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What changed in U S PHYSICAL THERAPY INC /NV's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of U S PHYSICAL THERAPY INC /NV's 2023 and 2024 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 2024 report.

+294 added−277 removedSource: 10-K (2025-03-03) vs 10-K (2024-02-29)

Top changes in U S PHYSICAL THERAPY INC /NV's 2024 10-K

294 paragraphs added · 277 removed · 218 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

47 edited+23 added−11 removed96 unchanged
Biggest changeAcquisitions of Businesses and Interests During the last three years, we completed the acquisitions of the following clinic practices and IIP businesses detailed below: % Interest Number of Acquisition Date Acquired Clinics October 2023 Acquisition October 31, 2023 ** * September 2023 Acquisition 1 September 29, 2023 70% 4 September 2023 Acquisition 2 September 29, 2023 70% 1 July 2023 Acquisition July 31, 2023 70% 7 May 2023 Acquisition May 31, 2023 45% 4 February 2023 Acquisition February 28, 2023 80% 1 November 2022 Acquisition November 30, 2022 80% 13 October 2022 Acquisition October 31, 2022 60% 14 September 2022 Acquisition September 30, 2022 80% 2 August 2022 Acquisition August 31, 2022 70% 6 March 2022 Acquisition March 31, 2022 70% 6 December 2021 Acquisition December 31, 2021 75% 3 November 2021 Acquisition November 30, 2021 70% * September 2021 Acquisition September 30, 2021 100% * June 2021 Acquisition June 30, 2021 65% 8 March 2021 Acquisition March 31, 2021 70% 6 * IIP business ** On October 31, 2023, we concurrently acquired 100% of an IIP business and a 55% equity interest in an ergonomics software business (“October 2023 Acquisition”).
Biggest changeAcquisitions of Businesses and Interests During the last three years, we completed the acquisitions of the following clinic practices and IIP businesses detailed below: Acquisition Date % Interest Acquired Number of Clinics November 2024 Acquisition November 30, 2024 75% 8 October 2024 Acquisition October 31, 2024 50% 50 August 2024 Acquisition August 31, 2024 70% 8 April 2024 Acquisition April 30, 2024 ** * March 2024 Acquisition March 29, 2024 50% 9 October 2023 Acquisition October 31, 2023 *** * September 2023 Acquisition 1 September 29, 2023 70% 4 September 2023 Acquisition 2 September 29, 2023 70% 1 July 2023 Acquisition July 31, 2023 70% 7 May 2023 Acquisition May 31, 2023 45% 4 February 2023 Acquisition February 28, 2023 80% 1 November 2022 Acquisition November 30, 2022 80% 13 October 2022 Acquisition October 31, 2022 60% 14 September 2022 Acquisition September 30, 2022 80% 2 August 2022 Acquisition August 31, 2022 70% 6 March 2022 Acquisition March 31, 2022 70% 6 * IIP business ** On April 30, 2024, one of our primary IIP businesses, Briotix Health Limited Partnership, acquired 100% of an IIP business. *** On October 31, 2023, we concurrently acquired 100% of an IIP business and a 55% equity interest in an ergonomics software business (“October 2023 Acquisition”).
An adverse inspection, review, audit or investigation could result in refunding amounts we have been paid; fines penalties and/or revocation of billing privileges for the affected clinics; the imposition of a corporate integrity agreement; exclusion from participation in the Medicare or Medicaid programs or one or more managed care payor networks; or damage to our reputation.
An adverse inspection, review, audit or investigation could result in refunding the amounts we have been paid; fines penalties and/or revocation of billing privileges for the affected clinics; the imposition of a corporate integrity agreement; exclusion from participation in the Medicare or Medicaid programs or one or more managed care payor networks; or damage to our reputation.
These services are performed through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers (“ATCs”). We were re-incorporated in April 1992 under the laws of the State of Nevada and have operating subsidiaries organized in various states in the form of limited partnerships, limited liability companies and wholly-owned corporations.
These services are performed through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers. We were re-incorporated in April 1992 under the laws of the State of Nevada and have operating subsidiaries organized in various states in the form of limited partnerships, limited liability companies and wholly-owned corporations.
For instance, managed care entities are demanding lower reimbursement rates from healthcare providers and, in some cases, are requiring or encouraging providers to accept capitated payments that may not allow providers to cover their full costs or realize traditional levels of profitability.
For instance, managed care entities are demanding lower reimbursement rates from healthcare providers and, in some cases, are requiring or encouraging providers to accept payments that may not allow providers to cover their full costs or realize traditional levels of profitability.
ITEM 1. BUSINESS GENERAL U.S. Physical Therapy, Inc. and subsidiaries (collectively, “we”, “us”, “our” or the “Company”), operates its business through two reportable business segments. Our reportable segments consist of the physical therapy operations segment and the industrial injury prevention services segment.
ITEM 1. BUSINESS GENERAL U.S. Physical Therapy, Inc. and subsidiaries (collectively, “we”, “us”, “our” or the “Company”), operates its business through two reportable business segments. Our reportable segments consist of the physical therapy operations segment and the industrial injury prevention services (“IIP”) segment.
We believe that we are in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on our financial statements as of December 31, 2023.
We believe that we are in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on our financial statements as of December 31, 2024.
It performs these services across a network in 45 states including onsite at eleven client locations. The business was then combined with Briotix Health increasing our ownership position in the partnership to approximately 76%. On September 30, 2021, we acquired a company that specializes in return-to-work and ergonomic services, among other offerings and contributed those assets to Briotix Health.
It performs these services across a network in 45 states including onsite at eleven client locations. The business was then combined with Briotix Health increasing our ownership position in the partnership to approximately 76%. In 2021, we acquired a company that specializes in return-to-work and ergonomic services, among other offerings and contributed those assets to Briotix Health.
Through our subsidiaries, we operate outpatient physical therapy clinics that provide pre-and post-operative care for a variety of orthopedic-related disorders and sports-related injuries, treatment for neurological-related injuries and rehabilitation of injured workers. We also have a majority interest in businesses which are leading providers of industrial injury prevention services (“IIP”).
Through our subsidiaries, we operate and/or manage outpatient physical therapy clinics that provide pre-and post-operative care for a variety of orthopedic-related disorders and sports-related injuries, treatment for neurological-related injuries and rehabilitation of injured workers. We also have a majority interest in businesses which are leading providers of industrial injury prevention services.
In connection with most of our acquired clinics, in the event that a limited non-controlling interest partner’s employment ceases and certain requirements are met as detailed in the respective limited partnership agreements, we have a call right (the “Call Right”) and the selling entity or individual has a put right (the “Put Right”) with respect to the partner’s limited partnership interests.
In connection with most of our acquired clinics, in the event that a limited non-controlling interest partner’s employment ceases and certain requirements are met as detailed in the respective limited partnership agreements, the Company has a call right (the “Call Right”) and the selling entity or individual has a put right (the “Put Right”) with respect to the partner’s limited partnership interests.
After the combination, we owned a 59.45% interest in the combined business, Briotix Health, Limited Partnership (“Briotix Health”). On April 11, 2019, we acquired 100% of a third provider of industrial injury prevention services. The acquired company specializes in delivering injury prevention and care, post offer employment testing, functional capacity evaluations and return-to-work services.
After the combination, we owned a 59.45% interest in the combined business, Briotix Health, Limited Partnership (“Briotix Health”). In 2019, we acquired 100% of a third provider of industrial injury prevention services. The acquired company specializes in delivering injury prevention and care, post offer employment testing, functional capacity evaluations and return-to-work services.
The corporate compliance group responds to questions from clinic personnel and conducts frequent teleconference meetings, webinars and training sessions on a variety of compliance related topics. When a clinic opens, we provide a package of compliance materials containing manuals and detailed instructions for meeting Medicare Conditions of Participation Standards and other compliance requirements.
The corporate compliance group responds to questions from clinic personnel and conducts frequent teleconference meetings, webinars and training sessions on a variety of compliance related topics. 14 Table of Contents When a clinic opens, we provide a package of compliance materials containing manuals and detailed instructions for meeting Medicare Conditions of Participation Standards and other compliance requirements.
Resources include a multitude of training and development programs delivered internally and externally, online and instructor-led, and on-the-job learning formats. We expect to continue adding personnel in the future as we focus on potential acquisition targets and organic growth opportunities.
