (expense) benefit of $(24,658), $(15,202) and $13,550 76,320 (45,695) (42,907) Comprehensive income 274,346 254,036 253,797 Less: Comprehensive income attributable to non-controlling interests 39,032 56,240 82,666 Comprehensive income attributable to Select Medical Holdings Corporation $ 235,314 $ 197,796 $ 171,131 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, 2023 2024 2025 Net income $ 299,731 $ 296,704 $ 214,533 Other comprehensive income (loss), net of tax: Gain (loss) on interest rate cap contract 15,783 5,723 (6,677) Reclassification adjustment for (gains) losses included in net income (61,478) (48,630) 273 Net change, net of tax (expense) benefit of $(15,202), $13,550 and $2,022 (45,695) (42,907) (6,404) Comprehensive income 254,036 253,797 208,129 Less: Comprehensive income attributable to non-controlling interests 56,240 82,666 68,314 Comprehensive income attributable to Select Medical Holdings Corporation $ 197,796 $ 171,131 $ 139,815 The accompanying notes are an integral part of these consolidated financial statements.
The income from the support services fees, as well as the cost to provide these services, are included within General and Administrative expense on the Consolidated Statements of Operations. The services under the TSA are expected to terminate no later than 24 months following the Concentra Distribution.
The income from the support services fees, as well as the cost to provide these services, are included within General and Administrative expense on the Consolidated Statements of Operations. The provision of services under the TSA will terminate no later than November 25, 2026.
Stock-based Compensation (Continued) Transactions related to restricted stock awards are as follows: Shares Weighted Average Grant Date Fair Value (share amounts in thousands) Unvested balance, January 1, 2024 4,511 $ 30.71 Granted 1,728 28.38 Vested (3,567) 30.90 Forfeited (70) 28.87 Unvested balance, December 31, 2024 2,602 $ 28.94 For the years ended December 31, 2022, 2023, and 2024, the weighted average grant date fair values of restricted stock awards granted were $28.41, $29.06, and $28.38, 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, 2025 2,602 $ 28.94 Granted 1,722 14.87 Vested (940) 30.84 Forfeited (28) 23.81 Unvested balance, December 31, 2025 3,356 $ 21.23 For the years ended December 31, 2023, 2024, and 2025, the weighted average grant date fair values of restricted stock awards granted were $29.06, $28.38, and $14.87, respectively.
Intangible Assets Goodwill The following table shows changes in the carrying amounts of goodwill by reporting unit for the years ended December 31, 2023 and 2024: Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Total (in thousands) Balance as of January 1, 2023 $ 1,151,196 $ 442,155 $ 664,978 $ 2,258,329 Acquisition of businesses 6,606 16,185 2,305 25,096 Balance as of December 31, 2023 1,157,802 458,340 667,283 2,283,425 Acquisition of businesses 8,000 38,367 1,666 48,033 Measurement period adjustment — 440 — 440 Balance as of December 31, 2024 $ 1,165,802 $ 497,147 $ 668,949 $ 2,331,898 F-22 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6.
Intangible Assets Goodwill The following table shows changes in the carrying amounts of goodwill by reporting unit for the years ended December 31, 2024 and 2025: Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Total (in thousands) Balance as of January 1, 2024 $ 1,157,802 $ 458,340 $ 667,283 $ 2,283,425 Acquisition of businesses 8,000 38,367 1,666 48,033 Measurement period adjustment — 440 — 440 Balance as of December 31, 2024 1,165,802 497,147 668,949 2,331,898 Acquisition of businesses 7,773 20,450 781 29,004 Balance as of December 31, 2025 $ 1,173,575 $ 517,597 $ 669,730 $ 2,360,902 F-20 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 6.
Segment Information (Continued) A reconciliation of Adjusted EBITDA to income from continuing operations before income taxes is as follows: For the Year Ended December 31, 2022 2023 2024 (in thousands) Adjusted EBITDA - Critical Illness Recovery Hospital Segment $ 111,344 $ 246,015 $ 301,634 Adjusted EBITDA - Rehabilitation Hospital Segment 198,034 221,875 245,748 Adjusted EBITDA - Outpatient Rehabilitation Segment 101,860 111,868 108,577 Other revenue 333,002 357,705 382,023 Other cost of services (1) (333,002) (357,705) (382,023) Other general and administrative expenses (1) (122,480) (134,153) (145,939) Other operating income 23,768 486 375 Depreciation and amortization (132,158) (135,691) (142,866) Stock compensation expense (35,614) (43,158) (99,214) Loss on early retirement of debt — (14,692) (28,845) Equity in earnings of unconsolidated subsidiaries 27,984 41,339 63,904 Interest expense (137,470) (154,165) (128,605) Income from continuing operations before income taxes $ 35,268 $ 139,724 $ 174,769 _______________________________________________________________________________ (1) Exclusive of depreciation, amortization and stock compensation expense.
A reconciliation of Adjusted EBITDA to income from continuing operations before income taxes is as follows: For the Year Ended December 31, 2023 2024 2025 (in thousands) Adjusted EBITDA - Critical Illness Recovery Hospital Segment $ 246,015 $ 301,634 $ 265,447 Adjusted EBITDA - Rehabilitation Hospital Segment 221,875 245,748 278,622 Adjusted EBITDA - Outpatient Rehabilitation Segment 111,868 108,577 90,163 Other revenue 357,705 382,023 401,189 Other cost of services (1) (357,705) (382,023) (401,189) Other general and administrative expenses (1) (134,153) (145,939) (141,129) Other operating income 486 375 72 Depreciation and amortization (135,691) (142,866) (140,303) Stock compensation expense (43,158) (99,214) (16,702) Loss on early retirement of debt (14,692) (28,845) — Equity in earnings of unconsolidated subsidiaries 41,339 63,904 54,521 Interest expense (154,165) (128,605) (117,942) Income from continuing operations before income taxes $ 139,724 $ 174,769 $ 272,749 _______________________________________________________________________________ (1) Exclusive of depreciation, amortization, and stock compensation expense. 15.
The chief operating decision maker also uses segment Adjusted EBITDA to assess the performance of each segment by comparing the results of each segment to one another and to each segment’s budget.
The chief operating decision maker considers budget-to-actual variances when making decisions about the allocation of operating and capital resources to each segment. The chief operating decision maker also uses segment Adjusted EBITDA to assess the performance of each segment by comparing the results of each segment to one another and to each segment’s budget.
December 31, 2023 December 31, 2024 Financial Instrument Level Carrying Value Fair Value Carrying Value Fair Value (in thousands) 6.250% senior notes due 2026 Level 2 $ 1,232,596 $ 1,228,063 $ — $ — 6.250% senior notes due 2032 Level 2 — — 539,363 528,000 Credit facilities: Revolving facility Level 2 280,000 278,600 105,000 102,900 Term loan Level 2 2,077,216 2,092,485 1,041,661 1,051,313 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. 12.
December 31, 2024 December 31, 2025 Financial Instrument Level Carrying Value Fair Value Carrying Value Fair Value (in thousands) 6.250% senior notes due 2032 Level 2 539,363 528,000 540,695 537,262 Credit facilities: Revolving facility Level 2 105,000 102,900 100,000 98,500 Term loan Level 2 1,041,661 1,051,313 1,032,400 1,036,901 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. 12.
The Company’s total lease cost from continuing operations is as follows: For the Year Ended December 31, 2022 2023 2024 Unrelated Parties Related Parties Total Unrelated Parties Related Parties Total Unrelated Parties Related Parties Total (in thousands) Operating lease cost $ 207,446 $ 7,245 $ 214,691 $ 212,360 $ 7,335 $ 219,695 $ 226,866 $ 7,335 $ 234,201 Finance lease cost: Amortization of right-of-use assets 572 — 572 572 — 572 572 — 572 Interest on lease liabilities 1,026 — 1,026 1,013 — 1,013 984 — 984 Short-term lease cost 74 — 74 — — — — — — Variable lease cost 38,868 462 39,330 45,086 84 45,170 47,678 16 47,694 Sublease income (7,803) — (7,803) (6,725) — (6,725) (6,875) — (6,875) Total lease cost from continuing operations $ 240,183 $ 7,707 $ 247,890 $ 252,306 $ 7,419 $ 259,725 $ 269,225 $ 7,351 $ 276,576 Supplemental cash flow information related to leases is as follows: For the Year Ended December 31, 2022 2023 2024 (in thousands) Cash paid for amounts included in the measurement of lease liabilities (1) : Operating cash flows for operating leases $ 308,085 $ 317,256 $ 321,271 Operating cash flows for finance leases 1,335 1,239 1,104 Financing cash flows for finance leases 1,472 1,617 1,347 Right-of-use assets obtained in exchange for lease liabilities: Operating leases 234,616 171,569 299,111 _______________________________________________________________________________ (1) Cash flows include cash paid for operating and finance leases of discontinued operations.
The Company’s total lease cost from continuing operations is as follows: For the Year Ended December 31, 2023 2024 2025 Unrelated Parties Related Parties Total Unrelated Parties Related Parties Total Unrelated Parties Related Parties Total (in thousands) Operating lease cost $ 212,360 $ 7,335 $ 219,695 $ 226,866 $ 7,335 $ 234,201 $ 237,045 $ 7,335 $ 244,380 Finance lease cost: Amortization of right-of-use assets 572 — 572 572 — 572 686 — 686 Interest on lease liabilities 1,013 — 1,013 984 — 984 1,268 — 1,268 Variable lease cost 45,086 84 45,170 47,678 16 47,694 51,123 — 51,123 Sublease income (6,725) — (6,725) (6,875) — (6,875) (7,369) — (7,369) Total lease cost from continuing operations $ 252,306 $ 7,419 $ 259,725 $ 269,225 $ 7,351 $ 276,576 $ 282,753 $ 7,335 $ 290,088 Supplemental cash flow information related to leases is as follows: For the Year Ended December 31, 2023 2024 2025 (in thousands) Cash paid for amounts included in the measurement of lease liabilities (1) : Operating cash flows for operating leases $ 317,256 $ 321,271 $ 244,623 Operating cash flows for finance leases 1,239 1,104 1,081 Financing cash flows for finance leases 1,617 1,347 652 Right-of-use assets obtained in exchange for lease liabilities: Operating leases 171,569 299,111 238,495 Finance leases — — 56,676 _______________________________________________________________________________ (1) Cash flows include cash paid for operating and finance leases of discontinued operations for the years ended December 31, 2023 and 2024.
The services under the TSA generally are a continuation of the support services provided by Select to Concentra prior to the IPO. The support services fees provided to Concentra after the distribution were $1.2 million for the year ended December 31, 2024.
The services under the TSA generally are a continuation of the support services provided by Select to Concentra prior to the IPO. The fee for support services provided to Concentra was $1.2 million and $12.1 million for the years ended December 31, 2024 and 2025, respectively.
For the Year Ended December 31, 2022 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,234,132 $ 916,763 $ 1,125,282 $ 333,002 $ 4,609,179 Personnel expense 1,427,515 530,159 774,144 Other segment items (1) 695,273 188,570 249,278 Adjusted EBITDA 111,344 198,034 101,860 Total assets 2,484,542 1,200,767 1,371,123 327,214 5,383,646 Capital expenditures 79,524 14,426 40,677 9,762 144,389 For the Year Ended December 31, 2023 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,299,773 $ 979,585 $ 1,188,914 $ 357,705 $ 4,825,977 Personnel expense 1,326,448 554,899 825,907 Other segment items (1) 727,310 202,811 251,139 Adjusted EBITDA 246,015 221,875 111,868 Total assets 2,496,886 1,233,888 1,380,447 248,204 5,359,425 Capital expenditures 93,036 21,922 38,776 6,126 159,860 For the Year Ended December 31, 2024 Critical Illness Recovery Hospital Rehabilitation Hospitals Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,444,196 $ 1,110,592 $ 1,250,294 $ 382,023 $ 5,187,105 Personnel Expense 1,376,917 629,149 888,290 Other segment items (1) 765,645 235,695 253,427 Adjusted EBITDA 301,634 245,748 108,577 Total assets 2,654,474 1,366,922 1,404,379 182,176 5,607,951 Capital expenditures 65,861 53,620 36,142 3,285 158,908 _______________________________________________________________________________ (1) Other segment items consist of facilities expense, other operating expenses, and other operating income.
For the Year Ended December 31, 2023 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,299,773 $ 979,585 $ 1,188,914 $ 357,705 $ 4,825,977 Personnel expense 1,326,448 554,899 825,907 Other segment items (1) 727,310 202,811 251,139 Adjusted EBITDA 246,015 221,875 111,868 Total assets 2,496,886 1,233,888 1,380,447 248,204 5,359,425 Capital expenditures 93,036 21,922 38,776 6,126 159,860 For the Year Ended December 31, 2024 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,444,196 $ 1,110,592 $ 1,250,294 $ 382,023 $ 5,187,105 Personnel expense 1,376,917 629,149 888,290 Other segment items (1) 765,645 235,695 253,427 Adjusted EBITDA 301,634 245,748 108,577 Total assets 2,654,474 1,366,922 1,404,379 182,176 5,607,951 Capital expenditures 65,861 53,620 36,142 3,285 158,908 F-28 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14.
Organization and Significant Accounting Policies (Continued) The Company’s most recent impairment assessments were completed as of October 1, 2024. The Company did not identify any instances of impairment with respect to goodwill or other indefinite-lived intangible assets. Finite-lived intangible assets Finite-lived intangible assets are amortized based on the pattern in which the economic benefits are consumed or otherwise depleted.
The Company did not identify any instances of impairment with respect to goodwill or other indefinite-lived intangible assets. Finite-lived intangible assets Finite-lived intangible assets are amortized based on the pattern in which the economic benefits are consumed or otherwise depleted.
The Company has elected the optional exemption which allows for the exclusion of disclosures regarding the transaction price allocated to unsatisfied performance obligations of contracts with a duration of less than one year. F-15 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1.
The Company has elected the optional exemption which allows for the exclusion of disclosures regarding the transaction price allocated to unsatisfied performance obligations of contracts with a duration of less than one year.
The amendments in the update also require annual disclosure of income taxes paid, disaggregated by federal, state, and foreign taxes, as well as any individual jurisdictions in which income taxes paid is greater than 5% of total income taxes paid. The Company will adopt ASU 2023-09 beginning with our annual reporting period ending December 31, 2025.
The amendments in the update also require annual disclosure of income taxes paid, disaggregated by federal, state, and foreign taxes, as well as any individual jurisdictions in which income taxes paid is greater than 5% of total income taxes paid.
(iii) The net income allocated to each security is then divided by the weighted average number of outstanding shares for the period to determine the EPS for each security considered in the two-class method. The Company applies the treasury stock method when computing diluted EPS.
The total net income allocated to each security is determined by adding both distributed and undistributed net income for the period. (iii) The net income allocated to each security is then divided by the weighted average number of outstanding shares for the period to determine the EPS for each security considered in the two-class method.
Accrued and other liabilities The following table sets forth the components of accrued and other liabilities on the Consolidated Balance Sheets: December 31, 2023 2024 (in thousands) Accrued payroll $ 175,944 $ 183,045 Accrued vacation 116,260 122,376 Accrued interest 32,049 9,075 Accrued other 226,332 288,681 Income taxes payable 1,099 6,644 Accrued and other liabilities $ 551,684 $ 609,821 10.
Accrued and other liabilities The following table sets forth the components of accrued and other liabilities on the Consolidated Balance Sheets: December 31, 2024 2025 (in thousands) Accrued payroll $ 183,045 $ 188,977 Accrued vacation 122,376 129,473 Accrued interest 9,075 4,300 Accrued other 288,681 274,082 Income taxes payable 6,644 1,226 Accrued and other liabilities $ 609,821 $ 598,058 10.
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. F-13 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1.
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, 2025.
The following is selected financial information included on the Consolidated Statements of Cash Flows for Concentra: For the Year Ended December 31, 2022 2023 2024 Depreciation and amortization 73,667 73,051 61,028 Cash flows from investing activities: Purchases of property, equipment, and other assets $ 45,983 $ 69,340 $ 63,269 The following table reconciles the cash and cash equivalents balance at December 31, 2023 between cash and cash equivalents from continuing operations and cash and cash equivalents from discontinued operations.
The following is selected financial information included on the Consolidated Statements of Cash Flows for Concentra: For the Year Ended December 31, 2023 2024 Depreciation and amortization 73,051 61,028 Cash flows from investing activities: Purchases of property, equipment, and other assets $ 69,340 $ 63,269 F-16 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.
Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost which approximates fair value. Accounts Receivable Substantially all of the Company’s accounts receivable is related to providing healthcare services to patients.
The Company applies the treasury stock method when computing diluted EPS. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost which approximates fair value.
Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the lease, as appropriate.
Capitalized software costs are included within furniture and equipment. Software training costs, maintenance, and repairs are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the lease, as appropriate.
Income Taxes (Continued) The Company’s deferred tax assets and liabilities are as follows: December 31, 2023 2024 (in thousands) Deferred tax assets Implicit discounts and adjustments $ 4,446 $ 6,169 Compensation and benefit-related accruals 41,460 44,651 Professional malpractice liability insurance 13,835 14,081 Federal and state net operating loss and state tax credit carryforwards 25,476 22,611 Interest limitation carryforward 17,683 47,905 Stock awards 7,003 2,314 Equity investments 4,724 1,235 Operating lease liabilities 151,710 174,165 Research and experimental expenditures 13,349 20,478 Excess capital loss — 4,941 Other 361 384 Deferred tax assets 280,047 338,934 Valuation allowance (14,493) (15,230) Deferred tax assets, net of valuation allowance 265,554 323,704 Deferred tax liabilities Investment in unconsolidated affiliates $ (16,788) $ (20,228) Investment in consolidated affiliates — (3,511) Depreciation and amortization (190,153) (190,355) Deferred financing costs (1,483) (494) Operating lease right-of-use assets (141,030) (162,171) Derivatives (14,151) — Other (801) (1,378) Deferred tax liabilities (364,406) (378,137) Deferred tax liabilities, net of deferred tax assets $ (98,852) $ (54,433) The Company’s deferred tax assets and liabilities are included in the consolidated balance sheet captions as follows: December 31, 2023 2024 (in thousands) Other assets $ 21,090 $ 27,064 Non-current deferred tax liability (119,942) (81,497) $ (98,852) $ (54,433) As of December 31, 2023 and 2024, the Company’s valuation allowance is primarily attributable to the uncertainty regarding the realization of state net operating losses and other net deferred tax assets of loss entities.
Income Taxes (Continued) The Company’s deferred tax assets and liabilities are as follows: December 31, 2024 2025 (in thousands) Deferred tax assets Implicit discounts and adjustments $ 6,169 $ 4,166 Compensation and benefit-related accruals 44,651 46,459 Professional malpractice liability insurance 14,081 14,724 Federal and state net operating loss and state tax credit carryforwards 22,611 26,506 Interest limitation carryforward 47,905 46,187 Stock awards 2,314 995 Equity investments 1,235 1,442 Operating lease liabilities 174,165 192,152 Derivatives — 1,548 Research and experimental expenditures 20,478 9,914 Excess capital loss 4,941 1,131 Other 384 399 Deferred tax assets 338,934 345,623 Valuation allowance (15,230) (16,644) Deferred tax assets, net of valuation allowance 323,704 328,979 Deferred tax liabilities Investment in unconsolidated affiliates $ (20,228) $ (22,502) Investment in consolidated affiliates (3,511) (3,613) Depreciation and amortization (190,355) (205,334) Deferred financing costs (494) (420) Operating lease right-of-use assets (162,171) (178,359) Other (1,378) (1,813) Deferred tax liabilities (378,137) (412,041) Deferred tax liabilities, net of deferred tax assets $ (54,433) $ (83,062) The Company’s deferred tax assets and liabilities are included in the consolidated balance sheet captions as follows: December 31, 2024 2025 (in thousands) Other assets $ 27,064 $ 29,095 Non-current deferred tax liability (81,497) (112,157) $ (54,433) $ (83,062) As of December 31, 2024 and 2025, the Company’s valuation allowance is primarily attributable to the uncertainty regarding the realization of state net operating losses and other net deferred tax assets of loss entities.
At December 31, 2023 and 2024, the Company recorded insurance proceeds receivable of $8.1 million and $8.5 million, respectively, for liabilities which exceeded its deductibles and self-insured retention limits and are recoverable through its insurance policies. F-24 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9.
At December 31, 2024 and 2025, the Company recorded insurance proceeds receivable of $8.5 million and $7.0 million, respectively, for liabilities which exceeded its deductibles and self-insured retention limits and are recoverable through its insurance policies. 9.
The Company also tests for impairment when events or conditions indicate that goodwill may be impaired.
The Company has elected to perform its annual impairment tests as of October 1. The Company also tests for impairment when events or conditions indicate that goodwill may be impaired.
For the Company’s operating leases, lease expense, a component of cost of services and general and administrative expense in the consolidated statements of operations, is recognized on a straight-line basis over the lease term.
F-11 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Organization and Significant Accounting Policies (Continued) For the Company’s operating leases, lease expense, a component of cost of services and general and administrative expense in the consolidated statements of operations, is recognized on a straight-line basis over the lease term.
In connection with the separation and distribution, the Company and Concentra also entered into several agreements to govern various interim and ongoing relationships between the Company and Concentra, including a transition services agreement (“TSA”), a tax matters agreement and an employee matters agreement.
Acquisitions and Dispositions Dispositions In connection with the separation and distribution of Concentra’s common stock, the Company and Concentra entered into several agreements to provide a framework of our ongoing relationship with Concentra, including a transition services agreement (“TSA”), a separation agreement, a tax matters agreement and an employee matters agreement.
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, 2024, Select’s leverage ratio was 3.18 to 1.00. F-27 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12.
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, 2025, Select’s leverage ratio was 3.67 to 1.00.
For these leases, the Company recognizes lease payments on a straight-line basis over the lease term and lease payments are expensed as incurred. These expenses are included as components of cost of services in the consolidated statements of operations. F-12 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1.
For these leases, the Company recognizes lease payments on a straight-line basis over the lease term and lease payments are expensed as incurred. These expenses are included as components of cost of services in the consolidated statements of operations. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation.
The amended complaint alleges that the defendants billed Federally funded health programs for one-on-one therapy services when group therapy was performed or overbilled for one-on-one therapy services, and billed for unreimbursable unskilled physical therapy services. In September 2024, the Company filed a motion to dismiss the amended complaint on multiple grounds.
The second amended complaint alleged that the defendants billed Federally funded health programs for one-on-one therapy services when group therapy was performed or overbilled for one-on-one therapy services, and billed for unreimbursable unskilled physical therapy services. In June 2025, the U.S. District Court granted the Company’s motion to dismiss the second amended complaint, and allowed Ms.
Property and Equipment The Company’s property and equipment consists of the following: December 31, 2023 2024 (in thousands) Land $ 92,385 $ 96,255 Leasehold improvements 538,841 565,320 Buildings 576,765 601,615 Furniture and equipment 649,390 686,042 Construction-in-progress 40,874 84,620 Total property and equipment 1,898,255 2,033,852 Accumulated depreciation (1,053,064) (1,161,667) Property and equipment, net $ 845,191 $ 872,185 Depreciation expense was $130.3 million, $134.1 million, and $141.1 million for the years ended December 31, 2022, 2023, and 2024, respectively. 6.
Property and Equipment The Company’s property and equipment consists of the following: December 31, 2024 2025 (in thousands) Land $ 96,255 $ 93,844 Leasehold improvements 565,320 646,706 Buildings 601,615 680,883 Furniture and equipment 686,042 723,941 Construction-in-progress 84,620 122,248 Total property and equipment 2,033,852 2,267,622 Accumulated depreciation (1,161,667) (1,275,308) Property and equipment, net $ 872,185 $ 992,314 Depreciation expense was $134.1 million, $141.1 million, and $138.5 million for the years ended December 31, 2023, 2024, and 2025, respectively. 6.
These services are paid for primarily by federal and state governmental authorities, managed care health plans, commercial insurance companies, workers’ compensation programs, and employer-directed programs. The Company’s general policy is to verify insurance coverage prior to the date of admission for patients admitted to its critical illness recovery hospitals and rehabilitation hospitals.
Accounts Receivable Substantially all of the Company’s accounts receivable is related to providing healthcare services to patients. These services are paid for primarily by federal and state governmental authorities, managed care health plans, commercial insurance companies, workers’ compensation programs, and employer-directed programs.
Income Taxes The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements.
F-13 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Organization and Significant Accounting Policies (Continued) Income Taxes The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

81 edited+49 added−9 removed155 unchanged
Biggest changeIn addition, MVP participants select certain quality measures and improvement activities and then report data for such measures and activities. At this time, the impact that the transition to MVPs will have on our business and operating results is unclear, however, any resulting administrative burden or decrease in reimbursement rates may reduce our future revenue and profitability.
Biggest changeAt this time, the impact that the transition to MVPs will have on our business and operating results is unclear, however, any resulting administrative burden or decrease in reimbursement rates may reduce our future revenue and profitability. 39 Table of Contents 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.
On September 15, 2022, the HHS-OIG updated its work plan to conduct a nationwide audit of IRF claims in order to determine the extent to which CMS could clarify the Medicare IRF claim payment criteria. The HHS-OIG expects to issue a report on this audit.
On September 15, 2022, the HHS-OIG updated its work plan to conduct a nationwide audit of IRF claims in order to determine the extent to which CMS could clarify the Medicare IRF claim payment criteria. The HHS-OIG expects to issue a report on this audit in 2026.
Failure to maintain the security and functionality of our information systems and related software, or to defend a cybersecurity attack or other attempt to gain unauthorized access to our or third-party’s systems, facilities, or patient health information could expose us to a number of adverse consequences, including but not limited to disruptions in our operations, regulatory and other civil and criminal penalties, reputational harm, investigations and enforcement actions (including, but not limited to, those arising from the SEC, Federal Trade Commission, the OIG or state attorneys general), fines, litigation with those affected by the data breach, loss of customers, disputes with payors, and increased operating expense, which either individually or in the aggregate could have a material adverse effect on our business, financial position, results of operations, and liquidity.
Failure to maintain the security and functionality of our information systems and related software, or to defend a cybersecurity attack or other attempt to gain unauthorized access to our or third-party’s systems, facilities, or patient health information could expose us to a number of adverse consequences, including but not limited to disruptions in our operations, regulatory and other civil and criminal penalties, reputational harm, investigations and 41 Table of Contents enforcement actions (including, but not limited to, those arising from the SEC, Federal Trade Commission, the OIG or state attorneys general), fines, litigation with those affected by the data breach, loss of customers, disputes with payors, and increased operating expense, which either individually or in the aggregate could have a material adverse effect on our business, financial position, results of operations, and liquidity.
Beginning August 21, 2023, CMS implemented a five-year review choice demonstration (“RCD”) for IRF services in Alabama. On March 1, 2024, CMS expanded RCD to IRFs in Pennsylvania. CMS plans to further expand RCD to Texas and California, but the timing of this expansion is not known. We operate inpatient rehabilitation hospitals in Pennsylvania, Texas and California.
Beginning August 21, 2023, CMS implemented a five-year review choice demonstration (“RCD”) for IRF services in Alabama. On March 1, 2024, CMS expanded RCD to IRFs in Pennsylvania. CMS previously announced plans to further expand RCD to Texas and California, but the timing of this expansion is not known. We operate inpatient rehabilitation hospitals in Pennsylvania, Texas and California.
For cost reports that started prior to October 1, 2024, the criteria for an outlier reconciliation were: (1) a change in the LTCH’s CCR of 10 percentage points or more when comparing the actual CCR to the CCR used during the cost reporting period to make outlier payments; and (2) the LTCH received at least $500,000 in outlier payments during the cost reporting period.
For cost reports that started prior to October 1, 2025, the criteria for an outlier reconciliation were: (1) a change in the LTCH’s CCR of 10 percentage points or more when comparing the actual CCR to the CCR used during the cost reporting period to make outlier payments; and (2) the LTCH received at least $500,000 in outlier payments during the cost reporting period.
Payments at rates applicable to general acute care hospitals would result in our hospitals receiving significantly less Medicare reimbursement than they currently receive for their patient services. 37 Table of Contents Decreases in Medicare reimbursement rates received by our outpatient rehabilitation clinics may reduce our future revenue and profitability.
Payments at rates applicable to general acute care hospitals would result in our hospitals receiving significantly less Medicare reimbursement than they currently receive for their patient services. 38 Table of Contents Decreases in Medicare reimbursement rates received by our outpatient rehabilitation clinics may reduce our future revenue and profitability.
Beginning with cost reporting periods starting on or after October 1, 2024, the first criterion now specifies that the LTCH is subject to reconciliation if the actual CCR is found to be plus or minus 20 percent or more from the CCR used during the cost reporting period to make outlier payments.
Beginning with cost reporting periods starting on or after October 1, 2025, the first criterion now specifies that the LTCH is subject to reconciliation if the actual CCR is found to be plus or minus 20 percent or more from the CCR used during the cost reporting period to make outlier payments.
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. See “Item 3. Legal Proceedings.” and Note 20 – Commitments and Contingencies in our audited consolidated financial statements.
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. See “Item 3. Legal Proceedings.” and Note 19 – Commitments and Contingencies in our audited consolidated financial statements.
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. 47 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. 49 Table of Contents Our inability to comply with any of these covenants could result in a default under our credit facilities or our Indenture.
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, 2024, we operated 104 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, 2025, we operated 104 critical illness recovery hospitals, all of which are currently certified by Medicare as LTCHs.
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.
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 51 Table of Contents stability, increases in inflation rate and energy prices, cyber-attacks, supply chain challenges and adverse effects on currency exchange rates and financial markets.
These factors may continue to impact the LTCH-PPS rate setting in future years, including the upcoming FY 2026 rate setting for the Federal fiscal year that begins on October 1, 2025.
These factors may continue to impact the LTCH-PPS rate setting in future years, including the upcoming FY 2027 rate setting for the Federal fiscal year that begins on October 1, 2026.
Public health threats, such as 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.
Public health threats, similar to 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.
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.
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. CMS has increased several quality reporting program data completion thresholds for certain provider types.
When CMS increases the fixed loss amount, our LTCHs have fewer cases that qualify for outlier payments and often lower payments for the cases that do qualify. In the FY 2024 IPPS/LTCH-PPS Proposed Rule, CMS proposed an unprecedented increase to the fixed loss amount, from $38,518 to $94,378.