Resources include a multitude of training and development programs delivered internally and externally, online and instructor-led, and on-the-job learning formats. 15 Table of Contents We expect to continue adding personnel in the future as we focus on potential acquisition targets and organic growth opportunities.
In addition, many states also have enacted similar statutes, which may include criminal penalties, substantial fines, and treble damages. 12 Table of Contents COMPLIANCE PROGRAM Our Compliance Program Our ongoing success depends upon our reputation for quality service and ethical business practices. We operate in a highly regulated environment with many federal, state and local laws and regulations.
In addition, many states also have enacted similar statutes, which may include criminal penalties, substantial fines, and treble damages. COMPLIANCE PROGRAM Our Compliance Program Our ongoing success depends upon our reputation for quality service and ethical business practices. We operate in a highly regulated environment with many federal, state and local laws and regulations.
Our Company performs these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and ATCs. In March 2017, we acquired a 55% interest in an initial IIP business. On April 30, 2018, we acquired a 65% interest in another business in the IIP sector and then we combined the two businesses.
Our Company performs these services through Industrial Sports Medicine Professionals, consisting of both physical therapists and ATCs. In 2017, we acquired a 55% interest in an initial IIP business. In 2018, we acquired a 65% interest in another business in the IIP sector and then combined the two businesses.
Medicare During the year ended December 31, 2023, approximately 40.3% of our visits and 36.6% of our net patient revenue was from patients with Medicare or Medicaid program coverage.
Medicare During the year ended December 31, 2024, approximately 40.6% of our visits and 36.0% of our net patient revenue was from patients with Medicare or Medicaid program coverage.
On October 31, 2023, we made another acquisition and purchased 100% of an IIP business and contributed its assets to Briotix Health. As part of the October 2023 Acquisition, we also acquired a 55% interest in an ergonomics software business.
On October 31, 2023, we made an acquisition and purchased 100% of an additional IIP business and contributed its assets to Briotix Health. As part of the October 2023 Acquisition, we also acquired a 55% interest in an ergonomics software business. In April 2024, the Company acquired 100% of an IIP business and contributed its assets to Briotix Health.
Under a management agreement, the Company provides a variety of support services to each clinic, including supervision of site selection, construction, clinic design and equipment selection, establishment of accounting systems and billing procedures and training of office support personnel, processing of accounts payable, operational direction, auditing of regulatory compliance, payroll, benefits administration, accounting services, legal services, quality assurance and marketing support. 5 Table of Contents We provide services at our clinics on an outpatient basis.
Under a management agreement, we provide a variety of support services to each clinic, including supervision of site selection, construction, clinic design and equipment selection, establishment of accounting systems and billing procedures and training of office support personnel, processing of accounts payable, non-clinical operational direction, auditing of regulatory compliance, payroll, benefits administration, accounting services, legal services, quality assurance and marketing support. 5 Table of Contents We provide services at our clinics on an outpatient basis and generally charge for treatment on a per procedure basis.
A portion of the net proceeds was used to repay the $35.0 million then outstanding under the Company’s credit facility while the remainder is expected to be used primarily for additional acquisitions.
A portion of the net proceeds was used to repay the $35.0 million then outstanding under our credit facility while the remainder was used primarily for additional acquisitions.
In addition, our clinics will develop, when appropriate, individual maintenance and self-management exercise programs to be continued after treatment. We continually assess the potential for developing new services and expanding the methods of providing our existing services in the most efficient manner while providing high quality patient care.
Medicare patients are charged based on prescribed time increments and Medicare billing standards. In addition, our clinics will develop, when appropriate, individual maintenance and self-management exercise programs to be continued after treatment. We continually assess the potential for developing new services and expanding the methods of providing existing services in the most efficient manner while providing high quality patient care.
For the Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Net Patient Net Patient Net Patient Payor Revenue Percentage Revenue Percentage Revenue Percentage Managed Care Programs/ (In thousands, except percentages) Commercial Health Insurance $ 244,470 47.5 % $ 215,822 46.5 % $ 209,129 47.7 % Medicare/Medicaid 188,329 36.6 % 174,401 37.5 % 155,122 35.4 % Workers' Compensation Insurance 48,834 9.5 % 45,010 9.7 % 44,549 10.2 % Other 32,923 6.4 % 29,357 6.3 % 29,530 6.7 % Total $ 514,556 100.0 % $ 464,590 100.0 % $ 438,330 100.0 % Our physical therapy business depends to a significant extent on our relationships with commercial health insurers, health maintenance organizations, preferred provider organizations and workers’ compensation insurers.
For the Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Net Patient Revenue Percentage Net Patient Revenue Percentage Net Patient Revenue Percentage Payor Managed Care Programs/ (In thousands, except percentages) Commercial Health Insurance $ 264,704 47.2 % $ 244,470 47.5 % $ 215,822 46.5 % Medicare/Medicaid 202,040 36.0 % 188,329 36.6 % 174,401 37.5 % Workers’ Compensation Insurance 56,524 10.1 % 48,834 9.5 % 45,010 9.7 % Other 37,285 6.7 % 32,923 6.4 % 29,357 6.3 % Total $ 560,553 100.0 % $ 514,556 100.0 % $ 464,590 100.0 % Our physical therapy business depends to a significant extent on our relationships with commercial health insurers, health maintenance organizations, preferred provider organizations and workers’ compensation insurers.
We rent clinic space for some of our clinics from referring physicians and have taken the steps that we believe are necessary to ensure that all leases comply to the extent possible and applicable, with the space rental Safe Harbor to the Fraud and Abuse Law.
We rent clinic space for some of our clinics from referring physicians and have taken the steps that we believe are necessary to ensure that all leases comply to the extent possible and applicable, with the space rental Safe Harbor to the Fraud and Abuse Law. 10 Table of Contents One of the OIG’s special advisory bulletins addressed certain complex contractual arrangements for the provision of items and services.
We cannot predict what negative effect, if any, HIPAA/HITECH or any applicable state law or regulation will have on our business. 11 Table of Contents Other Regulatory Factors Political, economic and regulatory influences are fundamentally changing the healthcare industry in the United States.
We cannot predict what negative effect, if any, HIPAA/HITECH or any applicable state law or regulation will have on our business. Other Regulatory Factors Political, economic and regulatory influences are fundamentally changing the healthcare industry in the United States. Congress, state legislatures and the private sector continue to review and assess alternative healthcare delivery and payment systems.
Due to the nature of our business operations, some of our management service arrangements exhibit one or more of these characteristics. However, we believe we have taken steps regarding the structure of such arrangements as necessary to sufficiently distinguish them from these suspect ventures, and to comply with the requirements of the Fraud and Abuse Law.
However, we believe we have taken steps regarding the structure of such arrangements as necessary to sufficiently distinguish them from these suspect ventures, and to comply with the requirements of the Fraud and Abuse Law.
There are 25 clinics occupying space in the range of over 7,000 square feet to 16,500 square feet. We attempt to lease ground level space for our patients’ ease of access to our clinics.
Our typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center. There are 20 clinics occupying space in the range of over 7,000 square feet to 16,500 square feet. We attempt to lease ground level space for our patients’ ease of access to clinics.
Our highest concentration of clinics is in the following states: Texas, Tennessee, Michigan, Virginia, Florida, Oregon, Maryland, Pennsylvania, Georgia, Missouri, Idaho, Arizona, South Carolina, Alabama and Connecticut. In addition to our 671 clinics, we also managed 43 physical therapy practices for unrelated physician groups and hospitals as of December 31, 2023.
Our highest concentration of clinics is in the following states: Texas, Tennessee, Michigan, New York, Virginia, Oregon, Florida, Pennsylvania, Georgia, Maryland, Idaho, Missouri, Arizona, Alabama, Connecticut, South Carolina, and Wyoming. In addition to these clinics, we also managed 39 hospital and/or physician owned physical therapy practices as of December 31, 2024, through management contracts.
OUR OPERATING SEGMENTS Physical Therapy Operations Our physical therapy operations segment primarily operates through subsidiary clinic partnerships (“Clinic Partnerships”), in which the Company generally owns a 1% general partnership interest in the Clinic Partnerships. The Company’s limited partnership interests generally range from 65% to 75% (a range of 10%-99%) in the Clinic Partnerships.
OUR OPERATING SEGMENTS Physical Therapy Operations Our physical therapy operations segment primarily operates through subsidiary clinic partnerships (“Clinic Partnerships”), in which we generally serve as the general partner or managing member of the Clinic Partnerships. Our equity interests generally range from 65% to 75% (a range of 10%-99%) in the Clinic Partnerships.