When CMS increases the fixed-loss amount, our LTCHs have fewer cases that qualify for outlier payments 36 Table of Contents and often lower payments for the cases that do qualify. In the FY 2024 IPPS/LTCH-PPS Proposed Rule, CMS proposed an unprecedented increase to the fixed-loss amount, from $38,518 to $94,378.
Item 1A. Risk Factors . In addition to the factors discussed elsewhere in this Form 10-K, the following are important factors which could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of us.
Item 1A. Risk Factors . In addition to the factors discussed elsewhere in this Form 10-K, this section discusses important factors which could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of us.
As of December 31, 2024, 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, 2024, our leverage ratio was 3.18 to 1.00.
As of December 31, 2025, 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, 2025, our leverage ratio was 3.67 to 1.00.
CMS did not change the second criterion regarding the outlier payments exceeding $500,000. CMS’s change to the first criterion will likely result in the MACs conducting more outlier reconciliations when settling our LTCH cost reports.
CMS did not change the second criterion regarding the outlier payments exceeding $500,000. 37 Table of Contents CMS’s change to the first criterion will likely result in the MACs conducting more outlier reconciliations when settling our LTCH cost reports.
The effects of the COVID-19 pandemic on the dataset CMS uses for rate setting is one factor that is contributing to the recent increases to the LTCH-PPS high cost outlier fixed loss amount for standard Federal payment rate cases.
The effects of the COVID-19 pandemic on the dataset CMS uses for rate setting are one factor that have contributed to the recent increases to the LTCH-PPS high cost outlier fixed-loss amount for standard Federal payment rate cases.
We may be exposed to claims and liabilities as a result of the Distribution. We entered into a separation agreement and various other agreements with Concentra to govern the Distribution and the relationship of the two companies going forward. These agreements provide for specific indemnity and liability obligations and could lead to disputes between us and Concentra.
We entered into a separation agreement and various other agreements with Concentra to govern the Distribution and the relationship of the two companies going forward. These agreements provide for specific indemnity and liability obligations and could lead to disputes between us and Concentra.
As long as CMS uses data impacted by the COVID-19 public health emergency and associated waivers, the fixed loss amount will reflect increased costs and utilization patterns that were unique to the pandemic. Another contributing factor to the recent increases to the fixed loss amount is the dual payment rate structure of the LTCH-PPS.
While CMS used data impacted by the COVID-19 public health emergency and associated waivers, the fixed-loss amount reflected increased costs and utilization patterns that were unique to the pandemic. Another contributing factor to the recent increases to the fixed-loss amount is the dual payment rate structure of the LTCH-PPS.
Therefore, even though the COVID-19 public health emergency ended on May 11, 2023, the cost report data used to calculate the fixed-loss amount will continue to be affected by abnormal LTCH utilization and case-mix that occurred during the COVID-19 pandemic until June 2026.
Therefore, even though the COVID-19 public health emergency ended on May 11, 2023, the cost report data used to calculate the fixed-loss amount continued to be affected by abnormal LTCH utilization and case-mix that occurred during the COVID-19 pandemic through the FY 2026 ratesetting.
If we fail to maintain established relationships with the physicians in the areas we serve, our revenue may decrease. Our success is partially dependent upon the admissions and referral practices of the physicians in the communities our critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics serve, and our ability to maintain good relations with these physicians.
Our success is partially dependent upon the admissions and referral practices of the physicians in the communities our critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics serve, and our ability to maintain good relations with these physicians.
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.
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.
Also, these restrictions do not prevent us or our subsidiaries from incurring obligations that do not constitute indebtedness. As of December 31, 2024, we had $453.3 million of availability under our revolving facility (as defined below) (after giving effect to $105.0 million of outstanding borrowings and $41.7 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, 2025, we had $469.1 million of availability under our revolving facility (as defined below) (after giving effect to $100.0 million of outstanding borrowings and $30.9 million of outstanding letters of credit).
In the FY 35 Table of Contents 2025 IPPS/LTCH-PPS Proposed Rule, CMS proposed another significant increase to the fixed loss amount, to $90,921. However, after incorporating more recent data, CMS set the fixed-loss amount at $77,048 in the FY 2025 IPPS/LTCH-PPS Final Rule.
In the FY 2025 IPPS/LTCH-PPS Proposed Rule, CMS proposed another significant increase to the fixed-loss amount, to $90,921. However, after incorporating more recent data, CMS set the fixed-loss amount at $77,048 in the FY 2025 IPPS/LTCH-PPS Final Rule. In the FY 2026 IPPS/LTCH-PPS Proposed Rule, CMS again proposed an increase to the fixed-loss amount, from $77,048 to $91,247.
As of December 31, 2024, we had approximately $1,711.8 million of total indebtedness. Our indebtedness could have important consequences to you.
As of December 31, 2025, we had approximately $1,828.2 million of total indebtedness. Our indebtedness could have important consequences to you.
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.
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.
These acquisitions could also have a negative impact on our results of operations if it is subsequently determined that goodwill or other acquired intangible assets are impaired, thus resulting in an impairment charge in a future period.
We may fail to retain employees or patients acquired through these acquisitions, which may negatively impact the integration efforts. These acquisitions could also have a negative impact on our results of operations if it is subsequently determined that goodwill or other acquired intangible assets are impaired, thus resulting in an impairment charge in a future period.
We cannot predict the impact, if any, the RCD may have on the collectability of our Medicare claims over its five-year term and ultimately our financial position, results of operations, and cash flows.
We cannot predict the impact, if any, the RCD may have on the collectability of our Medicare claims over its five-year term and ultimately our financial position, results of operations, and cash flows. Recent data released by CMS does not provide clear results on the impact of the RCD on provider reimbursement.
If insurers or managed care companies from whom we receive substantial payments reduce the amounts they pay for services, our profit margins may decline, or we may lose patients if we choose not to renew our contracts with these insurers at lower rates.
If insurers or managed care companies from whom we receive substantial payments reduce the amounts they pay for services, our profit margins may decline, or we may lose patients if we choose not to renew our contracts with these insurers at lower rates. 44 Table of Contents If we fail to maintain established relationships with the physicians in the areas we serve, our revenue may decrease.
The MAC will conduct the outlier reconciliation when the criteria are met and will determine if Medicare underpaid or overpaid the LTCH for outlier payments during the LTCH’s cost reporting period.
If specific criteria are met, LTCH outlier payments may be subject to reconciliation by the MAC at the time of cost report settlement. The MAC will conduct the outlier reconciliation when the criteria are met and will determine if Medicare underpaid or overpaid the LTCH for outlier payments during the LTCH’s cost reporting period.
Moreover, even if we ultimately succeed in recovering from Concentra or its insurance providers any amounts for which we are held liable, we may be temporarily required to bear these losses. The occurrence of any of these events could adversely affect our business, results of operations or financial condition.
Moreover, even if we ultimately succeed in recovering from Concentra or its insurance providers any amounts for which we are held liable, we may be temporarily required to bear these losses.
Currently, CMS only requires IRFs to complete the IRF Patient Assessment Instrument for Medicare beneficiaries (Part A and Part C). There can be no assurance that all of our hospitals will continue to meet quality reporting requirements in the future which may result in one or more of our hospitals seeing a reduction in its Medicare reimbursements.
There can be no assurance that all of our hospitals will continue to meet quality reporting requirements in the future which may result in one or more of our hospitals seeing a reduction in its Medicare reimbursements.
CMS finalized record increases to the high cost outlier fixed loss amount for LTCH-PPS standard Federal payment rate cases in FY 2024 and FY 2025 and, unless there are significant reforms, the fixed loss amount will likely increase again in FY 2026, which will result in fewer cases qualifying for high cost outlier payments and often lower payments for the cases that do qualify.
Unless there are significant reforms, the fixed-loss amount will likely increase again in FY 2027, which will result in fewer cases qualifying for high cost outlier payments and often lower payments for the cases that do qualify.
Any default under our credit facilities would permit lenders to foreclose on our assets and would also be deemed a default under the Indenture governing our 6.250% senior notes, which may also result in the acceleration of that indebtedness. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Item 1B. Unresolved Staff Comments.
Any default under our credit facilities would permit lenders to foreclose on our assets and would also be deemed a default under the Indenture governing our 6.250% senior notes, which may also result in the acceleration of that indebtedness.
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. 44 Table of Contents If there is later a determination that certain steps of the Separation or the Distribution are taxable because the facts, assumptions, representations or undertakings underlying the IRS private letter ruling or any tax opinions are incorrect or for any other reason, then the Company and our stockholders could incur significant U.S. federal income tax liabilities and Concentra could incur significant liabilities through its indemnification obligations under the Tax Matters Agreement.
If there is later a determination that certain steps of the Separation or the Distribution are taxable because the facts, assumptions, representations or undertakings underlying the IRS private letter ruling or any tax opinions are incorrect or for any other reason, then the Company and our stockholders could incur significant U.S. federal income tax liabilities and Concentra could incur significant liabilities through its indemnification obligations under the Tax Matters Agreement.
These outlier reconciliations could lead to the MACs recouping payments from our LTCHs if the MACs find that the Medicare program overpaid the LTCH for outlier payments during the cost reporting period.
These outlier reconciliations could lead to the MACs recouping payments from our LTCHs if the MACs find that the Medicare program overpaid the LTCH for outlier payments during the cost reporting period. Outlier reconciliations also delay final settlement of the cost report, which prevents the LTCH from pursuing a reimbursement appeal related to its cost report.
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.
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.
In healthcare generally, the burdens associated with collecting, recording, and reporting quality data are increasing. This includes the additional burden from the fiscal year 2023 IRF-PPS final rule to require IRFs, starting with discharges after October 1, 2024, to collect data using the IRF Patient Assessment Instrument for all IRF patients, regardless of payer.
This includes the additional burden from the fiscal year 2023 IRF-PPS final rule to require IRFs, starting with discharges after October 1, 2024, to collect data using the IRF Patient Assessment Instrument for all IRF patients, regardless of payer. Previously, CMS only required IRFs to complete the IRF Patient Assessment Instrument for Medicare beneficiaries (Part A and Part C).
These acquisitions could result in difficulties integrating acquired operations, technologies, and personnel into our business. Such difficulties may divert significant financial, operational, and managerial resources from our existing operations and make it more difficult to achieve our operating and strategic objectives. We may fail to retain employees or patients acquired through these acquisitions, which may negatively impact the integration efforts.
If we fail to successfully integrate acquisitions, our financial condition and results of operations may be materially adversely affected. These acquisitions could result in difficulties integrating acquired operations, technologies, and personnel into our business. Such difficulties may divert significant financial, operational, and managerial resources from our existing operations and make it more difficult to achieve our operating and strategic objectives.
Our insurance policies generally are silent with respect to punitive damages so coverage is available to the extent insurance under the law of any applicable jurisdiction and are subject to various deductibles and policy limits. We review our insurance program annually and may make adjustments to the amount of insurance coverage and self-insured retentions in future years.
Our insurance policies generally are silent with respect to punitive damages so coverage is available to the extent insurance under the law of any applicable jurisdiction and are subject to various deductibles and policy 45 Table of Contents limits.
There are several factors that have likely caused the recent increases to the fixed loss amount, including the COVID-19 pandemic, the LTCH-PPS dual payment rate structure with the site neutral payment rate, and inflation.
In the FY 2026 IPPS/LTCH-PPS Final Rule, CMS set the fixed-loss amount at $78,936 based on the updated datasets available to CMS for the final ratesetting. There are several factors that have likely caused the recent increases to the fixed-loss amount, including the COVID-19 pandemic, the LTCH-PPS dual payment rate structure with the site-neutral payment rate, and inflation.
As CMS adds new measures to the Medicare quality reporting programs to implement the IMPACT Act, the burden to report data increases. Moreover, when CMS adds other measures to the quality reporting programs, provider reporting obligations become more burdensome.
As CMS adds new measures to the Medicare quality reporting programs to implement the IMPACT Act, the burden to report data increases. Moreover, when CMS adds other measures to the quality reporting programs, provider reporting obligations become more burdensome. For example, CMS recently added a COVID-19 Vaccination Coverage Among Healthcare Personnel measure to the LTCH and SNF quality reporting programs.
Generally, these laws restrict business arrangements that involve a physician or therapist sharing medical fees with a referral source, but in some states, these laws have been interpreted to extend to management agreements between physicians or therapists and business entities under some circumstances. 43 Table of Contents We believe that the Company’s current and planned activities do not constitute fee-splitting or the unlawful corporate practice of medicine as contemplated by these state laws.
Generally, these laws restrict business arrangements that involve a physician or therapist sharing medical fees with a referral source, but in some states, these laws have been interpreted to extend to management agreements between physicians or therapists and business entities under some circumstances.
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.
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.
Many of these individuals also have significant equity ownership in our company. We do not maintain any key life insurance policies for any of our employees.
We currently have employment agreements in place with three executive officers and change in control agreements and/or non-competition agreements with several other officers. Many of these individuals also have significant equity ownership in our company. We do not maintain any key life insurance policies for any of our employees.
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.
For example, trade policies and geopolitical disputes (including as a result of China-Taiwan relations and U.S. foreign policy in Latin America) and other international conflicts can result in tariffs, sanctions and other measures that restrict international trade, and may adversely affect our business.
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.
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. We are subject to risks associated with artificial intelligence and machine learning technology.
If CMS does not address these factors, it is likely that the fixed loss amount for FY 2026 will increase further, which will reduce the Medicare payment for high cost outlier cases. CMS changed the criteria for reconciliation of outlier payments, which could lead to more recoupments of Medicare outlier payments from our LTCHs.
CMS has not directly accounted for these cost increases when calculating the fixed-loss amount. If CMS does not address these factors, it is likely that the fixed-loss amount for FY 2027 will increase further, which will reduce the Medicare payment for high cost outlier cases.
The healthcare business is highly competitive, and we compete with other hospitals, rehabilitation clinics, and other healthcare providers for patients.
If we fail to compete effectively with other hospitals, clinics, 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, and other healthcare providers for patients.
However, there can be no assurance that future interpretations of such laws will not require structural and organizational modification of our existing relationships with the practices.
We believe that the Company’s current and planned activities do not constitute fee-splitting or the unlawful corporate practice of medicine as contemplated by these state laws. However, there can be no assurance that future interpretations of such laws will not require structural and organizational modification of our existing relationships with the practices.
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 could become mandatory in 2029. Each MVP includes population health claims-based measures and requires clinicians to report on the Promoting Interoperability performance category measures.
Beginning in 2026, multispecialty groups must form subgroups to report MVPs. CMS plans to develop more MVPs from 2024 to 2027 so that MVP reporting could become mandatory in the future. CMS previously stated that MVP reporting could become mandatory in 2029.
Outlier reconciliations also delay final settlement of the cost report, which prevents the LTCH from pursuing a reimbursement appeal related to its cost report. 36 Table of Contents 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.
These reviews can be conducted post-payment, but the contractors can also subject providers to pre-payment review of claims. In addition to the additional costs and burdens discussed above, providers can be further subject to withholding of Medicare payments during this review process.
These reviews can be conducted post-payment, but the contractors can also subject providers to pre-payment review of claims.
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.
Countries may also adopt other measures, such as controls on imports or exports of goods, technology or data, that could adversely impact our operations. Further, military conflicts or wars (such as the ongoing conflicts between Russia and Ukraine, Israel and Palestine and the United States and Venezuela) can cause exacerbated volatility and disruptions to various aspects of the global economy.
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.
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. In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.