For those therapist providers who actually participated in MIPS during 2020 and 2021, the resulting average payment adjustment in 2022 and 2023 was an increase of 1%. The 2024 adjustment for those therapist providers who participated in MIPS during 2022 is expected to remain at an average increase of 1%.
The 2025 adjustment for those therapist providers who participated in MIPS during 2024 is expected to remain at an average increase of approximately 1%.
Under the MIPS requirements, a provider’s performance is assessed according to established performance standards each year and then is used to determine an adjustment factor that is applied to the professional’s payment for the corresponding payment year. The provider’s MIPS performance in 2021 determined the payment adjustment in 2023.
Under the MIPS requirements, a provider’s performance is assessed according to established performance standards each year and then is used to determine an adjustment factor that is applied to the professional’s payment for the corresponding payment year. For those therapist providers who participated in MIPS during 2020 through 2023, the resulting average payment adjustment was an increase of 1%.
We also have established systems for reporting potential violations, educating our employees, monitoring and auditing compliance and handling enforcement and discipline. Committees Our Compliance Committee, appointed by the Board, consists of four independent directors. The Compliance Committee has general oversight of our Company’s compliance with the legal and regulatory requirements regarding healthcare operations, as well as cybersecurity.
We also have established systems for reporting potential violations, educating our employees, monitoring and auditing compliance and handling enforcement and discipline. 13 Table of Contents Committees Our Compliance Committee, appointed by the Board, consists of three independent directors.
We may face more intense competition if consolidation of the therapy industry continues. We believe that our partnership strategy provides us with a competitive advantage. Our clinics are partly owned by therapists who have developed exceptional reputations in their local communities and these therapist-owners oversee their respective clinic operations helping to ensure the success of the clinics.
Our clinics are partly owned by therapists who have developed exceptional reputations in their local communities and these therapist-owners oversee their respective clinic operations helping to ensure the success of the clinics.
The Compliance Committee relies on the expertise and knowledge of management, the CCO and other compliance and legal personnel. The CCO regularly communicates with the Chairman of the Compliance Committee.
The Compliance Committee has general oversight of our Company’s compliance with the legal and regulatory requirements regarding healthcare operations, as well as cybersecurity. The Compliance Committee relies on the expertise and knowledge of management, the CCO and other compliance and legal personnel. The CCO regularly communicates with the Chairman of the Compliance Committee.
The Compliance Committee, compliance staff, human resources staff and management investigate violations of our compliance program and impose disciplinary action as considered appropriate. 14 Table of Contents EMPLOYEES As of December 31, 2023, we employed approximately 6,720 people nationwide, of which approximately 3,899 were full-time employees. It is crucial that we continue to attract and retain top talent.
The Compliance Committee, compliance staff, human resources staff and management investigate violations of our compliance program and impose disciplinary action as considered appropriate. EMPLOYEES As of December 31, 2024, we employed approximately 7,028 people nationwide, of which approximately 4,034 were full-time employees.
However, if the OIG believes we have entered into a prohibited contractual joint venture, it could have an adverse effect on our business, financial condition and results of operations. 10 Table of Contents Although the business of managing physician-owned and hospital-owned physical therapy facilities is regulated by the Fraud and Abuse Law, the manner in which we contract with such facilities often falls outside the complete scope of available Safe Harbors.
Although the business of managing physician-owned and hospital-owned physical therapy facilities is regulated by the Fraud and Abuse Law, the manner in which we contract with such facilities often falls outside the complete scope of available Safe Harbors.
Congress, state legislatures and the private sector continue to review and assess alternative healthcare delivery and payment systems. Potential alternative approaches could include mandated basic healthcare benefits, controls on healthcare spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, and price controls.
Potential alternative approaches could include mandated basic healthcare benefits, controls on healthcare spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending, the creation of large insurance purchasing groups, and price controls. Legislative debate is expected to continue in the future and market forces are expected to demand only modest increases or reduced costs.
One of the OIG’s special advisory bulletins addressed certain complex contractual arrangements for the provision of items and services. This special advisory bulletin identified several characteristics commonly exhibited by suspect arrangements, the existence of one or more of which could indicate a prohibited arrangement to the OIG.
This special advisory bulletin identified several characteristics commonly exhibited by suspect arrangements, the existence of one or more of which could indicate a prohibited arrangement to the OIG. Due to the nature of our business operations, some of our management service arrangements exhibit one or more of these characteristics.
Upon completion of the offering, the Company received net proceeds of approximately $163.6 million, after deducting an underwriting discount of $8.6 million and recognizing related fees and expenses of $0.2 million.
On May 30, 2023, we completed a secondary offering of 1,916,667 shares of its common stock at an offering price of $90.00 per share. Upon completion of the offering, we received net proceeds of approximately $163.6 million, after deducting an underwriting discount of $8.6 million and recognizing related fees and expenses of $0.2 million.
This committee reviews and monitors all employee and patient incident reports and provides clinic personnel with actions to be taken in response to the reports. 13 Table of Contents Reporting Violations In order to facilitate our employees’ ability to report in confidence, anonymously and without retaliation any perceived improper work-related activities, accounting irregularities and other violations of our compliance program, we have set up an independent national compliance hotline.
Reporting Violations In order to facilitate our employees’ ability to report in confidence, anonymously and without retaliation any perceived improper work-related activities, accounting irregularities and other violations of our compliance program, we have set up an independent national compliance hotline. The compliance hotline is available to receive confidential reports of wrongdoing Monday through Friday (excluding holidays), 24 hours a day.
For the vast majority of the Clinic Partnerships, the managing healthcare practitioner is a physical therapist who owns the remaining limited partnership interest in the Clinic Partnership. The managing therapist of each clinic owns, directly or indirectly, the remaining limited partnership interest in most of the clinics (hereinafter referred to as “Clinic Partnerships”).
For the vast majority of the Clinic Partnerships, the managing healthcare practitioner is a physical therapist who owns the remaining limited partnership interest in the Clinic Partnership. Generally, the therapist partners have no interest in the net losses of Clinic Partnerships, except to the extent of their capital accounts.
The information received is documented and forwarded timely to the CCO, who, together with the Compliance Committee, has the power and resources to investigate and resolve matters of improper conduct. Educating Our Employees We utilize numerous methods to train our employees in compliance related issues, including an online learning management system.
The compliance hotline is staffed by experienced third party professionals trained to utilize utmost care and discretion in handling sensitive issues and confidential information. The information received is documented and forwarded timely to the CCO, who, together with the Compliance Committee, has the power and resources to investigate and resolve matters of improper conduct.
All employees complete a comprehensive training program comprised of numerous modules relating to our business and proper practices when newly hired and annually thereafter. The directors/administrators also provide periodic “refresher” training for existing employees and one-on-one comprehensive training with new hires.
The directors/administrators also provide periodic “refresher” training for existing employees and one-on-one comprehensive training with new hires.
To a lesser extent, the Company operates some clinics, through wholly-owned subsidiaries, under profit sharing arrangements with therapists (hereinafter referred to as “Wholly-Owned Facilities”). Our Clinics We operated 671 clinics in 42 states on December 31, 2023.
These Clinic Partnerships similarly are owned collectively by the Company and one or more physical therapists who are involved in the management of the operations. To a lesser extent, the Company operates some clinics, through wholly-owned subsidiaries (hereinafter referred to as “Wholly-Owned Facilities”). Our Clinics We operated and/or managed 729 clinics in 43 states on December 31, 2024.
The Bipartisan Budget Act of 2018 extended the 2% reductions to Medicare payments through fiscal year 2027. The CARES Act suspended the 2% payment reduction to Medicare payments for dates of service from May 1, 2020, through December 31, 2020, and the Consolidated Appropriations Act, 2021 further suspended the 2% payment reduction through March 2021.
The Bipartisan Budget Act of 2018 extended the 2% reductions to Medicare payments through fiscal year 2027.
Our strategy is to continue acquiring outpatient physical therapy practices, develop outpatient physical therapy clinics as satellites in existing partnerships, and continue acquiring companies that provide or serve the Company’s industrial injury prevention services sector. 4 Table of Contents On May 30, 2023, the Company completed a secondary offering of 1,916,667 shares of its common stock at an offering price of $90.00 per share.