In addition, our indemnity obligations to Concentra may be significant, and these risks could negatively affect our results of operations and financial condition. 46 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. We have a substantial amount of indebtedness.
These provisions may also prevent or discourage attempts to remove and replace incumbent directors. 48 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. We have a substantial amount of indebtedness.
In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program.
Revenues from providing services to patients covered under the Medicare program represented approximately 31%, 29%, and 29% of our revenue for the years ended December 31, 2023, 2024, and 2025, respectively. In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program.
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.
If we are unable to successfully manage the effects of inflation, our business, operating results, cash flows and financial condition may be adversely affected. 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.
We have experienced and may continue to experience decreased profitability due to increased employee-related costs.
Labor shortages, increased employee turnover, increases in employee-related costs, and union activity could have adverse effects including significant increases in our operating costs. We have experienced and may continue to experience decreased profitability due to increased employee-related costs.
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, and healthcare providers in the local areas we serve, our revenue and profitability may decline.
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.
Although Select and Concentra are now two independent companies, our long joint history may cause consumers and investors to continue to associate the companies with each other, either positively or negatively. Separating the businesses may also eliminate or reduce synergies or economies of scale that existed prior to the Distribution, which could harm our business.
As a result, we may be more vulnerable to changing market conditions, which could materially and adversely affect our business, financial condition and results of operations. Although Select and Concentra are now two independent companies, our long joint history may cause consumers and investors to continue to associate the companies with each other, either positively or negatively.
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.
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.
Finally, recent increases to the fixed loss amount may be attributable to rising inflation in the United States, and in the healthcare sector specifically.
Despite these changes to the LTCH-PPS, CMS has not modified its high cost outlier rate setting process to account for their effects. Finally, recent increases to the fixed-loss amount may be attributable to rising inflation in the United States, and in the healthcare sector specifically.
Most of our critical illness recovery hospitals are subject to short-term leases, and the loss of multiple leases close in time could materially and adversely affect our business, financial condition, and results of operations . We lease most of our critical illness recovery hospitals under short-term leases with terms of less than ten years.
In addition to the additional costs and burdens discussed above, providers can be further subject to withholding of Medicare payments during this review process. 40 Table of Contents Most of our critical illness recovery hospitals are subject to short-term leases, and the loss of multiple leases close in time could materially and adversely affect our business, financial condition, and results of operations .
We may not be able to successfully integrate our acquired businesses into ours, and therefore, we may not be able to realize the intended benefits from an acquisition. If we fail to successfully integrate acquisitions, our financial condition and results of operations may be materially adversely affected.
These acquisitions, 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. 43 Table of Contents We may not be able to successfully integrate our acquired businesses into ours, and therefore, we may not be able to realize the intended benefits from an acquisition.
For example, CMS recently added a COVID-19 Vaccination Coverage Among Healthcare Personnel measure to the LTCH, IRF, and SNF quality reporting programs. The adoption of additional quality reporting measures for our hospitals to track and report will require additional time and expense and could affect reimbursement in the future.
The adoption of additional quality reporting measures for our hospitals to track and report will require additional time and expense and could affect reimbursement in the future. In healthcare generally, the burdens associated with collecting, recording, and reporting quality data are increasing.
Our LTCHs receive two types of outlier payments from Medicare: (1) high cost outlier payments, and (2) short stay outlier payments. If specific criteria are met, LTCH outlier payments may be subject to reconciliation by the MAC at the time of cost report settlement.
CMS changed the criteria for reconciliation of outlier payments, which could lead to more recoupments of Medicare outlier payments from our LTCHs. Our LTCHs receive two types of outlier payments from Medicare: (1) high cost outlier payments, and (2) short stay outlier payments.
These risks and their impacts are difficult to predict and could continue to otherwise disrupt and adversely affect our operations and our financial performance. 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.
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. 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.
See “Business—Government Regulations—Other Healthcare Regulations” 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 11.56% of Holdings’ outstanding common stock as of February 1, 2025.
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” Concentration of ownership among our existing executives and directors may prevent new investors from influencing significant corporate decisions.
In fact, the Distribution may adversely affect our business. Following the Distribution, we are a smaller company with a less diversified product portfolio and a narrower business focus. As a result, we may be more vulnerable to changing market conditions, which could materially and adversely affect our business, financial condition and results of operations.
There is a risk that we may not be able to achieve the full strategic, operational and financial benefits to us that were anticipated to result from the Separation. In fact, the Distribution may adversely affect our business. Following the Distribution, we are a smaller company with a less diversified product portfolio and a narrower business focus.
Our success depends to a significant degree upon the continued contributions of our senior officers and other key employees, and our ability to retain and motivate these individuals. We currently have employment agreements in place with three executive officers and change in control agreements and/or non-competition agreements with several other officers.
Our business operations could be significantly disrupted if we lose key members of our management team. Our success depends to a significant degree upon the continued contributions of our senior officers and other key employees, and our ability to retain and motivate these individuals.
As part of our growth strategy, we may pursue acquisitions of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and other related healthcare facilities and services. These acquisitions, 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.
As part of our growth strategy, we may pursue acquisitions of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and other related healthcare facilities and services.
It has also led us to use agency clinical staff in our facilities, which can increase our costs and lower our margins.
It has also led us to use agency clinical staff in our facilities, which can increase our costs and lower our margins. 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.
This requirement is now commonly referred to as the “60% Rule.” Compliance with the 60% Rule is demonstrated through a two-step process. The first step is the “presumptive” method, in which patient diagnosis codes are compared to a “presumptive compliance” list.
The first step is the “presumptive” method, in which patient diagnosis codes are compared to a “presumptive compliance” list. 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.
These leases generally cannot be renewed or extended without the written consent of the landlords thereunder.
We lease most of our critical illness recovery hospitals under short-term leases with terms of less than ten years. These leases generally cannot be renewed or extended without the written consent of the landlords thereunder.
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 certain key employees, particularly our Executive Chairman, 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. Item 1B. Unresolved Staff Comments. None.
Our rehabilitation hospitals must meet certain conditions of participation to enroll in, and seek payment from, the Medicare program as an IRF. Among other things, at least 60% of the IRF’s total inpatient population must require treatment for one or more of 13 conditions specified by regulation.
Among other things, at least 60% of the IRF’s total inpatient population must require treatment for one or more of 13 conditions specified by regulation. This requirement is now commonly referred to as the “60% Rule.” Compliance with the 60% Rule is demonstrated through a two-step process.
LTCHs have been subject to relatively large increases in labor, supply, and drug costs in recent years. for example, the American Hospital Association found that the growth in hospital labor costs from 2014 to 2023 significantly outpaced economy-wide inflation over the same period. However, CMS has not directly accounted for these cost increases when calculating the fixed loss amount.
LTCHs have been subject to relatively large increases in labor, supply, and drug costs in recent years. For example, the American Hospital Association found that hospital expenses are growing faster than inflation and CMS’s payment updates for hospitals in recent years have been significantly less than the inflation rate.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeManagement's Role in Cybersecurity Risk Management The Company’s management, including the Company’s CIO and CISO, is responsible for assessing and managing material risks from cybersecurity threats. The Company’s CIO and CISO each have more than 20 years of experience in cybersecurity. The Company provides formalized cybersecurity training for newly-hired employees and annually for existing employees.
Biggest changeThe Company’s CIO and CISO each have more than 20 years of experience in cybersecurity. The Company provides formalized information security and cybersecurity training for newly-hired employees and annually for existing employees. In addition, the Company provides cybersecurity awareness training and information security education throughout the year.
The Company’s cybersecurity program involves establishing information security policies, procedures and standards, investing in and implementing information protection processes, security measures and technologies, ongoing monitoring of systems and networks on which the Company relies, cybersecurity training and collaborating with public and private organizations on cyber threat information and best practices.
The Company’s information security program involves establishing information security policies, procedures and standards, investing in and implementing information protection processes, security measures and technologies, ongoing monitoring of systems and networks on which the Company relies, cybersecurity training and collaborating with public and private organizations on cyber threat information and best practices.
As noted above, an assessment of the cybersecurity program leveraging the Cybersecurity Framework is completed annually by an independent and qualified external third-party cybersecurity assessor. The Company has not experienced a cybersecurity breach or information security breach during the past four fiscal years.
As noted above, an assessment of the information security program leveraging the Cybersecurity Framework is completed annually by an independent and qualified external third-party cybersecurity assessor. The Company has not experienced a cybersecurity breach or information security breach during the past four fiscal years.
As part of its enterprise risk management program, the Company has processes in place to assess, identify, and manage material business, operational and legal risks from cybersecurity threats. Such risks include business disruption, fraud, extortion, reputational harm, violations of laws and regulations, litigation, and harm to employees, patients, customers and business partners.
As part of its enterprise risk management program, the Company has processes in place to assess, identify, and manage material business, operational and legal risks from security threats, including cybersecurity threats. Such risks include business disruption, fraud, extortion, reputational harm, violations of laws and regulations, litigation, and harm to employees, patients, customers and business partners.
Cybersecurity Program Overview The Company’s cybersecurity program is structured around the cybersecurity framework (“Cybersecurity Framework”) of the National Institute of Standards and Technology (“NIST”), an agency of the U.S. Department of Commerce. The Cybersecurity Framework provides best practices to prevent, detect, identify, respond to, and recover from cyber-attacks.
Information Security Program Overview The Company’s information security program is structured around the cybersecurity framework (“Cybersecurity Framework”) of the National Institute of Standards and Technology (“NIST”), an agency of the U.S. Department of Commerce. The Cybersecurity Framework provides best practices to prevent, detect, identify, respond to, and recover from cyber-attacks.
Item 1C. Cybersecurity. The proper confidentiality, integrity, and availability of the Company’s information systems are critical to the business. Securing the Company’s business information, customer, patient and employee data, and technology systems is essential for the continuity of its businesses, meeting applicable regulatory requirements, and maintaining the trust of its stakeholders.
Item 1C. Information Security. The proper confidentiality, integrity, and availability of the Company’s information systems are critical to the business. Securing the Company’s business information, customer, patient and employee data, and technology systems is essential for the continuity of its businesses, meeting applicable regulatory requirements, and maintaining the trust of its stakeholders.
Although the Company did not experience a material cybersecurity incident during the year ended December 31, 2024, the scope and impact of any future incident cannot be predicted. 50 Table of Contents
Although the Company did not experience a material cybersecurity incident during the year ended December 31, 2025, the scope and impact of any future incident cannot be predicted. 53 Table of Contents
In addition, the Company provides cybersecurity awareness training and education throughout the year. The annual cybersecurity training curriculum includes modules on information security, the employee’s role in protecting Company information, recognizing different cybersecurity incidents, identifying phishing emails, understanding the appropriate personnel to approach with information or questions, and acceptance of the Company’s Information Security Policy.
The annual cybersecurity training curriculum includes modules on information security, the employee’s role in protecting Company information, recognizing different cybersecurity incidents, identifying phishing emails, understanding the appropriate personnel to approach with information or questions, and acceptance of the Company’s Information Security Policy.
The reports to the Board of Directors include details and metrics on, among other things, the Company’s quarterly Cybersecurity Framework assessment updates, internal and external threat intelligence, quarterly information security program progress, business associate risk assessments and ongoing monitoring, company-wide awareness training, device security compliance, routine resilience efforts including disaster recovery exercises, tabletop security incident response exercises, and cyber penetration tests.
The reports to the Board of Directors include details and metrics on, among other things, the Company’s quarterly Cybersecurity Framework assessment updates, internal and external threat intelligence, quarterly information security program progress, business associate risk assessments and ongoing monitoring, company-wide awareness training, device security compliance, routine resilience efforts including disaster recovery exercises, tabletop security incident response exercises, and cyber penetration tests. 52 Table of Contents Management’s Role in Information Security Risk Management The Company’s management, including the Company’s CIO and CISO, is responsible for assessing and managing material risks from cybersecurity threats.
The team works with colleagues in various departments throughout the Company, including Information Technology, Human Resources, Legal, Risk Management and Compliance, to prevent, mitigate and remediate cybersecurity incidents impacting the Company. 49 Table of Contents Assessment of Cybersecurity Risk Management continuously assesses the potential impact of risks from cybersecurity threats on the Company, and regularly evaluates how such risks could materially affect the Company’s business strategy, operational results, and financial condition.
Assessment of Information Security Risk Management continuously assesses the potential impact of risks from cybersecurity threats on the Company, and regularly evaluates how such risks could materially affect the Company’s business strategy, operational results, and financial condition.
The Company actively monitors the current threat landscape in an effort to identify material risks arising from new and evolving cybersecurity threats. The Company engages an external third-party cybersecurity assessor to perform an annual assessment or validation of the cybersecurity program in accordance with the Cybersecurity Framework and the HIPAA Security Risk Assessment Tool of the U.S.
The Company engages an external third-party healthcare-focused cybersecurity assessor to perform an annual assessment or validation of the cybersecurity program in accordance with the Cybersecurity Framework and the HIPAA Security Risk Assessment Tool of the U.S. Health and Human Services Office for Civil Rights.
The Company’s Chief Information Officer (“CIO”) and Chief Information Security Officer (“CISO”) provide annual written reports and quarterly briefings on the Company’s cybersecurity program to the Board of Directors. They also provide quarterly cybersecurity updates to the Audit and Compliance Committee.
The CISO directly reports to the CIO. The Company’s Chief Compliance Officer (“COO”) is Robert Breighner. The CISO and CCO serve as data protection officers. The CIO, CISO, and the CCO provide annual written reports and quarterly briefings on the Company’s information security program to the Board of Directors.
Health and Human Services Office for Civil Rights. Board Oversight of Cybersecurity Risks The Board of Directors of the Company provides strategic oversight on cybersecurity matters, including risks associated with cybersecurity threats.
Board Oversight of Information Security Risks The Board of Directors of the Company provides strategic oversight on information security matters, including risks associated with cybersecurity threats. The Company’s Chief Information Officer (“CIO”) is Brian Rusignuolo. The Company’s Chief Information Security Officer (“CISO”) is Justin Stover. Three directors of information security directly report to the CISO.
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The Company actively monitors the current threat landscape in an effort to identify material risks arising from new and evolving cybersecurity threats. The Company engages an independent security firm to complete an annual cyber penetration test, as well as application and service specific tests.
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They also provide quarterly information security updates to the Audit and Compliance Committee.
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The team works with colleagues in various departments throughout the Company, including Information Technology, Human Resources, Legal, Risk Management and Compliance, to prevent, mitigate and remediate cybersecurity incidents impacting the Company.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following is a list by state of the number of facilities we operated as of December 31, 2024. 51 Table of Contents Critical Illness Recovery Hospitals (1) Rehabilitation Hospitals (1) Outpatient Rehabilitation Clinics (1) Total Facilities Alabama 1 — 15 16 Alaska — — 12 12 Arizona 4 4 60 68 Arkansas 1 — 1 2 California 1 1 92 94 Colorado — — 50 50 Connecticut — — 62 62 Delaware 1 — 13 14 District of Columbia — — 3 3 Florida 12 3 132 147 Georgia 4 1 70 75 Illinois 1 — 87 88 Indiana 3 1 43 47 Iowa 2 — 26 28 Kansas 2 — 16 18 Kentucky 2 — 71 73 Louisiana — 2 2 4 Maine — — 34 34 Maryland — — 60 60 Massachusetts — — 19 19 Michigan 10 — 38 48 Minnesota 1 — 27 28 Mississippi 4 — 1 5 Missouri 3 3 111 117 Nebraska 1 — 1 2 Nevada — 1 20 21 New Hampshire — — 7 7 New Jersey 3 4 168 175 North Carolina 2 — 45 47 Ohio 13 6 107 126 Oklahoma 2 1 30 33 Oregon — — 4 4 Pennsylvania 9 2 219 230 South Carolina 2 — 25 27 South Dakota 1 — — 1 Tennessee 7 — 20 27 Texas 2 5 155 162 Virginia 3 1 43 47 Washington — — 13 13 West Virginia 4 — 6 10 Wisconsin 3 — 6 9 Total Company 104 35 1,914 2,053 _______________________________________________________________________________ (1) Includes managed critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics, respectively.
Biggest changeThe following is a list by state of the number of facilities we operated as of December 31, 2025. 54 Table of Contents Critical Illness Recovery Hospitals (1) Rehabilitation Hospitals (1) Outpatient Rehabilitation Clinics (1) Total Facilities Alabama 1 — 15 16 Alaska — — 12 12 Arizona 4 4 61 69 Arkansas 1 — 1 2 California 1 1 88 90 Colorado — — 56 56 Connecticut — — 61 61 Delaware 1 — 13 14 District of Columbia — — 3 3 Florida 12 3 135 150 Georgia 4 1 70 75 Illinois 1 — 87 88 Indiana 3 1 44 48 Iowa 2 — 23 25 Kansas 2 — 16 18 Kentucky 2 1 71 74 Louisiana — 2 2 4 Maine — — 34 34 Maryland — — 58 58 Massachusetts — — 19 19 Michigan 10 — 37 47 Minnesota 1 — 26 27 Mississippi 4 — 1 5 Missouri 3 3 114 120 Nebraska 1 — 1 2 Nevada — 1 21 22 New Hampshire — — 7 7 New Jersey 3 4 172 179 North Carolina 2 — 47 49 Ohio 13 7 106 126 Oklahoma 2 1 29 32 Oregon — — 4 4 Pennsylvania 9 3 216 228 South Carolina 2 — 24 26 Tennessee 8 — 20 28 Texas 2 5 155 162 Virginia 3 1 44 48 Washington — — 12 12 West Virginia 4 — 7 11 Wisconsin 3 — 5 8 Total Company 104 38 1,917 2,059 _______________________________________________________________________________ (1) Includes managed critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics, respectively.
As of December 31, 2024, we leased 83 of our critical illness recovery hospitals, 14 of our rehabilitation hospitals, and 1,616 of our outpatient rehabilitation clinics. We lease our corporate headquarters from companies owned by a related party affiliated with us through common ownership or management.
As of December 31, 2025, we leased 83 of our critical illness recovery hospitals, 17 of our rehabilitation hospitals, and 1,616 of our outpatient rehabilitation clinics. We lease our corporate headquarters from companies owned by a related party affiliated with us through common ownership or management.
As of December 31, 2024, our corporate headquarters is approximately 292,173 square feet and is located in Mechanicsburg, Pennsylvania.
As of December 31, 2025, our corporate headquarters is approximately 292,173 square feet and is located in Mechanicsburg, Pennsylvania.
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. Item 4. Mine Safety Disclosures. None. 52 Table of Contents PART II
Item 3. Legal Proceedings. Refer to the “Litigation” section contained within Note 19 – Commitments and Contingencies of the notes to our consolidated financial statements included herein. Item 4. Mine Safety Disclosures. None. 55 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividend Policy Holdings’ Board of Directors declared the following dividends during the year ended December 31, 2024: Declaration Date Record Date Payment Date Dividend Per Share Amount (in thousands) February 13, 2024 March 1, 2024 March 13, 2024 $ 0.125 $ 16,045 May 1, 2024 May 16, 2024 May 30, 2024 $ 0.125 $ 16,254 July 31, 2024 August 14, 2024 August 30, 2024 $ 0.125 $ 16,194 October 30, 2024 November 15, 2024 November 26, 2024 $ 0.125 $ 16,124 There is no assurance that future dividends will be declared.
Biggest changeDividend Policy Holdings’ Board of Directors declared the following dividends during the year ended December 31, 2025: Declaration Date Record Date Payment Date Dividend Per Share Amount (in thousands) February 13, 2025 March 3, 2025 March 13, 2025 $ 0.0625 $ 8,060 April 30, 2025 May 15, 2025 May 29, 2025 $ 0.0625 $ 7,885 July 30, 2025 August 13, 2025 August 28, 2025 $ 0.0625 $ 7,739 October 29, 2025 November 12, 2025 November 25, 2025 $ 0.0625 $ 7,751 There is no assurance that future dividends will be declared.
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.
The program will remain in effect until December 31, 2027, 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 133 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 134 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.” 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, 2019, with dividends being reinvested on the date paid through and including the market close on December 31, 2024, 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.” 56 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, 2020, with dividends being reinvested on the date paid through and including the market close on December 31, 2025, 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, 2025, Holdings had 128,962,850 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, 2026, Holdings had 124,017,191 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, 2024 (1) 73,877 $ 31.74 — $ 399,677,961 November 1 – November 31, 2024 (1) 474,083 37.20 — 399,677,961 December 1 – December 31, 2024 — — — 399,677,961 Total 547,960 $ 35.68 — $ 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. 55 Table of Contents Item 6. [Reserved] 56 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, 2025 — $ — — $ 303,223,970 November 1 – November 30, 2025 (1) 39,001 13.83 — 303,223,970 December 1 – December 31, 2025 — — — 303,223,970 Total 39,001 $ 13.83 — 303,223,970 _______________________________________________________________________________ (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. 58 Table of Contents Item 6. [Reserved] 59 Table of Contents
The chart below the graph sets forth the actual numbers depicted on the graph. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Select Medical Holdings Corporation (SEM) $ 100.00 $ 118.51 $ 128.59 $ 112.79 $ 110.62 $ 169.23 S&P Health Care Services Select Industry Index (SPSIHP) $ 100.00 $ 133.00 $ 145.57 $ 116.36 $ 121.70 $ 123.45 S&P 500 $ 100.00 $ 116.26 $ 147.52 $ 118.84 $ 147.64 $ 182.05 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.
The chart below the graph sets forth the actual numbers depicted on the graph. 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Select Medical Holdings Corporation (SEM) $ 100.00 $ 108.51 $ 95.17 $ 93.35 $ 142.80 $ 114.38 S&P Health Care Services Select Industry Index (SPSIHP) $ 100.00 $ 109.45 $ 87.48 $ 91.50 $ 92.81 $ 109.97 S&P 500 $ 100.00 $ 126.89 $ 102.22 $ 126.99 $ 156.59 $ 182.25 57 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.
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, 2024.
The following table provides information regarding repurchases of our common stock during the three months ended December 31, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeRevenue per visit is calculated by dividing patient service revenue, excluding revenues from certain other ancillary services, by the total number of visits. 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, 2022 2023 2024 Revenue 100.0 % 100.0 % 100.0 % Costs and expenses: Cost of services, exclusive of depreciation and amortization (1) 91.3 88.2 87.8 General and administrative 3.3 3.5 4.4 Depreciation and amortization 2.9 2.8 2.8 Total costs and expenses 97.5 94.5 95.0 Other operating income 0.6 — 0.2 Income from continuing operations before other income and expense 3.1 5.5 5.2 Loss on early retirement of debt — (0.3) (0.6) Equity in earnings of unconsolidated subsidiaries 0.6 0.9 1.2 Interest expense (2.9) (3.2) (2.4) Income from continuing operations before income taxes 0.8 2.9 3.4 Income tax expense from continuing operations 0.4 0.6 0.9 Income from continuing operations, net of tax 0.4 2.3 2.5 Discontinued operations: Income from discontinued business 4.9 5.0 4.3 Income tax expense from discontinued business 1.0 1.1 1.1 Income from discontinued operations, net of tax 3.9 3.9 3.2 Net income 4.3 6.2 5.7 Net income attributable to non-controlling interests 0.9 1.2 1.6 Net income attributable to Select Medical Holdings Corporation 3.4 % 5.0 % 4.1 % _______________________________________________________________________________ (1) Cost of services includes personnel expense, facilities 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, 2022 2023 2024 % Change 2022 – 2023 % Change 2023 – 2024 (in thousands, except percentages) Revenue: Critical illness recovery hospital $ 2,234,132 $ 2,299,773 $ 2,444,196 2.9 % 6.3 % Rehabilitation hospital 916,763 979,585 1,110,592 6.9 13.4 Outpatient rehabilitation 1,125,282 1,188,914 1,250,294 5.7 5.2 Other (1) 333,002 357,705 382,023 7.4 6.8 Total Company $ 4,609,179 $ 4,825,977 $ 5,187,105 4.7 % 7.5 % Income (loss) from continuing operations before other income and expense: (2) Critical illness recovery hospital $ 49,779 $ 182,150 $ 231,792 265.9 % 27.3 % Rehabilitation hospital 170,220 193,820 217,306 13.9 12.1 Outpatient rehabilitation 69,197 76,658 71,998 10.8 (6.1) Other (1) (144,442) (185,386) (252,781) N/M N/M Total Company $ 144,754 $ 267,242 $ 268,315 84.6 % 0.4 % Adjusted EBITDA: (2) Critical illness recovery hospital $ 111,344 $ 246,015 $ 301,634 121.0 % 22.6 % Rehabilitation hospital 198,034 221,875 245,748 12.0 10.8 Outpatient rehabilitation 101,860 111,868 108,577 9.8 (2.9) Other (1) (98,712) (133,667) (145,564) N/M N/M Total Company $ 312,526 $ 446,091 $ 510,395 42.7 % 14.4 % Adjusted EBITDA margins: (2) Critical illness recovery hospital 5.0 % 10.7 % 12.3 % Rehabilitation hospital 21.6 22.6 22.1 Outpatient rehabilitation 9.1 9.4 8.7 Other (1) N/M N/M N/M Total Company 6.8 % 9.2 % 9.8 % Total assets: Critical illness recovery hospital $ 2,484,542 $ 2,496,886 $ 2,654,474 Rehabilitation hospital 1,200,767 1,233,888 1,366,922 Outpatient rehabilitation 1,371,123 1,380,447 1,404,379 Other (1) 327,214 248,204 182,176 Total Company $ 5,383,646 $ 5,359,425 $ 5,607,951 Purchases of property, equipment and other assets: Critical illness recovery hospital $ 79,524 $ 93,036 $ 65,861 Rehabilitation hospital 14,426 21,922 53,620 Outpatient rehabilitation 40,677 38,776 36,142 Other (1) 9,762 6,126 3,285 Total Company $ 144,389 $ 159,860 $ 158,908 _______________________________________________________________________________ (1) Other includes our corporate administration and shared services, as well as employee leasing services with our non-consolidating subsidiaries.
Biggest changeWe own a minority interest in these businesses. 71 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, 2023 2024 2025 Revenue 100.0 % 100.0 % 100.0 % Costs and expenses: Cost of services, exclusive of depreciation and amortization (1) 88.2 87.8 88.5 General and administrative 3.5 4.4 2.8 Depreciation and amortization 2.8 2.8 2.6 Total costs and expenses 94.5 95.0 93.9 Other operating income — 0.2 0.1 Income from continuing operations before other income and expense 5.5 5.2 6.2 Loss on early retirement of debt (0.3) (0.6) — Equity in earnings of unconsolidated subsidiaries 0.9 1.2 1.0 Interest expense (3.2) (2.4) (2.2) Income from continuing operations before income taxes 2.9 3.4 5.0 Income tax expense from continuing operations 0.6 0.9 1.1 Income from continuing operations, net of tax 2.3 2.5 3.9 Discontinued operations: Income from discontinued business 5.0 4.3 — Income tax expense from discontinued business 1.1 1.1 — Income from discontinued operations, net of tax 3.9 3.2 — Net income 6.2 5.7 3.9 Net income attributable to non-controlling interests 1.2 1.6 1.2 Net income attributable to Select Medical Holdings Corporation 5.0 % 4.1 % 2.7 % _______________________________________________________________________________ (1) Cost of services includes personnel expense, facilities expense, and other operating costs. 72 Table of Contents The following table summarizes selected financial data by segment for the periods indicated: Year Ended December 31, 2023 2024 2025 % Change 2023 – 2024 % Change 2024 – 2025 (in thousands, except percentages) Revenue: Critical illness recovery hospital $ 2,299,773 $ 2,444,196 $ 2,477,814 6.3 % 1.4 % Rehabilitation hospital 979,585 1,110,592 1,288,954 13.4 16.1 Outpatient rehabilitation 1,188,914 1,250,294 1,284,873 5.2 2.8 Other (1) 357,705 382,023 401,189 6.8 5.0 Total Company $ 4,825,977 $ 5,187,105 $ 5,452,830 7.5 % 5.1 % Income (loss) from continuing operations before other income and expense: Critical illness recovery hospital $ 182,150 $ 231,792 $ 198,538 27.3 % (14.3) % Rehabilitation hospital 193,820 217,306 248,303 12.1 14.3 Outpatient rehabilitation 76,658 71,998 53,806 (6.1) (25.3) Other (1) (185,386) (252,781) (164,477) N/M N/M Total Company $ 267,242 $ 268,315 $ 336,170 0.4 % 25.3 % Adjusted EBITDA: Critical illness recovery hospital $ 246,015 $ 301,634 $ 265,447 22.6 % (12.0) % Rehabilitation hospital 221,875 245,748 278,622 10.8 13.4 Outpatient rehabilitation 111,868 108,577 90,163 (2.9) (17.0) Other (1) (133,667) (145,564) (141,057) N/M N/M Total Company $ 446,091 $ 510,395 $ 493,175 14.4 % (3.4) % Adjusted EBITDA margins: Critical illness recovery hospital 10.7 % 12.3 % 10.7 % Rehabilitation hospital 22.6 22.1 21.6 Outpatient rehabilitation 9.4 8.7 7.0 Other (1) N/M N/M N/M Total Company 9.2 % 9.8 % 9.0 % Total assets: Critical illness recovery hospital $ 2,496,886 $ 2,654,474 $ 2,669,940 Rehabilitation hospital 1,233,888 1,366,922 1,602,879 Outpatient rehabilitation 1,380,447 1,404,379 1,399,975 Other (1) 248,204 182,176 178,795 Total Company $ 5,359,425 $ 5,607,951 $ 5,851,589 Purchases of property and equipment: Critical illness recovery hospital $ 93,036 $ 65,861 $ 76,412 Rehabilitation hospital 21,922 53,620 112,550 Outpatient rehabilitation 38,776 36,142 37,250 Other (1) 6,126 3,285 3,013 Total Company $ 159,860 $ 158,908 $ 229,225 _______________________________________________________________________________ (1) Other includes our corporate administration and shared services, as well as employee leasing services with our non-consolidating subsidiaries.
On August 28, 2024, CMS published a final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2025 (affecting discharges and cost reporting periods beginning on or after October 1, 2024, through September 30, 2025). Certain errors in the final rule were corrected in a document published on October 2, 2024.
Fiscal Year 2025. On August 28, 2024, CMS published a final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2025 (affecting discharges and cost reporting periods beginning on or after October 1, 2024, through September 30, 2025). Certain errors in the final rule were corrected in a document published on October 2, 2024.