Besides the multi-clinic acquisitions referenced in the table above, during 2024 and 2023, we purchased the assets and businesses of eight and nine physical therapy clinics, respectively, in separate transactions. 4 Table of Contents Our strategy is to continue acquiring outpatient physical therapy practices, develop outpatient physical therapy clinics as satellites in existing partnerships, manage outpatient physical therapy clinics owned by third parties, and continue acquiring companies that provide or serve the Company’s industrial injury prevention services sector.
The Put Right and the Call Right do not expire, even upon an individual partner’s death, and contain no mandatory redemption feature.
The Put Right and the Call Right do not expire, even upon an individual partner’s death, and contain no mandatory redemption feature. In addition, certain of these selling entities or individuals have the right to exercise some or all of their Put Right as of a specified anniversary date, in addition to having such rights upon termination of employment.
Generally, the therapist partners have no interest in the net losses of Clinic Partnerships, except to the extent of their capital accounts. Since we also develop satellite clinic facilities of existing clinics, most Clinic Partnerships consist of more than one clinic location.
Since we also develop satellite clinic facilities of existing clinics, most Clinic Partnerships consist of more than one clinic location. Some of the Clinic Partnerships serve as management services organizations which manage and provide staffing and a variety of administrative services to physical therapy provider entities in which we do not have an ownership interest.
Since January 1, 2022, outpatient therapy services furnished in whole or part by a therapist assistant are paid at an amount equal to 85% of the payment amount otherwise applicable for the service. For 2022, the MPFS Final Rule was to be an approximately 3.75% reduction to Medicare payments for physical/occupational therapy services.
For dates of service on and after January 1, 2022, CMS pays for physical therapy and occupational therapy services provided by PTAs and occupational therapist assistants (“OTAs”) at 85% of the otherwise applicable Part B payment amount.
Penalties for violations include denial of payment for the services, significant civil monetary penalties, and exclusion from the Medicare and Medicaid programs. HIPAA In an effort to further combat healthcare fraud and protect patient confidentially, Congress included several anti-fraud measures in the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).
While we believe our arrangements with physician-owned and physical therapist-owned professional corporations are not in conflict with applicable state corporate practice of medicine restrictions, a state or a court could in the future determine that our arrangements implicate the restrictions on the corporate practice of medicine. 11 Table of Contents HIPAA In an effort to further combat healthcare fraud and protect patient confidentially, Congress included several anti-fraud measures in the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).
Removed
For the Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Number of clinics, beginning of period 640 591 554 Additions 46 65 42 Closed or sold (15 ) (16 ) (5 ) Number of clinics, end of period 671 640 591 Our typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center.
Added
Clinic Count Roll Forward (1) For the Year Ended December 31, 2024 December 31, 2023 Number of clinics owned or managed, beginning of period 671 640 Additions (2) 103 46 Closed or sold (45 ) (15 ) Number of clinics owned or managed, end of period 729 671 (1) The Company also manages clinics owned by third parties through management contracts.
Removed
Patients are usually treated for approximately one hour per day, two to three times a week, typically for two to six weeks. We generally charge for treatment on a per procedure basis. Medicare patients are charged based on prescribed time increments and Medicare billing standards.
Added
In addition to the clinic count shown above, as of December 31, 2024, the Company managed 39 clinics bringing the total owned/managed clinics to 768. As of December 31, 2023, the Company managed 43 clinics bringing the total owned/managed clinics to 714. (2) Includes clinics added through acquisitions.
Removed
In 2024, we intend to continue to acquire multi-clinic practices and to continue to develop outpatient physical therapy clinics as satellites in existing partnerships, along with increasing our patient volume through marketing and new programs.
Added
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). Outpatient rehabilitation providers may enroll in Medicare as institutional outpatient rehabilitation facilities (i.e., rehab agencies) or individual physical or occupational therapists in private practice.
Removed
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). In 2021 the MPFS established by Centers for Medicare and Medicaid Services (“CMS”) resulted in an approximate 3.5% decrease in the reimbursement for the codes applicable to physical/occupational therapy services provided by our clinics, as compared to 2020.
Added
The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice while the remaining balance of providers are reimbursed through enrolled rehab agencies.
Removed
This was due to the expiration of the additional funding to the conversion factor provided by Congress in 2021 under the Consolidated Appropriations Act, 2021. However, this reduction was addressed in the Protecting Medicare and American Farmers from Sequester Cuts Act (“2021 Act”) signed into law on December 10, 2021.
Added
For calendar years 2021, 2022 and 2023, Centers for Medicare and Medicaid Services (“CMS”) expected decreases in Medicare reimbursement were partially offset by one-time increases in payments as a result of other legislation passed by Congress, resulting in decreases of approximately 3.5%, 0.75% and 2.0% in each of these years, respectively.
Removed
Based on various provisions in the 2021 Act, the Medicare rate reduction for 2022 was approximately 0.75%. 7 Table of Contents In the 2023 MPFS Proposed Rule, CMS proposed a 4.5% reduction in the Physician Fee Schedule conversion factor. However, this reduction was later addressed in the Consolidated Appropriations Act, 2023 (“2023 Act”).
Added
For January 1 through March 8 of 2024, CMS’s final rule resulted in an approximate 3.5% decrease in Medicare payments for the therapy specialty.
Removed
The provisions of the 2023 Act increased the conversion factor by 2.5% for 2023 and by 1.25% for 2024, resulting in an overall reduction of approximately 2% in the 2023 Physician Fee Schedule conversion factor for 2023.
Added
However, effective as of March 9, 2024, pursuant to the Consolidated Appropriations Act, 2024, Congress minimized the reduction in Medicare payments for therapy services for the balance of 2024, resulting in an approximate 1.8% reduction in Medicare payments for therapy services (rather than the 3.5% decrease).
Removed
In the 2024 MPFS Final Rule, CMS decreased the Physician Fee Schedule conversion factor by 3.39%, which is estimated to result in an approximately 3.5% reduction in reimbursement for the codes applicable to physical/occupational therapy services provided by our clinics, as compared to 2023, unless these reductions are otherwise mitigated by further action of Congress.
Added
The MPFS proposed by CMS for 2025, if enacted, is expected to decrease Medicare reimbursement for therapy services by approximately 2.9% as compared to the reimbursement rates in effect for most of 2024. 7 Table of Contents In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, an identification of the PTA’s participation (as denoted by a “CQ modifier”) is not required.
Removed
In April 2021, additional legislation was enacted that waived the 2% payment reduction for the remainder of calendar 2021. The 2021 Act included a three-month extension of the 2% sequester relief applied to all Medicare payments through March 2022, followed by three months of 1% sequester relief through June 30, 2022. Sequester relief ended on June 30, 2022.
Added
Also, when the same service (code) is furnished separately by the physical therapist and PTA, CMS applies the de minimis standard to each 15-minute unit of codes, not on the total physical therapist and PTA time of the service.
Removed
Legislative debate is expected to continue in the future and market forces are expected to demand only modest increases or reduced costs.
Added
CMS allows a timed service to be billed without a CQ (for PTA’s) or CO (for OTA’s) modifier when a PTA or OTA participates in providing care, but the physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes.
Removed
The compliance hotline is available to receive confidential reports of wrongdoing Monday through Friday (excluding holidays), 24 hours a day. The compliance hotline is staffed by experienced third party professionals trained to utilize utmost care and discretion in handling sensitive issues and confidential information.
Added
This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute midpoint. The proposed 2025 MPFS final rule does not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapist assistants.
Added
However, if the OIG believes we have entered into a prohibited contractual joint venture, it could have an adverse effect on our business, financial condition and results of operations.
Added
Penalties for violations include denial of payment for the services, significant civil monetary penalties, and exclusion from the Medicare and Medicaid programs. Corporate Practice of Medicine; Fee-Splitting We also contract with physician-owned professional corporations and physical therapists owned professional corporations to deliver our services to them on behalf of their patients.
Added
We may also enter into management and/or administrative services agreements with these physician-owned and/or therapist-owned professional corporations pursuant to which we may provide them with staffing, billing, scheduling and a wide range of other services, and they pay us for those services out of the fees they collect from patients and third-party payors.
Added
These contractual relationships will be subject to various state laws, including those of New York, that prohibit fee-splitting or the practice of medicine by lay entities or persons and are intended to prevent unlicensed persons from interfering with or influencing the licensed physician’s or physical therapist’s professional judgment.
Added
In addition, various state laws also generally prohibit the sharing of professional services income with nonprofessional or business interests. Activities other than those directly related to the delivery of healthcare may be considered an element of the practice of medicine in many states.