As part of our qualitative assessments, we considered (i) the magnitude of the reporting unit’s excess fair value over its carrying amount from the most recent quantitative impairment test, (ii) industry and market conditions, including the impacts of the interest rate environment, (iii) historical financial performance, including our revenue, earnings, and operating cash flow growth trends, (iv) our forecasts of revenue, earnings, and operating cash flows, (v) cost factors, including the effects of inflation and rising prices, (vi) the regulatory environment, including reimbursement and compliance requirements such as those that exist under the Medicare program, (vii) other factors specific to each reporting unit, such as a change in strategy, a change in management, or acquisitions and divestitures affecting the composition of the reporting unit and its future operating results, and (viii) consideration of changes in our market capitalization.
As part of our qualitative assessments, we considered (i) the magnitude of the reporting unit’s excess fair value over its carrying amount from the most recent quantitative impairment test, (ii) industry and market conditions, including the impacts of the interest rate environment, (iii) historical financial performance, including revenue, earnings, and operating cash flow growth trends, (iv) our forecasts of revenue, earnings, and operating cash flows, (v) cost factors, including the effects of inflation and rising prices, (vi) the regulatory environment, including reimbursement and compliance requirements such as those that exist under the Medicare program, (vii) other factors specific to each reporting unit, such as a change in strategy, a change in management, or acquisitions and divestitures affecting the composition of the reporting unit and its future operating results, and (viii) consideration of changes in our market capitalization.
CMS issued additional waivers to permit more than 150 additional services to be furnished by telehealth, allow physicians to monitor patient services remotely, and fulfill face-to-face requirements in IRFs.
CMS issued additional waivers to permit more than 150 other services to be furnished by telehealth, allow physicians to monitor patient services remotely, and fulfill face-to-face requirements in IRFs.
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.
The common stock repurchase program will remain in effect until December 31, 2027, 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 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 31%, 31%, and 29% of our revenue for the years ended December 31, 2022, 2023, and 2024, 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 31%, 29%, and 29% of our revenue for the years ended December 31, 2023, 2024, and 2025, respectively.
When performing the qualitative assessment, we apply judgement in determining the events and circumstances that most affect the fair value of the reporting unit and in evaluating the significance of those identified events and circumstances in order to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
When performing the qualitative assessment, we apply judgment in determining the events and circumstances that most affect the fair value of the reporting unit and in evaluating the significance of those identified events and circumstances in order to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
Our purchase obligations primarily relate to software licensing and support agreements which specify all significant contractual terms and are legally binding and enforceable. Our construction commitments are described further in Note 20 – Commitments and Contingencies. v.
Our purchase obligations primarily relate to software licensing and support agreements which specify all significant contractual terms and are legally binding and enforceable. Our construction commitments are described further in Note 19 – Commitments and Contingencies. v.
The remaining amounts are recorded in other non-current liabilities. vi. Other current liabilities recorded in the consolidated balance sheet as of December 31, 2024, such as accounts payable and accrued expenses, which are not specifically identified above.
The remaining amounts are recorded in other non-current liabilities. vi. Other current liabilities recorded in the consolidated balance sheet as of December 31, 2025, such as accounts payable and accrued expenses, which are not specifically identified above.
Medicare payments to our rehabilitation hospitals are made in accordance with IRF-PPS. Fiscal Year 2023. On August 1, 2022, CMS published the final rule updating policies and payment rates for the IRF-PPS for fiscal year 2023 (affecting discharges and cost reporting periods beginning on or after October 1, 2022, through September 30, 2023).
Medicare payments to our rehabilitation hospitals are made in accordance with IRF-PPS. Fiscal Year 2024. 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).
Pursuant to the Coronavirus Preparedness and Response Supplemental Appropriations Act, Public Law 116-123, CMS also waived Medicare telehealth payment requirements during the emergency so that beneficiaries in all areas of the country (not just rural areas) could receive telehealth services, including in their homes.
Pursuant to the Coronavirus Preparedness and Response Supplemental Appropriations Act, Public Law 116-123, CMS also waived Medicare telehealth payment requirements during the emergency so that beneficiaries in all areas of the country (not just rural areas) 64 Table of Contents could receive telehealth services, including in their homes.
First, CMS makes additional payments to LTCHs for high cost outlier cases that have extraordinarily high costs relative to the costs of most discharges. For these cases, CMS sets a fixed loss amount each year that represents the maximum loss an LTCH will incur for a case before qualifying for a high cost outlier payment.
First, CMS makes additional payments to LTCHs for high cost outlier cases that have extraordinarily high costs relative to the costs of most discharges. For these cases, 65 Table of Contents CMS sets a fixed-loss amount each year that represents the maximum loss an LTCH will incur for a case before qualifying for a high cost outlier payment.
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, 2024.
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, 2025.
The outlier reconciliation criteria were: (1) a change in the LTCH’s CCR of 10 percentage points or more when comparing the actual CCR to the CCR used during the cost reporting period to make outlier payments; and (2) the LTCH received at least 62 Table of Contents $500,000 in outlier payments during the cost reporting period.
The outlier reconciliation criteria were: (1) a change in the LTCH’s CCR of 10 percentage points or more when comparing the actual CCR to the CCR used during the cost reporting period to make outlier payments; and (2) the LTCH received at least $500,000 in outlier payments during the cost reporting period.
According to CMS, the reconciliation of outlier payments is intended to account for the fact that the LTCH’s cost-to-charge ratio (“CCR”) used to pay Medicare claims during the cost reporting year may differ from the LTCH’s final CCR for the year calculated by the MAC at cost report settlement.
According to CMS, the reconciliation of outlier payments is intended to account for the fact that the LTCH’s CCR used to pay Medicare claims during the cost reporting year may differ from the LTCH’s final CCR for the year calculated by the MAC at cost report settlement.
Medicare payments to our critical illness recovery hospitals are made in accordance with LTCH-PPS. 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).
Medicare payments to our critical illness recovery hospitals are made in accordance with LTCH-PPS. Fiscal Year 2024. On August 28, 2023, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2024 (affecting discharges and cost reporting periods beginning on or after October 1, 2023, through September 30, 2024).
The calendar year 2025 MPFS final rule did not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapy assistants. 64 Table of Contents Critical Accounting Estimates Revenue Recognition and Accounts Receivable Our principal revenue source comes from providing healthcare services to patients.
The calendar year 2026 MPFS final rule did not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapy assistants. 67 Table of Contents Critical Accounting Estimates Revenue Recognition and Accounts Receivable Our principal revenue source comes from providing healthcare services to patients.
These covenants are subject to a number of exceptions, limitations and qualifications. 77 Table of Contents 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.
These covenants are subject to a number of exceptions, limitations and qualifications. 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.
As of December 31, 2024, 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 3.18 to 1.00.
As of December 31, 2025, 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 3.67 to 1.00.
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, and outpatient rehabilitation clinics in the United States. As of December 31, 2024, we had operations in 40 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, and outpatient rehabilitation clinics in the United States. As of December 31, 2025, we had operations in 39 states and the District of Columbia.
Refer to Note 4 – 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 $282.8 million, with $237.7 million payable within the next twelve months.
Refer to Note 4 – 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 $216.8 million, with $165.4 million payable within the next twelve months.
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.
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.
We monitor these programs quarterly and revise our estimates as necessary to take into account additional information. We recorded a liability of $132.1 million and $141.6 million for our estimated losses under these insurance programs at December 31, 2023 and 2024, respectively.
We monitor these programs quarterly and revise our estimates as necessary to take into account additional information. We recorded a liability of $143.6 million and $141.6 million for our estimated losses under these insurance programs at December 31, 2025 and 2024, respectively.
We also recorded insurance proceeds receivable of $8.1 million and $8.5 million, respectively, at December 31, 2023 and 2024, 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 three reporting units which include the critical illness recovery hospital reporting unit, the rehabilitation hospital reporting unit, and the outpatient rehabilitation reporting unit.
We also recorded insurance proceeds receivable of $7.0 million and $8.5 million, respectively, at December 31, 2025 and 2024, for liabilities which exceed our deductibles and self-insured retention limits and are recoverable through our insurance policies. 68 Table of Contents Goodwill We operate three reporting units which include the critical illness recovery hospital reporting unit, the rehabilitation hospital reporting unit, and the outpatient rehabilitation reporting unit.
The standard federal rate also includes an area wage budget neutrality factor of 0.9964315. The fixed-loss amount for high cost outlier cases paid under LTCH-PPS is $77,048, an increase from the fixed-loss amount in the 2024 fiscal year of $59,873.
The standard federal rate also included an area wage budget neutrality factor of 0.9964315. The fixed-loss amount for high cost outlier cases paid under LTCH-PPS was set at $77,048, an increase from the fixed-loss amount in the 2024 fiscal year of $59,873.
Our cost of services, a major component of which is labor expense, was $4,553.5 million, or 87.8% of revenue, for the year ended December 31, 2024, compared to $4,254.4 million, or 88.2% of revenue, for the year ended December 31, 2023.
Our cost of services, a major component of which is labor expense, was $4,823.5 million, or 88.5% of revenue, for the year ended December 31, 2025, compared to $4,553.5 million, or 87.8% of revenue, for the year ended December 31, 2024.
Income from Continuing Operations before Other Income and Expense For the year ended December 31, 2024, we had income from operations from continuing operations before other income and expense of $268.3 million, compared to $267.2 million for the year ended December 31, 2023.
Income from Continuing Operations before Other Income and Expense For the year ended December 31, 2025, we had income from operations from continuing operations before other income and expense of $336.2 million, compared to $268.3 million for the year ended December 31, 2024.
CMS increased the outlier threshold amount for fiscal year 2025 to $12,043 from $10,423 established in the final rule for fiscal year 2024. 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 2026 to $10,141 from $12,043 established in the final rule for fiscal year 2025. Medicare Reimbursement of Outpatient Rehabilitation Clinic Services The Medicare program reimburses outpatient rehabilitation providers based on the MPFS.
Debt payments, including finance lease payments – Our expected principal payments total $1,731.3 million, with $20.3 million payable within the next twelve months. Refer to Note 12 – 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 $1,845.4 million, with $24.2 million payable within the next twelve months. Refer to Note 12 – Long-Term Debt and Notes Payable of the notes to our consolidated financial statements included herein for additional information. ii.
The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $42,750, an increase from the fixed-loss amount in the 2023 fiscal year of $38,788. Fiscal Year 2025.
The fixed-loss amount for high cost outlier cases paid under LTCH-PPS was set at $59,873, an increase from the fixed-loss amount in the 2023 fiscal year of $38,518. The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $42,750, an increase from the fixed-loss amount in the 2023 fiscal year of $38,788.
The standard federal rate for fiscal year 2025 is $49,383, an increase from the standard federal rate applicable during fiscal year 2024 of $48,117. The update to the standard federal rate for fiscal year 2025 includes a market basket increase of 3.5%, less a productivity adjustment of 0.5%.
The standard federal rate for fiscal year 2025 was set at $49,383, an increase from the standard federal rate applicable during fiscal year 2024 of $48,117. The update to the standard federal rate for fiscal year 2025 included a market basket increase of 3.5%, less a productivity adjustment of 0.5%.
Insurance liabilities – Our expected payments related to our insurance liabilities, including those for workers’ compensation and professional malpractice liabilities, total $141.6 million, with $69.3 million payable within the next twelve months. The amounts payable within the next twelve months are recorded in accrued other in the consolidated balance sheet as of December 31, 2024.
Insurance liabilities – Our expected payments related to our insurance liabilities, including those for workers’ compensation and professional malpractice liabilities, total $143.6 million, with $67.4 million payable within the next twelve months. The amounts payable within the next twelve months are recorded in accrued other in the consolidated balance sheet as of December 31, 2025.
Loss on Early Retirement of Debt For the year ended December 31, 2024, we had a loss on early retirement of debt of $28.8 million related to the prepayment on our term loan, the amendments to the Select credit agreement, and the refinancing of our senior notes, as described in Note 12 - Long-Term Debt and Notes Payable .
Loss on Early Retirement of Debt For the year ended December 31, 2024, we had a loss on early retirement of debt of $28.8 million related to the prepayment on our term loan, the amendments to the Select credit agreement, and the refinancing of our senior notes.
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.
For the year ended December 31, 2023, the principal uses of cash were $229.2 million for purchases of property, equipment, and other assets, and $39.4 million for investments in and acquisitions of businesses. Financing activities used $163.2 million of cash flows for the year ended December 31, 2025.
Our days sales outstanding was 58 days at December 31, 2024, 60 days at September 30, 2024, 55 days at December 31, 2023, and 58 days at December 31, 2022. Our days sales outstanding will fluctuate based upon variability in our collection cycles and patient volumes.
Our days sales outstanding was 57 days at December 31, 2025, 58 days at December 31, 2024, and 55 days at December 31, 2023. Our days sales outstanding will fluctuate based upon variability in our collection cycles and patient volumes.
Our Adjusted EBITDA margin for the outpatient rehabilitation segment was 8.7% for the year ended December 31, 2024, compared to 9.4% for the year ended December 31, 2023.
Our Adjusted EBITDA margin for the outpatient rehabilitation segment was 7.0% for the year ended December 31, 2025, compared to 8.7% for the year ended December 31, 2024.
Other Operating Income For the year ended December 31, 2024, we had other operating income of $3.4 million, compared to $1.5 million for the year ended December 31, 2023. Adjusted EBITDA Critical Illness Recovery Hospital Segment.
Other Operating Income For the year ended December 31, 2025, we had other operating income of $1.6 million, compared to $3.4 million for the year ended December 31, 2024. Adjusted EBITDA Critical Illness Recovery Hospital Segment. Adjusted EBITDA was $265.4 million for the year ended December 31, 2025, compared to $301.6 million for the year ended December 31, 2024.
The decreases in our Adjusted EBITDA and Adjusted EBITDA margin for the year ended December 31, 2024, as compared to the year ended December 31, 2023, were principally attributable to higher labor costs, partially offset by an increase in revenue.
The decreases in our Adjusted EBITDA and Adjusted EBITDA margin for the year ended December 31, 2025, as compared to the year ended December 31, 2024, were principally attributable to an increase in personnel expense, partially offset by an increase in revenue.
We used the income approach in determining the fair value of the outpatient rehabilitation reporting unit. Included in the income approach are assumptions regarding revenue growth rates, future Adjusted EBITDA margin estimates, future capital expenditure requirements, the industry’s weighted average cost of capital, and industry specific, market observable implied Adjusted EBITDA multiples.
We used both the income and market approaches in determining the fair value of the critical illness recovery hospital reporting unit. Included in these approaches are assumptions regarding revenue growth rates, future Adjusted EBITDA margin estimates, future capital expenditure requirements, the industry’s weighted average cost of capital, and industry specific, market observable implied Adjusted EBITDA multiples.
At December 31, 2024, Select had $550.0 million of 6.250% senior notes outstanding (excluding debt issuance costs of $10.6 million).
At December 31, 2025, Select had $550.0 million of 6.250% senior notes outstanding (excluding debt issuance costs of $9.3 million).
Operating activities provided $517.9 million, $582.1 million, and $284.8 million of cash flows during the years ended December 31, 2024, 2023, and 2022, respectively.
Operating activities provided $346.5 million, $517.9 million, and $582.1 million of cash flows during the years ended December 31, 2025, 2024, and 2023, respectively.
The increase in Adjusted EBITDA was principally due to an increase in revenue. 71 Table of Contents Outpatient Rehabilitation Segment. Adjusted EBITDA was $108.6 million for the year ended December 31, 2024, compared to $111.9 million for the year ended December 31, 2023.