Added
State corporate practice of medicine and fee-splitting laws also vary from state to state and are not always consistent among states. In addition, these requirements are subject to broad powers of interpretation and enforcement by state regulators.
Added
Some of these requirements may apply to us even if we do not have a physical presence in the state, based solely on our engagement of a provider licensed in the state or the provision of telehealth to a resident of the state.
Added
Failure to comply could lead to adverse judicial or administrative action against us and/or our providers, civil or criminal penalties, receipt of cease-and-desist orders from state regulators, loss of provider licenses, the need to make changes to the terms of engagement of our providers that interfere with our business and other materially adverse consequences.
Added
We may face more intense competition if consolidation of the therapy industry continues. 12 Table of Contents We believe that our partnership strategy provides us with a competitive advantage.
Added
This committee reviews and monitors all employee and patient incident reports and provides clinic personnel with actions to be taken in response to the reports.
Added
Educating Our Employees We utilize numerous methods to train our employees in compliance related issues, including an online learning management system. All employees complete a comprehensive training program comprised of numerous modules relating to our business and proper practices when newly hired and annually thereafter.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

41 edited+8 added−6 removed83 unchanged
Biggest changeImpact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interests (minority interests). As described in Note 6 to our financial statements included in Item 8, the redeemable non-controlling interests in our partnerships are held by our partners.
Biggest changeIf we are unable to enforce the contractual arrangements, we may not be able to exert effective control over the variable interest entities, and our ability to conduct our business, as well as our financial condition and results of operations, may be materially and adversely affected. 20 Table of Contents Impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non-controlling interests (minority interests).
Furthermore, while our information technology systems, and those of our third-party vendors, are maintained with safeguards protecting against cyber-attacks. A cyber-attack that bypasses our information technology security systems, or those of our third-party vendors, could result in a material adverse effect on our business, financial condition, results of operations, or cash flows.
Furthermore, our information technology systems, and those of our third-party vendors, are maintained with safeguards protecting against cyber-attacks. A cyber-attack that bypasses our information technology security systems, or those of our third-party vendors, could result in a material adverse effect on our business, financial condition, results of operations, or cash flows.
Similarly, in our rehabilitation business, we have management and other services agreements with hospitals, physician groups and other ancillary providers; either a breach or termination of those contractual arrangements by such clients could cause operating results to be less than expected. 23 Table of Contents RISKS RELATED TO OUR COMMON STOCK Issuance of shares in connection with financing transactions or under stock incentive plans will dilute current stockholders.
Similarly, in our rehabilitation business, we have management and other services agreements with hospitals, physician groups and other ancillary providers; either a breach or termination of those contractual arrangements by such clients could cause operating results to be less than expected. 24 Table of Contents RISKS RELATED TO OUR COMMON STOCK Issuance of shares in connection with financing transactions or under stock incentive plans will dilute current stockholders.
Any of the foregoing could also cause investors to lose confidence in our reported financial information and in us and would likely result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future. 22 Table of Contents Our revenues may fluctuate due to weather.
Any of the foregoing could also cause investors to lose confidence in our reported financial information and in us and would likely result in a decline in the market price of our stock and in our ability to raise additional financing if needed in the future. 23 Table of Contents Our revenues may fluctuate due to weather.
The Company believes that the Company is in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on the Company’s financial statements as of December 31, 2023.
The Company believes that the Company is in compliance, in all material respects, with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on the Company’s financial statements as of December 31, 2024.
Accordingly, we may be vulnerable to losses associated with the improper functioning, security breach, or unavailability of our information systems as well as any systems used in acquired operations. 21 Table of Contents We depend upon the cultivation and maintenance of relationships with the physicians in our markets.
Accordingly, we may be vulnerable to losses associated with the improper functioning, security breach, or unavailability of our information systems as well as any systems used in acquired operations. 22 Table of Contents We depend upon the cultivation and maintenance of relationships with the physicians in our markets.
Our loan agreements contain certain restrictions and requirements that among other things: • require us to maintain a quarterly fixed charge coverage ratio and minimum working capital ratio; • limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions, to fund growth or for general corporate purposes; 18 Table of Contents • limit our future ability to refinance our indebtedness on terms acceptable to us or at all; • limit our flexibility in planning for or reacting to changes in our business and market conditions or in funding our strategic growth plan; and • impose on us financial and operational restrictions.
Our loan agreements contain certain restrictions and requirements that among other things: • require us to maintain a quarterly fixed charge coverage ratio and minimum working capital ratio; • limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions, to fund growth or for general corporate purposes; • limit our future ability to refinance our indebtedness on terms acceptable to us or at all; • limit our flexibility in planning for or reacting to changes in our business and market conditions or in funding our strategic growth plan; and • impose on us financial and operational restrictions.
The healthcare industry is subject to extensive federal, state and local laws and regulations relating to: 19 Table of Contents • facility and professional licensure/permits, including certificates of need; • conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral; • addition of facilities and services; and • coding, billing and payment for services.
The healthcare industry is subject to extensive federal, state and local laws and regulations relating to: • facility and professional licensure/permits, including certificates of need; • conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral. • addition of facilities and services; and • coding, billing and payment for services.
These matters can involve significant costs, monetary damages and penalties. We have been subject to these proceedings in the past, and future proceedings could result in an adverse impact on our business and financial results. We face inspections, reviews, audits and investigations under federal and state government programs and contracts.
These matters can involve significant costs, monetary damages and penalties. We have been subject to these proceedings in the past, and future proceedings could result in an adverse impact on our business and financial results. 21 Table of Contents We face inspections, reviews, audits and investigations under federal and state government programs and contracts.
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). For services provided in 2024, we expect our reimbursement rates under the MPFS to be approximately 3.5% less than the applicable reimbursement rates during 2023. Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation.
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (“MPFS”). For services provided in 2025, we expect our reimbursement rates under the MPFS to be approximately 2.9% less than the applicable reimbursement rates during 2024. Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation.
HITECH, which was signed into law in 2009, enhanced the privacy, security and enforcement provisions of HIPAA by, among other things establishing security breach notification requirements, allowing enforcement of HIPAA by state attorneys general, and increasing penalties for HIPAA violations. Violations of HIPAA or HITECH could result in civil or criminal penalties.
HITECH, which was signed into law in 2009, enhanced the privacy, security and enforcement provisions of HIPAA by, among other things establishing security breach notification requirements, allowing enforcement of HIPAA by state attorneys general, and increasing penalties for HIPAA violations.
Some of our acquisition agreements include contingent earn-out consideration, the fair value of which is estimated as of the acquisition date based on the present value of the expected contingent payments as determined using weighted probabilities of possible future payments.
Some of our acquisition agreements contain contingent consideration, the value of which may impact future financial results. Some of our acquisition agreements include contingent earn-out consideration, the fair value of which is estimated as of the acquisition date based on the present value of the expected contingent payments as determined using weighted probabilities of possible future payments.
Substantially all of our revenues are derived from private and governmental third-party payors. In 2023, approximately 63.4% of our revenues were derived collectively from managed care plans, commercial health insurers, workers’ compensation payors, and other private pay revenue sources while approximately 36.6% of our revenues were derived from Medicare and Medicaid.
Substantially all of our revenues are derived from private and governmental third-party payors. In 2024, approximately 64.0% of our revenues were derived collectively from managed care plans, commercial health insurers, workers’ compensation payors, and other private pay revenue sources while approximately 36.0% of our revenues were derived from Medicare and Medicaid.
The number of shares of our common stock eligible for future sale could adversely affect the market price of our stock. On December 31, 2023, we had reserved approximately 513,193 shares for future equity grants.
The number of shares of our common stock eligible for future sale could adversely affect the market price of our stock. On December 31, 2024, we had reserved approximately 424,722 shares for future equity grants.
These additional post-payment reviews may require us to incur additional costs to respond to requests for records and to pursue the reversal of payment denials, and ultimately may require us to refund amounts paid to us by Medicare that are determined to have been overpaid.
These post-payment reviews have increased as a result of government cost-containment initiatives. These additional post-payment reviews may require us to incur additional costs to respond to requests for records and to pursue the reversal of payment denials, and ultimately may require us to refund amounts paid to us by Medicare that are determined to have been overpaid.
If a court or regulatory body determines that we have violated these laws or if new laws are introduced that would render our arrangements illegal, we could be subject to civil or criminal penalties, our contracts could be found legally invalid and unenforceable (in whole or in part), or we could be required to restructure our contractual arrangements with our affiliated physicians and other licensed providers.