The increase in Adjusted EBITDA was principally due to an increase in revenue. 74 Table of Contents Outpatient Rehabilitation Segment. Adjusted EBITDA was $90.2 million for the year ended December 31, 2025, compared to $108.6 million for the year ended December 31, 2024.
Income Tax Expense from Continuing Operations We recorded income tax expense of $44.8 million for the year ended December 31, 2024, which represented an effective tax rate of 25.6%. We recorded income tax expense of $29.3 million for the year ended December 31, 2023, which represented an effective tax rate of 20.9%.
Income Tax Expense from Continuing Operations We recorded income tax expense of $58.2 million for the year ended December 31, 2025, which represented an effective tax rate of 21.3%. We recorded income tax expense of $44.8 million for the year ended December 31, 2024, which represented an effective tax rate of 25.6%.
The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate is $46,217, an increase from the fixed-loss amount in the 2024 fiscal year of $42,750. See high cost outlier risk factor within “Item 1A. Risk Factors . Criteria for Reconciliation of Outlier Payments Under the LTCH PPS, CMS makes two types of outlier payments to LTCHs.
The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate is $40,397, a decrease from the fixed-loss amount in the 2025 fiscal year of $46,217. See high cost outlier risk factor within “Item 1A. Risk Factors”. Criteria for Reconciliation of Outlier Payments Under the LTCH PPS, CMS makes two types of outlier payments to LTCHs.
Equity in Earnings of Unconsolidated Subsidiaries For the year ended December 31, 2024, we had equity in earnings of unconsolidated subsidiaries of $63.9 million, compared to $41.3 million for the year ended December 31, 2023.
Equity in Earnings of Unconsolidated Subsidiaries For the year ended December 31, 2025, we had equity in earnings of unconsolidated subsidiaries of $54.5 million, compared to $63.9 million for the year ended December 31, 2024.
For the Year Ended December 31, 2022 2023 2024 Critical illness recovery hospital data: Number of consolidated hospitals—start of period (1) 104 103 107 Number of hospitals acquired 2 2 — Number of hospital start-ups 1 4 1 Number of hospitals closed/sold (4) (2) (4) Number of consolidated hospitals—end of period (1) 103 107 104 Available licensed beds (3) 4,386 4,538 4,450 Admissions (3)(4) 36,594 36,225 35,784 Patient days (3)(5) 1,127,911 1,108,492 1,118,757 Average length of stay (days) (3)(6) 31 31 31 Revenue per patient day (3)(7) $ 1,973 $ 2,067 $ 2,177 Occupancy rate (3)(8) 69 % 68 % 68 % Percent patient days—Medicare (3)(9) 39 % 38 % 35 % Rehabilitation hospital data: Number of consolidated hospitals—start of period (1) 20 20 21 Number of hospitals acquired — 1 1 Number of hospital start-ups — — 1 Number of hospitals closed/sold — — — Number of consolidated hospitals—end of period (1) 20 21 23 Number of unconsolidated hospitals managed—end of period (2) 11 12 12 Total number of hospitals (all)—end of period 31 33 35 Available licensed beds (3) 1,391 1,479 1,639 Admissions (3)(4) 29,736 31,627 33,665 Patient days (3)(5) 430,547 446,145 470,594 Average length of stay (days) (3)(6) 15 14 14 Revenue per patient day (3)(7) $ 1,953 $ 2,017 $ 2,134 Occupancy rate (3)(8) 85 % 85 % 84 % Percent patient days—Medicare (3)(9) 48 % 49 % 48 % Outpatient rehabilitation data: Number of consolidated clinics—start of period 1,572 1,622 1,633 Number of clinics acquired 30 16 11 Number of clinic start-ups 44 37 17 Number of clinics closed/sold (24) (42) (44) Number of consolidated clinics—end of period 1,622 1,633 1,617 Number of unconsolidated clinics managed—end of period 306 300 297 Total number of clinics (all)—end of period 1,928 1,933 1,914 Number of visits (3)(10) 9,573,980 10,657,558 11,147,920 Revenue per visit (3)(11) $ 103 $ 100 $ 101 67 Table of Contents _______________________________________________________________________________ (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, 2023 2024 2025 Critical illness recovery hospital data: Number of consolidated hospitals—start of period (1) 103 107 104 Number of hospitals acquired 2 — 2 Number of hospital start-ups 4 1 — Number of hospitals closed/sold (2) (4) (2) Number of consolidated hospitals—end of period (1) 107 104 104 Available licensed beds (3) 4,538 4,450 4,420 Admissions (3)(4) 36,225 35,784 36,126 Patient days (3)(5) 1,108,492 1,118,757 1,107,387 Average length of stay (days) (3)(6) 31 31 31 Revenue per patient day (3)(7) $ 2,067 $ 2,177 $ 2,230 Occupancy rate (3)(8) 68 % 68 % 69 % Percent patient days—Medicare (3)(9) 38 % 35 % 35 % Rehabilitation hospital data: Number of consolidated hospitals—start of period (1) 20 21 23 Number of hospitals acquired 1 1 1 Number of hospital start-ups — 1 2 Number of hospitals closed/sold — — — Number of consolidated hospitals—end of period (1) 21 23 26 Number of unconsolidated hospitals managed—end of period (2) 12 12 12 Total number of hospitals (all)—end of period 33 35 38 Available licensed beds - consolidated hospitals (3) 1,479 1,639 1,826 Available licensed beds - unconsolidated hospitals managed (12) 632 662 662 Admissions (3)(4) 31,627 33,665 36,787 Patient days (3)(5) 446,145 470,594 510,127 Average length of stay (days) (3)(6) 14 14 14 Revenue per patient day (3)(7) $ 2,017 $ 2,134 $ 2,260 Occupancy rate (3)(8) 85 % 84 % 82 % Percent patient days—Medicare (3)(9) 49 % 48 % 50 % Outpatient rehabilitation data: Number of consolidated clinics—start of period 1,622 1,633 1,617 Number of clinics acquired 16 11 5 Number of clinic start-ups 37 17 27 Number of clinics closed/sold (42) (44) (32) Number of consolidated clinics—end of period 1,633 1,617 1,617 Number of unconsolidated clinics managed—end of period 300 297 300 Total number of clinics (all)—end of period 1,933 1,914 1,917 Number of visits (3)(10) 10,657,558 11,147,920 11,517,388 Revenue per visit (3)(11) $ 100 $ 101 $ 100 70 Table of Contents _______________________________________________________________________________ (1) Represents the number of hospitals included in our consolidated financial results at the end of each period presented.
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. Fiscal Year 2025.
CMS increased the outlier threshold amount for fiscal year 2025 to $12,043 from $10,423 established in the final rule for fiscal year 2024. Fiscal Year 2026 .
General and administrative expenses were $225.9 million, or 4.4% of revenue, for the year ended December 31, 2024, compared to $170.2 million, or 3.5% of revenue, for the year ended December 31, 2023.
General and administrative expenses were $154.4 million, or 2.8% of revenue, for the year ended December 31, 2025, compared to $225.9 million, or 4.4% of revenue, for the year ended December 31, 2024.
We also intend to open new outpatient rehabilitation clinics in local areas that we currently serve where we can benefit from existing referral relationships and brand awareness to produce incremental growth. In addition to our development activities, we may grow through opportunistic acquisitions.
We also intend to open new outpatient rehabilitation clinics in local areas that we currently serve where we can benefit from existing referral relationships and brand awareness to produce incremental growth.
Certain errors in the final rule were corrected in documents published November 4, 2022, and December 13, 2022. 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.
Certain errors in the final rule were corrected in documents published October 4, 2023 and November 9, 2023. The standard federal rate for fiscal year 2024 was set at $48,117, an increase from the standard federal rate applicable during fiscal year 2023 of $46,433.
We had revenue of $5,187.1 million for the year ended December 31, 2024. Of this total, we earned approximately 47% of our revenue from our critical illness recovery hospital segment, approximately 21% from our rehabilitation hospital segment, and approximately 24% from our outpatient rehabilitation segment.
We had revenue of $5,452.8 million for the year ended December 31, 2025. Of this total, we earned approximately 45% of our revenue from our critical illness recovery hospital segment, approximately 24% from our rehabilitation hospital segment, and approximately 24% from our outpatient rehabilitation segment.
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.
On August 5, 2025, CMS published the final rule to update policies and payment rates for the IRF-PPS for fiscal year 2026 (affecting discharges and cost reporting periods beginning on or after October 1, 2025, through September 30, 2026). Certain errors in the final rule were corrected in a document published on December 17, 2025.
We have recorded total goodwill of $2.3 billion at December 31, 2024, of which $1.2 billion related to our critical illness recovery hospital reporting unit, $497.1 million related to our rehabilitation hospital reporting unit, and $668.9 million related to our outpatient rehabilitation reporting unit. 66 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 $2.4 billion at December 31, 2025, of which $1.2 billion related to our critical illness recovery hospital reporting unit, $517.6 million related to our rehabilitation hospital reporting unit, and $669.7 million related to our outpatient rehabilitation reporting unit. 69 Table of Contents Operating Statistics The following table sets forth operating statistics for each of our segments for the periods presented.
At December 31, 2024, Select had outstanding borrowings under its credit facilities consisting of a $1,050.0 million term loan (excluding unamortized original issue discounts and debt issuance costs of $8.3 million) and borrowings of $105.0 million under its revolving facility.
At December 31, 2025, Select had outstanding borrowings under its credit facilities consisting of a $1,039.5 million term loan (excluding unamortized original issue discounts and debt issuance costs of $7.1 million) and borrowings of $100.0 million under its revolving facility.
Interest payments – Our expected interest payments on the 6.250% senior notes, term loan, and revolving facility total $763.7 million, with $111.6 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, revolving facility, and other debt facilities total $685.1 million, with $110.8 million payable within the next twelve months. Interest payments for the 6.250% senior notes were calculated using the stated interest rate.
Depreciation and Amortization Depreciation and amortization expense was $142.9 million for the year ended December 31, 2024, compared to $135.7 million for the year ended December 31, 2023.
Depreciation and Amortization Depreciation and amortization expense was $140.3 million for the year ended December 31, 2025, compared to $142.9 million for the year ended December 31, 2024.
Interest payments for the term loan and revolving facility were calculated using interest rates of 6.5% and 8.7%, respectively. iii. Operating lease payments – Our expected operating lease payments total $1,374.2 million, with $235.5 million payable within the next twelve months.
Interest payments for the term loan and revolving facility were calculated using interest rates of 6.3% and 6.8%, respectively. Interest payments on our other debt facilities were calculated using a blended rate of 5.7%. iii. Operating lease payments – Our expected operating lease payments total $1,505.2 million, with $244.6 million payable within the next twelve months.
For the Year Ended December 31, 2022 2023 2024 (in thousands) Income from continuing operations, net of tax $ 18,545 $ 110,471 $ 129,987 Income tax expense from continuing operations 16,723 29,253 44,782 Interest expense 137,470 154,165 128,605 Equity in earnings of unconsolidated subsidiaries (27,984) (41,339) (63,904) Loss on early retirement of debt — 14,692 28,845 Income from continuing operations before other income and expense 144,754 267,242 268,315 Stock compensation expense: Included in general and administrative 30,555 36,041 79,931 Included in cost of services 5,059 7,117 19,283 Depreciation and amortization 132,158 135,691 142,866 Adjusted EBITDA $ 312,526 $ 446,091 $ 510,395 58 Table of Contents Summary Financial Results Income from continuing operations, net of tax, was $130.0 million, $110.5 million, and $18.5 million for the years ended December 31, 2024, 2023, and 2022, respectively.
For the Year Ended December 31, 2023 2024 2025 (in thousands) Income from continuing operations, net of tax $ 110,471 $ 129,987 $ 214,533 Income tax expense from continuing operations 29,253 44,782 58,216 Interest expense 154,165 128,605 117,942 Equity in earnings of unconsolidated subsidiaries (41,339) (63,904) (54,521) Loss on early retirement of debt 14,692 28,845 — Income from continuing operations before other income and expense 267,242 268,315 336,170 Stock compensation expense: Included in general and administrative 36,041 79,931 13,285 Included in cost of services 7,117 19,283 3,417 Depreciation and amortization 135,691 142,866 140,303 Adjusted EBITDA $ 446,091 $ 510,395 $ 493,175 61 Table of Contents Summary Financial Results Income from continuing operations, net of tax, was $214.5 million, $130.0 million, and $110.5 million for the years ended December 31, 2025, 2024, and 2023, respectively.
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. Fiscal Year 2024.
The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $46,217, an increase from the fixed-loss amount in the 2024 fiscal year of $42,750. Fiscal Year 2026 .
Adjusted EBITDA increased 22.6% to $301.6 million for the year ended December 31, 2024, compared to $246.0 million for the year ended December 31, 2023. Our Adjusted EBITDA margin for the critical illness recovery hospital segment was 12.3% for the year ended December 31, 2024, compared to 10.7% for the year ended December 31, 2023.
Our Adjusted EBITDA margin for the critical illness recovery hospital segment was 10.7% for the year ended December 31, 2025, compared to 12.3% for the year ended December 31, 2024.
Investing activities used $231.0 million, $268.5 million, and $226.3 million of cash flows for the years ended December 31, 2024, 2023, and 2022, respectively. For the year ended December 31, 2024, the principal uses of cash were $222.2 million for purchases of property, equipment, and other assets, and $13.1 million for investments in and acquisitions of businesses.
Investing activities used $216.5 million, $231.0 million, and $268.5 million of cash flows for the years ended December 31, 2025, 2024, and 2023, respectively. For the year ended December 31, 2025, the principal uses of cash were $229.2 million for purchases of property and equipment, and $10.7 million for investments in and acquisitions of businesses.
The increases in our Adjusted EBITDA and Adjusted EBITDA margin during the year ended December 31, 2024, as compared to the year ended December 31, 2023, were principally attributable an increase in net revenue. Rehabilitation Hospital Segment.
The decreases in our Adjusted EBITDA and Adjusted EBITDA margin during the year ended December 31, 2025, as compared to the year ended December 31, 2024, were principally attributable an increase in our operating expenses, partially offset by an increase in revenue. Rehabilitation Hospital Segment.
Adjusted EBITDA increased 10.8% to $245.7 million for the year ended December 31, 2024, compared to $221.9 million for the year ended December 31, 2023. Our Adjusted EBITDA margin for the rehabilitation hospital segment was 22.1% for the year ended December 31, 2024, compared to 22.6% for the year ended December 31, 2023.
Adjusted EBITDA increased 13.4% to $278.6 million for the year ended December 31, 2025, compared to $245.7 million for the year ended December 31, 2024. Our Adjusted EBITDA margin for the rehabilitation hospital segment was 21.6% for the year ended December 31, 2025, compared to 22.1% for the year ended December 31, 2024.
The following tables reconcile our segment performance measures to our consolidated operating results for the years ended December 31, 2024, 2023, and 2022: For the Year Ended December 31, 2024 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,444,196 $ 1,110,592 $ 1,250,294 $ 382,023 $ 5,187,105 Operating expenses (2,145,595) (864,844) (1,141,715) (627,176) (4,779,330) Depreciation and amortization (69,842) (28,442) (36,579) (8,003) (142,866) Other operating income 3,033 — (2) 375 3,406 Income from continuing operations before other income and expense 231,792 217,306 71,998 (252,781) 268,315 Depreciation and amortization 69,842 28,442 36,579 8,003 142,866 Stock compensation expense — — — 99,214 99,214 Adjusted EBITDA $ 301,634 $ 245,748 $ 108,577 $ (145,564) $ 510,395 Adjusted EBITDA margin 12.3 % 22.1 % 8.7 % N/M 9.8 % For the Year Ended December 31, 2023 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,299,773 $ 979,585 $ 1,188,914 $ 357,705 $ 4,825,977 Operating expenses (2,053,758) (758,466) (1,077,322) (535,016) (4,424,562) Depreciation and amortization (63,865) (28,055) (35,210) (8,561) (135,691) Other operating income — 756 276 486 1,518 Income from continuing operations before other income and expense 182,150 193,820 76,658 (185,386) 267,242 Depreciation and amortization 63,865 28,055 35,210 8,561 135,691 Stock compensation expense — — — 43,158 43,158 Adjusted EBITDA $ 246,015 $ 221,875 $ 111,868 $ (133,667) $ 446,091 Adjusted EBITDA margin 10.7 % 22.6 % 9.4 % N/M 9.2 % For the Year Ended December 31, 2022 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,234,132 $ 916,763 $ 1,125,282 $ 333,002 $ 4,609,179 Operating expenses (2,127,233) (718,970) (1,023,422) (491,096) (4,360,721) Depreciation and amortization (61,565) (27,814) (32,663) (10,116) (132,158) Other operating income 4,445 241 — 23,768 28,454 Income from continuing operations before other income and expense 49,779 170,220 69,197 (144,442) 144,754 Depreciation and amortization 61,565 27,814 32,663 10,116 132,158 Stock compensation expense — — — 35,614 35,614 Adjusted EBITDA $ 111,344 $ 198,034 $ 101,860 $ (98,712) $ 312,526 Adjusted EBITDA margin 5.0 % 21.6 % 9.1 % N/M 6.8 % 59 Table of Contents The following tables summarize the changes in our segment performance measures for the year-to-date periods specified below. 2024 Compared to 2023 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total Change in revenue 6.3 % 13.4 % 5.2 % 6.8 % 7.5 % Change in income from continuing operations before other income and expense 27.3 % 12.1 % (6.1) % N/M 0.4 % Change in Adjusted EBITDA 22.6 % 10.8 % (2.9) % N/M 14.4 % 2023 Compared to 2022 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total Change in revenue 2.9 % 6.9 % 5.7 % 7.4 % 4.7 % Change in income from continuing operations before other income and expense 265.9 % 13.9 % 10.8 % N/M 84.6 % Change in Adjusted EBITDA 121.0 % 12.0 % 9.8 % N/M 42.7 % _______________________________________________________________________________ N/M Not meaningful. 60 Table of Contents Regulatory Changes The Medicare program reimburses healthcare providers for services furnished to Medicare beneficiaries, which are generally persons age 65 and older, those who are chronically disabled, and those suffering from end stage renal disease.
The following tables reconcile our segment performance measures to our consolidated operating results for the years ended December 31, 2025, 2024, and 2023: For the Year Ended December 31, 2025 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,477,814 $ 1,288,954 $ 1,284,873 $ 401,189 $ 5,452,830 Operating expenses (2,213,887) (1,010,332) (1,194,710) (559,020) (4,977,949) Depreciation and amortization (66,909) (30,319) (36,357) (6,718) (140,303) Other operating income 1,520 — — 72 1,592 Income from continuing operations before other income and expense 198,538 248,303 53,806 (164,477) 336,170 Depreciation and amortization 66,909 30,319 36,357 6,718 140,303 Stock compensation expense — — — 16,702 16,702 Adjusted EBITDA $ 265,447 $ 278,622 $ 90,163 $ (141,057) $ 493,175 Adjusted EBITDA margin 10.7 % 21.6 % 7.0 % N/M 9.0 % For the Year Ended December 31, 2024 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,444,196 $ 1,110,592 $ 1,250,294 $ 382,023 $ 5,187,105 Operating expenses (2,145,595) (864,844) (1,141,715) (627,176) (4,779,330) Depreciation and amortization (69,842) (28,442) (36,579) (8,003) (142,866) Other operating income 3,033 — (2) 375 3,406 Income from continuing operations before other income and expense 231,792 217,306 71,998 (252,781) 268,315 Depreciation and amortization 69,842 28,442 36,579 8,003 142,866 Stock compensation expense — — — 99,214 99,214 Adjusted EBITDA $ 301,634 $ 245,748 $ 108,577 $ (145,564) $ 510,395 Adjusted EBITDA margin 12.3 % 22.1 % 8.7 % N/M 9.8 % For the Year Ended December 31, 2023 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total (in thousands) Revenue $ 2,299,773 $ 979,585 $ 1,188,914 $ 357,705 $ 4,825,977 Operating expenses (2,053,758) (758,466) (1,077,322) (535,016) (4,424,562) Depreciation and amortization (63,865) (28,055) (35,210) (8,561) (135,691) Other operating income — 756 276 486 1,518 Income from continuing operations before other income and expense 182,150 193,820 76,658 (185,386) 267,242 Depreciation and amortization 63,865 28,055 35,210 8,561 135,691 Stock compensation expense — — — 43,158 43,158 Adjusted EBITDA $ 246,015 $ 221,875 $ 111,868 $ (133,667) $ 446,091 Adjusted EBITDA margin 10.7 % 22.6 % 9.4 % N/M 9.2 % 62 Table of Contents The following tables summarize the changes in our segment performance measures for the year-to-date periods specified below. 2025 Compared to 2024 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total Change in revenue 1.4 % 16.1 % 2.8 % 5.0 % 5.1 % Change in income from continuing operations before other income and expense (14.3) % 14.3 % (25.3) % N/M 25.3 % Change in Adjusted EBITDA (12.0) % 13.4 % (17.0) % N/M (3.4) % 2024 Compared to 2023 Critical Illness Recovery Hospital Rehabilitation Hospital Outpatient Rehabilitation Other Total Change in revenue 6.3 % 13.4 % 5.2 % 6.8 % 7.5 % Change in income from continuing operations before other income and expense 27.3 % 12.1 % (6.1) % N/M 0.4 % Change in Adjusted EBITDA 22.6 % 10.8 % (2.9) % N/M 14.4 % _______________________________________________________________________________ N/M Not meaningful. 63 Table of Contents Regulatory Changes The Medicare program reimburses healthcare providers for services furnished to Medicare beneficiaries, which are generally persons age 65 and older, those who are chronically disabled, and those suffering from end stage renal disease.
On August 28, 2023, CMS published the final rule updating policies and payment rates for the LTCH-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 documents published October 4, 2023 and November 9, 2023.
On August 4, 2025, CMS published a final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2026 (affecting discharges and cost reporting periods beginning on or after October 1, 2025, through September 30, 2026).
Historically, each reporting unit’s fair value has significantly exceeded its carrying amount. We performed a quantitative impairment assessment for the outpatient rehabilitation reporting unit as of October 1, 2024, to assess the impact of the current operating performance as compared to historical operating trends on the estimated fair value of the reporting unit.
Historically, each reporting unit’s fair value has significantly exceeded its carrying amount. We performed a quantitative impairment assessment for the critical illness recovery hospital reporting unit as of October 1, 2025, to assess the impact of Medicare reimbursement rates and current operating performance on the estimated fair value of the reporting unit.
As of December 31, 2024, we had cash and cash equivalents of $59.7 million and $453.3 million of availability under our revolving facility, after giving effect to $105.0 million of outstanding borrowings and $41.7 million of outstanding letters of credit. Our material cash requirements from known contractual and other obligations include: i.
As of December 31, 2025, we had cash and cash equivalents of $26.5 million and $469.1 million of availability under our revolving facility, after giving effect to $100.0 million of outstanding borrowings and $30.9 million of outstanding letters of credit. Our material cash requirements from known contractual and other obligations include: i.
For the Year Ended December 31, 2022 2023 2024 Cash flows provided by operating activities $ 284,825 $ 582,058 $ 517,864 Cash flows used in investing activities (226,339) (268,477) (231,011) Cash flows used in financing activities (34,890) (327,481) (311,165) Net increase (decrease) in cash and cash equivalents 23,596 (13,900) (24,312) Cash and cash equivalents at beginning of period 74,310 97,906 84,006 Cash and cash equivalents at end of period (1) $ 97,906 $ 84,006 $ 59,694 ______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ (1) The Company had and $37.7 million and $31.4 million of cash and cash equivalents from discontinued operations at December 31, 2022 and 2023, respectively.
For the Year Ended December 31, 2023 2024 2025 Cash flows provided by operating activities $ 582,058 $ 517,864 $ 346,467 Cash flows used in investing activities (268,477) (231,011) (216,486) Cash flows used in financing activities (327,481) (311,165) (163,152) Net decrease in cash and cash equivalents (13,900) (24,312) (33,171) Cash and cash equivalents at beginning of period 97,906 84,006 59,694 Cash and cash equivalents at end of period (1) $ 84,006 $ 59,694 $ 26,523 ______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ (1) The Company had $31.4 million of cash and cash equivalents from discontinued operations at December 31, 2023.
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. 77 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.
As of October 1, 2024, we performed a qualitative impairment assessment for the rehabilitation hospital reporting unit, the critical illness recovery hospital reporting unit, and the former Concentra reporting unit.
As of October 1, 2025, we performed a qualitative impairment assessment for the rehabilitation hospital reporting unit and the outpatient rehabilitation reporting unit.
Revenue increased 6.3% to $2,444.2 million for the year ended December 31, 2024, compared to $2,299.8 million for the year ended December 31, 2023. The increase was attributable to revenue per patient day, which increased 5.3% to $2,177 for the year ended December 31, 2024, compared to $2,067 for the year ended December 31, 2023.
Revenue increased 1.4% to $2,477.8 million for the year ended December 31, 2025, compared to $2,444.2 million for the year ended December 31, 2024. The increase was attributable to revenue per patient day, which increased 2.4% to $2,230 for the year ended December 31, 2025, compared to $2,177 for the year ended December 31, 2024.
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.
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 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
For the year ended December 31, 2024, Adjusted EBITDA was $510.4 million, with an Adjusted EBITDA margin of 9.8%, as compared to Adjusted EBITDA of $446.1 million and an Adjusted EBITDA margin of 9.2% in the prior year.
For the year ended December 31, 2025, Adjusted EBITDA was $493.2 million, with an Adjusted EBITDA margin of 9.0%, as compared to Adjusted EBITDA of $510.4 million and an Adjusted EBITDA margin of 9.8% in the prior year. Revenue Critical Illness Recovery Hospital Segment.
Our patient days were 1,108,492 for the year ended December 31, 2023, compared to 1,127,911 patient days for the year ended December 31, 2022. Occupancy in our critical illness recovery hospitals was 68% for the year ended December 31, 2023, compared to 69% for the year ended December 31, 2022. Rehabilitation Hospital Segment.
Our patient days were 1,107,387 for the year ended December 31, 2025, compared to 1,118,757 patient days for the year ended December 31, 2024. Occupancy in our critical illness recovery hospitals was 69% for the year ended December 31, 2025, compared to 68% for the year ended December 31, 2024. Rehabilitation Hospital Segment.
On March 13, 2024, May 30, 2024, August 30, 2024, and November 26, 2024, cash dividends totaling $16.0 million, $16.3 million, $16.2 million, and $16.1 million were paid. On February 13, 2025, our Board of Directors declared a cash dividend of $0.0625 per share.
Dividend On February 13, 2025, April 30, 2025, July 30, 2025, and October 29, 2025, our Board of Directors declared a cash dividend of $0.0625 per share. On March 13, 2025, May 29, 2025, August 28, 2025, and November 25, 2025, cash dividends totaling $8.1 million, $7.9 million, $7.7 million, and $7.8 million were paid.
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. 76 Table of Contents Capital Resources Working capital.
The principal uses of cash were net payments of $165.0 million under our revolving facility, $63.9 million of dividend payments to common stockholders, and $63.5 million for distributions to and purchases of non-controlling interests. 76 Table of Contents Capital Resources Working capital.
The standard payment conversion factor for discharges for fiscal year 2024 was set at $18,541, an increase from the standard payment conversion factor applicable during fiscal year 2022 of $17,878. The update to the standard payment conversion factor for fiscal year 2024 included a market basket increase of 3.6%, less a productivity adjustment of 0.2%.
The standard payment conversion factor for discharges for fiscal year 2026 was set at $19,371, an increase from the standard payment conversion 66 Table of Contents factor applicable during fiscal year 2025 of $18,907. The update to the standard payment conversion factor for fiscal year 2026 included a market basket increase of 3.3%, less a productivity adjustment of 0.7%.
Payments under the 2023 MPFS physician fee schedule decreased by 2%, and for calendar year 2024, CMS expected that its final policies for 2024 would result in a 3% decrease in Medicare payments for the therapy specialty. In the calendar year 2025 MPFS final rule, CMS calculated the payment rates without the one-time increases provided for in legislation.
In the calendar year 2025 MPFS final rule, CMS calculated the payment rates without the one-time increases provided for in legislation. CMS expected that its policies for 2025 would not result in any increase or decrease in Medicare payments for the therapy specialty.
At December 31, 2024, Select had $453.3 million of availability under its revolving facility after giving effect to $105.0 million of outstanding borrowings and $41.7 million of outstanding letters of credit.
At December 31, 2025, Select had $469.1 million of availability under its revolving facility after giving effect to $100.0 million of outstanding borrowings and $30.9 million of outstanding letters of credit.
The decrease in our operating expenses relative to our revenue was principally attributable to the decreased labor costs within our critical illness recovery hospital segment, as explained further within the “ Adjusted EBITDA ” discussion.
The increase in our cost of services relative to our revenue was principally attributable to the operating performance of our Critical Illness Recovery Hospital segment and Outpatient Rehabilitation segment, as explained further within the “ Adjusted EBITDA ” discussion.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2024, Select had outstanding borrowings under its credit facilities consisting of a $1,050.0 million term loan (excluding unamortized original issue discount and debt issuance costs of $8.3 million) and $105.0 million of borrowings under its revolving facility.
Biggest changeAs of December 31, 2025, Select had outstanding borrowings under its credit facilities consisting of a $1,039.5 million term loan (excluding unamortized original issue discount and debt issuance costs of $7.1 million) and $100.0 million of borrowings under its revolving facility, which bear interest at variable rates.
As of December 31, 2024, a 0.25% change in market interest rates would impact the interest expense on our variable rate debt by approximately $2.9 million per year. Item 8. Financial Statements and Supplementary Data. See Consolidated Financial Statements and Notes thereto commencing at Page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.
As of December 31, 2025, the first 0.25% increase in market interest rates will impact the annual interest expense on our variable rate debt by $2.8 million per year. Item 8. Financial Statements and Supplementary Data. See Consolidated Financial Statements and Notes thereto commencing at Page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Added
In order to mitigate our exposure to rising interest rates, we entered into an interest rate cap effective on March 31, 2025, which limits the Term SOFR rate to 4.5% on $1.0 billion of principal outstanding under our term loan. The agreement applies to interest payments through March 31, 2028.
Added
As of December 31, 2025, the Term SOFR rate was 3.69%. As of December 31, 2025, we had $39.5 million of term loan borrowings which would be subject to variable interest rates if the Term SOFR rate were to exceed 4.5%.

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