If a court or regulatory body determines that we have violated these laws or if new laws are introduced that would render our arrangements illegal, we could be subject to fines or penalties, our contracts could be found legally invalid and unenforceable (in whole or in part), or we could be required to restructure our contractual arrangements with physicians, hospitals and/or physical therapist-owned providers.
Some states prohibit the “corporate practice of therapy” that restricts business corporations from providing physical therapy services through the direct employment of therapist physicians or from exercising control over medical decisions by therapists. The laws relating to corporate practice vary from state to state and are not fully developed in each state in which we have facilities.
Some states prohibit the “corporate practice of therapy” that restricts business corporations from providing physical therapy services through the direct employment of therapist physicians or from exercising control over medical decisions by therapists. The laws relating to corporate practice vary from state to state.
The laws relating to fee-splitting also vary from state to state and are not fully developed. 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.
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.
The department released final regulations containing privacy standards in 2000 and published revisions to the final regulations in 2002. The privacy regulations extensively regulate the use and disclosure of individually identifiable health-related information. The regulations also provide patients with significant rights related to understanding and controlling how their health information is used or disclosed.
The privacy regulations extensively regulate the use and disclosure of individually identifiable health-related information. The regulations also provide patients with significant rights related to understanding and controlling how their health information is used or disclosed.
Such actions in turn may adversely affect our results of operations. We may be required to comply with a put right in one of our acquisition agreements, related to a potential future purchase of a majority interest in a separate company.
Such actions in turn may adversely affect our results of operations. We may be required to comply with put rights in certain of our acquisition agreements, related to a potential future purchase of significant equity interests in our existing subsidiaries or a separate company.
In the event the put right is triggered, we are required to purchase the aforementioned equity interest at a calculated purchase price.
In the event that one or more of these put rights is triggered, we are required to purchase the aforementioned equity interest at a calculated purchase price.
Changes in the fair value of contingent earn-outs will be reflected in our results of operations in the period in which they are recognized, the amount of which may be material and could cause volatility in our operating results.
Changes in the fair value of contingent earn-outs will be reflected in our results of operations in the period in which they are recognized, the amount of which may be material and could cause volatility in our operating results. Our contractual arrangements may not be as effective in providing control over our variable interest entities as direct ownership.
The ultimate content, timing or effect of any healthcare reform legislation and the impact of potential legislation on us is uncertain and difficult, if not impossible, to predict. That impact may be material to our business, financial condition or results of operations. Our operations are subject to extensive regulation.
See “Business—Our Operating Segments – Physical Therapy Operations-Sources of Revenue” in Item 1 for more information. The ultimate content, timing or effect of any healthcare reform legislation and the impact of potential legislation on us is uncertain and difficult, if not impossible, to predict. That impact may be material to our business, financial condition or results of operations.
For the year ended December 31, 2023 and 2022, respectively, net patient revenues from Medicare were approximately $170.7 million and $154.9 million, respectively. 15 Table of Contents Given the history of frequent revisions to the Medicare program and its reimbursement rates and rules, we may not continue to receive reimbursement rates from Medicare that sufficiently compensate us for our services or, in some instances, cover our operating costs.
Given the history of frequent revisions to the Medicare program and its reimbursement rates and rules, we may not continue to receive reimbursement rates from Medicare that sufficiently compensate us for our services or, in some instances, cover our operating costs.
The existing federal deficit, as well as deficit spending by federal and state governments as the result of adverse developments in the economy or other reasons, can lead to continuing pressure to reduce governmental expenditures for other purposes, including government-funded programs in which we participate, such as Medicare and Medicaid.
In addition, an economic downturn, coupled with sustained unemployment, may also impact the number of enrollees in managed care programs as well as the profitability of managed care companies, which could result in reduced reimbursement rates. 18 Table of Contents The existing federal deficit, as well as deficit spending by federal and state governments as the result of adverse developments in the economy or other reasons, can lead to continuing pressure to reduce governmental expenditures for other purposes, including government-funded programs in which we participate, such as Medicare and Medicaid.
One of our acquisition agreements includes a put right for the potential future purchase of a majority interest in a separate company at a purchase price which is derived based on a specified multiple of the separate company’s historical earnings. The exercise of the put right is outside of our control.
Certain of our acquisition agreements include put rights for the potential future purchase of significant equity interests in our subsidiaries or in a separate company, in each case at a purchase price which is derived based on a specified multiple of the applicable historical earnings. The exercise of these put rights is outside of our control.
Healthcare reform legislation may affect our business. In recent years, many legislative proposals have been introduced or proposed in Congress and in some state legislatures that would affect major changes in the healthcare system, either nationally or at the state level.
In recent years, many legislative proposals have been introduced or proposed in Congress and in some state legislatures that would affect major changes in the healthcare system, either nationally or at the state level. At the federal level, Congress has continued to propose or consider healthcare budgets that substantially reduce payments under the Medicare programs.
Additionally, from time to time we become aware, either based on information provided by third parties and/or the results of internal audits, of payments from payor sources that were either wholly or partially in excess of the amount that we should have been paid for the service provided.
Significant adjustments, recoupments or repayments of our Medicare or Medicaid revenue, and the costs associated with complying with investigative audits by regulatory and governmental authorities, could adversely affect our financial condition and results of operations. 16 Table of Contents Additionally, from time to time we become aware, either based on information provided by third parties and/or the results of internal audits, of payments from payor sources that were either wholly or partially in excess of the amount that we should have been paid for the service provided.
Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare program.
Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare program. For the year ended December 31, 2024, and 2023, respectively, net patient revenues from Medicare were approximately $183.4 million and $170.7 million, respectively.
Typically, however, professional corporations owned and controlled by licensed professionals are exempt from corporate practice restrictions and may employ therapists to furnish professional services. Those professional corporations may be managed by business corporations, such as the Company. Some states also prohibit entities from engaging in certain financial arrangements, such as fee-splitting, with physicians or therapists.
Typically, however, professional corporations owned and controlled by licensed professionals are exempt from corporate practice restrictions and may employ therapists to furnish professional services. Those professional corporations may be supported by business corporations, such as the Company, that provide management and/or administrative services, subject to certain limitations .
If Medicaid reimbursement rates are reduced or fail to increase as quickly as our costs, or if there are changes in the rules governing the Medicaid program that are disadvantageous to our businesses, our business and results of operations could be materially and adversely affected. 17 Table of Contents As a result of increased post-payment reviews of claims we submit to Medicare for our services, we may incur additional costs and may be required to repay amounts already paid to us.
If Medicaid reimbursement rates are reduced or fail to increase as quickly as our costs, or if there are changes in the rules governing the Medicaid program that are disadvantageous to our businesses, our business and results of operations could be materially and adversely affected.
We are subject to regular post-payment inquiries, investigations, and audits of the claims we submit to Medicare for payment for our services. These post-payment reviews have increased as a result of government cost-containment initiatives.
As a result of increased post-payment reviews of claims we submit to Medicare for our services, we may incur additional costs and may be required to repay amounts already paid to us. We are subject to regular post-payment inquiries, investigations, and audits of the claims we submit to Medicare for payment for our services.
Additional reforms or other changes to these payment systems may be proposed or adopted, either by the U.S. Congress or by CMS, including bundled payments, outcomes-based payment methodologies and a shift away from traditional fee-for-service reimbursement. If revised regulations are adopted, the availability, methods and rates of Medicare reimbursements for services of the type furnished at our facilities could change.
See “Business—Sources of Revenue – Physical Therapy Services” in Item 1 for more information including changes to Medicare reimbursement. Additional reforms or other changes to these payment systems may be proposed or adopted, either by the U.S. Congress or by CMS, including bundled payments, outcomes-based payment methodologies and a shift away from traditional fee-for-service reimbursement.
Some of these changes and proposed changes could adversely affect our business strategy, operations and financial results. Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable patient information. HIPAA required the HHS to adopt standards to protect the privacy and security of individually identifiable health-related information.
Our facilities are subject to extensive federal and state laws and regulations relating to the privacy of individually identifiable patient information. HIPAA required the HHS to adopt standards to protect the privacy and security of individually identifiable health-related information. The department released final regulations containing privacy standards in 2000 and published revisions to the final regulations in 2002.
A public health crisis may lead to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty.
Our operations expose us to risks associated with public health crises and epidemics/pandemics, such as COVID-19 that has spread globally. A public health crisis may lead to disruption and volatility in the global capital markets, which increases the cost of, and adversely impacts access to, capital and increases economic uncertainty.
We may be adversely affected by a security breach, such as a cyber-attack, which may cause a violation of HIPAA or HITECH and subject us to potential legal and reputational harm.
If adverse inspections, reviews, audits or investigations occur and any of the results noted above occur, it could have a material adverse effect on our business and operating results. We may be adversely affected by a security breach, such as a cyber-attack, which may cause a violation of HIPAA or HITECH and subject us to potential legal and reputational harm.
Upon the occurrence of certain events, such as retirement or other termination of employment, partners from acquired partnerships may have the right to exercise a “put” to cause us to purchase their redeemable non-controlling interests. Depending on the amount and timing of the exercise of any “put” rights, the funds required could have an adverse impact on our capital structure.
As described in Note 6 to our financial statements included in Item 8, the redeemable non-controlling interests in our partnerships are held by our partners. Upon the occurrence of certain events, such as retirement or other termination of employment, partners from acquired partnerships may have the right to exercise a “put” to cause us to purchase their redeemable non-controlling interests.
In addition to HIPAA, there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns, including unauthorized access or theft of personal information. State statutes and regulations vary from state to state. Lawsuits, including class actions and action by state attorneys general, directed at companies that have experienced a privacy or security breach also can occur.
Violations of HIPAA or HITECH could result in civil or criminal penalties. 17 Table of Contents In addition to HIPAA, there are numerous federal and state laws and regulations addressing patient and consumer privacy concerns, including unauthorized access or theft of personal information. State statutes and regulations vary from state to state.
Failure to obtain or maintain these approvals would adversely affect our financial results. 16 Table of Contents In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program. See “Business—Sources of Revenue – Physical Therapy Services” in Item 1 for more information including changes to Medicare reimbursement.
In addition, in certain geographical areas, our clinics must be approved as providers by key health maintenance organizations and preferred provider plans. Failure to obtain or maintain these approvals would adversely affect our financial results. In recent years, through legislative and regulatory actions, the federal government has made substantial changes to various payment systems under the Medicare program.
If our counterparties to such transactions or the sponsors fail to honor their obligations due to financial distress, we would be exposed to potential losses or the inability to recover anticipated gains from these transactions. Some of our acquisition agreements contain contingent consideration, the value of which may impact future financial results.
If our counterparties to such transactions or sponsors fail to honor their obligations due to financial distress, we would be exposed to potential losses or the inability to recover anticipated gains from these transactions. 19 Table of Contents In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.
We have established policies and procedures in an effort to ensure compliance with these privacy related requirements. However, if there is a breach, we may be subject to various penalties and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals.
However, if there is a breach, we may be subject to various penalties and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals. We are subject to risks associated with public health crises and epidemics/pandemics, such as the novel strain of coronavirus (“COVID-19”).
Removed
Significant adjustments, recoupments or repayments of our Medicare or Medicaid revenue, and the costs associated with complying with investigative audits by regulatory and governmental authorities, could adversely affect our financial condition and results of operations.
Added
If revised regulations are adopted, the availability, methods and rates of Medicare reimbursements for services of the type furnished at our facilities could change. Some of these changes and proposed changes could adversely affect our business strategy, operations and financial results.
Removed
In addition, in certain geographical areas, our clinics must be approved as providers by key health maintenance organizations and preferred provider plans.
Added
Lawsuits, including class actions and action by state attorneys general, directed at companies that have experienced a privacy or security breach also can occur. We have established policies and procedures in an effort to ensure compliance with these privacy related requirements.
Removed
We are subject to risks associated with public health crises and epidemics/pandemics, such as the novel strain of coronavirus (“COVID-19”). Our operations expose us to risks associated with public health crises and epidemics/pandemics, such as COVID-19 that has spread globally.
Added
Some states also prohibit entities from engaging in certain financial arrangements, such as fee-splitting, with physicians or therapists. The laws relating to fee-splitting also vary from state to state.
Removed
In addition, an economic downturn, coupled with sustained unemployment, may also impact the number of enrollees in managed care programs as well as the profitability of managed care companies, which could result in reduced reimbursement rates.
Added
Through contractual arrangements, we control the management and non-clinical operating activities but have less than majority ownership interests in certain variable interest entities. If our variable interest entities or their equity holders fail to perform their respective obligations under the contractual arrangements, we may incur substantial costs and expend additional resources to enforce such arrangements.
Removed
At the federal level, Congress has continued to propose or consider healthcare budgets that substantially reduce payments under the Medicare programs. See “Business—Our Operating Segments – Physical Therapy Operations-Sources of Revenue” in Item 1 for more information.
Added
Accordingly, these contractual arrangements may not be as effective as majority ownership in providing us with control over our variable interest entities. The variable interest entity equity holders may have conflicts of interest with us and they may not act in our best interests or may not perform their obligations under these contracts.
Removed
If adverse inspections, reviews, audits or investigations occur and any of the results noted above occur, it could have a material adverse effect on our business and operating results. 20 Table of Contents In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.
Added
For example, our variable interest entities and their respective equity holders could breach their contractual arrangements with us by, among other things, failing to conduct their operations or taking other actions that are detrimental to our interests.
Added
If any equity holder is uncooperative and any dispute relating to these contracts remains unresolved, we will have to enforce our rights under the contractual arrangements and through arbitration, litigation, and other legal proceeding, which may be costly and time-consuming and may be limited by legal principles preventing the enforcement of a contract if it is determined to involve a violation of law or public policy.
Added
Depending on the amount and timing of the exercise of any “put” rights, the funds required could have an adverse impact on our capital structure. Healthcare reform legislation may affect our business.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+0 added−1 removed18 unchanged
Biggest changeRisk Management Personnel Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the CISO, Mr. Chadd Pence. With over 25 years of experience in the field of IT and cybersecurity, Mr. Pence brings a wealth of expertise to his role.
Biggest changeThe Compliance Committee actively participates in strategic decisions related to cybersecurity. This involvement ensures that cybersecurity considerations are integrated into the Company’s broader strategic objectives. Risk Management Personnel Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with the CISO, Mr. Chadd Pence. With over 25 years of experience in the field of IT and cybersecurity, Mr.
This ongoing knowledge acquisition is crucial for the effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The CISO implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of a variety of security measures and system audits to identify potential vulnerabilities.
This ongoing knowledge acquisition is crucial for effective prevention, detection, mitigation, and remediation of cybersecurity incidents. The CISO implements and oversees processes for the regular monitoring of our information systems. This includes the deployment of a variety of security measures and system audits to identify potential vulnerabilities.
Reporting to Board of Directors The CISO, in his capacity, regularly informs our Chief Financial Officer and Chief Executive Officer of all aspects related to cybersecurity risks and incidents. This ensures that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing the Company.
Reporting to Board of Directors The CISO, in his capacity, regularly informs our Chief Financial Officer, President, and Chief Executive Officer of all aspects related to cybersecurity risks and incidents. This ensures that the highest levels of management are kept abreast of the cybersecurity posture and potential risks facing the Company.
The Company provides annual cybersecurity awareness training to its employees to mitigate risks by educating employees regarding best practices to avoid cybersecurity related breaches. 24 Table of Contents Engage Third-parties on Risk Management Understanding the ever-changing and complex nature of cybersecurity threats, our organization values collaboration with external experts, including cybersecurity consultants, for advisory purposes.
The Company provides annual cybersecurity awareness training to its employees to mitigate risks by educating employees regarding best practices to avoid cybersecurity related breaches. 25 Table of Contents Engage Third-parties on Risk Management Understanding the ever-changing and complex nature of cybersecurity threats, our organization values collaboration with external experts, including cybersecurity consultants, for advisory purposes.
His background includes experience as an enterprise CISO and his knowledge and experience are instrumental in developing and executing our cybersecurity strategies. Our CISO oversees our cybersecurity efforts and governance programs, tests our compliance with standards, remediates known risks, and provides regular guidance to management and the Board on these areas.
Pence brings a wealth of expertise to his role. His background includes experience as an enterprise CISO and his knowledge and experience are instrumental in developing and executing our cybersecurity strategies. Our CISO oversees our cybersecurity efforts and governance programs, tests our compliance with standards, remediates known risks, and provides regular guidance to management and the Board on these areas.
These briefings encompass a broad range of topics, including: ● Current cybersecurity landscape and emerging threats; ● Status of ongoing cybersecurity initiatives and strategies; 25 Table of Contents ● Incident reports and learnings from any cybersecurity events; and ● Compliance with regulatory requirements and industry standards.
These briefings encompass a broad range of topics, including: ● Current cybersecurity landscape and emerging threats; ● Status of ongoing cybersecurity initiatives and strategies; ● Incident reports and learnings from any cybersecurity events; and ● Compliance with regulatory requirements and industry standards. 26 Table of Contents In addition to our scheduled meetings, the Compliance Committee and management maintain an ongoing dialogue regarding emerging or potential cybersecurity risks.
Removed
In addition to our scheduled meetings, the Compliance Committee and management maintain an ongoing dialogue regarding emerging or potential cybersecurity risks. The Compliance Committee actively participates in strategic decisions related to cybersecurity. This involvement ensures that cybersecurity considerations are integrated into the Company’s broader strategic objectives.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center. There are 25 clinics occupying space in the range of over 7,000 square feet to16,500 square feet. We also lease our executive offices located in Houston, Texas, under a non-cancelable operating lease expiring in February 2028.
Biggest changeWe intend to lease the premises for any new clinic location except in rare instances where leasing is not a cost-effective alternative. Our typical clinic occupies 1,000 to 7,000 square feet of leased space in an office building or shopping center. There are 20 clinics occupying space in the range of over 7,000 square feet to 16,500 square feet.
We currently lease approximately 44,000 square feet of space (including allocations for common areas) at our executive offices.
We also lease our executive offices located in Houston, Texas, under a non-cancelable operating lease expiring in February 2028. We currently lease approximately 44,000 square feet of space (including allocations for common areas) at our executive offices.
ITEM 2. PROPERTIES We lease the properties used for our clinics under non-cancelable operating leases with terms ranging from one to seven years, with the exception of the property for one clinic which we own. We intend to lease the premises for any new clinic location except in rare instances where leasing is not a cost-effective alternative.
ITEM 2. PROPERTIES We lease the properties used for our clinics under non-cancellable operating leases, commonly with terms ranging from five to ten years (a range of one year to 15.0 years), with the exception of the property for one clinic which we own.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe have been a defendant in these cases in the past and may be named as a defendant in similar cases from time to time in the future.
Biggest changeWe have been a defendant in these cases in the past and may be named as a defendant in similar cases from time to time in the future. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. PART II
The Department of Justice, CMS, or other federal and state enforcement and regulatory agencies may conduct additional investigations related to our businesses in the future that may, either individually or in the aggregate, have a material adverse effect on our business, financial position, results of operations, and liquidity. 26 Table of Contents Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act.
The Department of Justice, CMS, or other federal and state enforcement and regulatory agencies may conduct additional investigations related to our businesses in the future that may, either individually or in the aggregate, have a material adverse effect on our business, financial position, results of operations, and liquidity. 27 Table of Contents Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act.
Removed
Prior Florida Legal Matter In 2019, a qui tam lawsuit (“the Complaint”) was filed by a relator on behalf of the United States against us and one of our Florida majority-owned subsidiaries (the “Hale Partnership”). This whistleblower lawsuit was filed in the U.S.
Removed
District Court for the Southern District of Texas, seeking damages and civil penalties under the federal False Claim Act. The U.S Government declined to intervene in the case and unsealed the Complaint in July 2019. The Complaint alleged that the Hale Partnership engaged in conduct to purposely “upcode” its billings for services provided to Medicare patients.
Removed
The plaintiff-relator also claimed that similar false claims occurred on other days and at other Company-owned partnerships. In January 2022, we entered into a settlement agreement with the plaintiff-relator. In the settlement agreement, the plaintiff-relator released all defendants from liability for all conduct alleged in the Complaint, and the Company admitted no liability or wrongdoing.
Removed
In connection with the settlement, the Office of the United States Attorney for the Southern District of Texas agreed to a dismissal of the claims against the Hale Partnership and the Company. Under the terms of the settlement, we agreed to make aggregate payments to the government, the plaintiff-relator and her counsel of $2.8 million.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDIVIDENDS Our Board of Directors declared the following dividends during the year ended December 31, 2023: Declaration Date Record Date Payment Date Dividend Per Share Aggregate Amount (in thousands) 02/21/2023 03/10/2023 04/07/2023 $ 0.43 $ 5,617 05/02/2023 05/18/2023 06/09/2023 $ 0.43 $ 5,621 08/07/2023 08/18/2023 09/08/2023 $ 0.43 $ 6,445 11/06/2023 11/16/2023 12/08/2023 $ 0.43 $ 6,445 There is no assurance that future dividends will be declared.
Biggest changeDIVIDENDS Our Board of Directors declared the following dividends during the year ended December 31, 2024: Declaration Date Record Date Payment Date Dividend Per Share Aggregate Amount (In thousands) 2/27/2024 3/12/2024 4/5/2024 $ 0.44 $ 6,630 5/7/2024 5/23/2024 6/14/2024 $ 0.44 6,634 8/12/2024 8/23/2024 9/13/2024 $ 0.44 6,634 11/4/2024 11/15/2024 12/6/2024 $ 0.44 6,642 There is no assurance that future dividends will be declared.
The graph assumes that $100 was invested in our common stock and the common stock of each of the companies listed on The NYSE Composite Index and The NYSE Health Care Index on December 31, 2018 and that any dividends were reinvested. 28 Table of Contents Comparison of Five Years Cumulative Total Return for the Year Ended December 31, 2023 12/18 12/19 12/20 12/21 12/22 12/23 U.
The graph assumes that $100 was invested in our common stock and the common stock of each of the companies listed on The NYSE Composite Index and The NYSE Health Care Index on December 31, 2019 and that any dividends were reinvested. 28 Table of Contents Comparison of Five Years Cumulative Total Return for the Year Ended December 31, 2024 12/19 12/20 12/21 12/22 12/23 12/24 U.
FIVE YEAR PERFORMANCE GRAPH The following performance graph compares the cumulative total stockholder return of our common stock to The NYSE Composite Index and the NYSE Health Care Index for the period from December 31, 2018 through December 31, 2023.
FIVE YEAR PERFORMANCE GRAPH The following performance graph compares the cumulative total stockholder return of our common stock to The NYSE Composite Index and the NYSE Health Care Index for the period from December 31, 2019 through December 31, 2024.
S. Physical Therapy, Inc. 100 112 117 93 79 91 NYSE Healthcare Index 100 119 132 161 155 159 The foregoing performance graph and related description shall not be deemed incorporated by reference into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference.
S. Physical Therapy, Inc. 100 105 84 71 81 78 NYSE Healthcare Index 100 111 135 130 134 135 The foregoing performance graph and related description shall not be deemed incorporated by reference into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock has traded on the New York Stock Exchange (“NYSE”) since August 14, 2012, under the symbol “USPH.” Prior to that, our common stock was traded on the Nasdaq Global Select Market under the symbol “USPH”.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock has traded on the New York Stock Exchange (“NYSE”) since August 14, 2012, under the symbol “USPH”. As of March 3, 2025, there were 85 holders of record of our outstanding common stock.
Removed
As of February 29, 2024, there were 83 holders of record of our outstanding common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe increase in both Adjusted EBITDA and Operating Results was primarily associated with clinic additions since the comparable prior year period and increased volume at mature clinics. 34 Table of Contents Physical Therapy Operations For the Year Ended December 31, Variance 2023 2022 $ % (In thousands, except percentages) Revenue related to: Mature Clinics (1) $ 452,459 $ 421,806 $ 30,653 7.3 % Clinic additions (2) 60,495 39,990 20,505 * (6) Clinics sold or closed (3) 1,602 2,794 (1,192 ) * (6) Net Patient Revenue 514,556 464,590 49,966 10.8 % Other (4) 11,992 11,502 490 4.3 % Total 526,548 476,092 50,456 10.6 % Operating costs (4) 421,484 380,035 41,449 10.9 % Gross profit $ 105,064 $ 96,057 $ 9,007 9.4 % Financial and operating metrics (not in thousands): Net rate per patient visit (1) $ 102.80 $ 103.63 $ (0.83 ) (0.8 )% Patient visits (1) 5,005,426 4,483,282 522,144.0 11.6 % Average daily visits per clinic (1) 30.0 28.7 1.3 4.5 % Gross margin 20.0 % 20.2 % Salaries and related costs per visit, clinics (5) $ 59.19 $ 59.52 $ (0.33 ) (0.6 )% Operating costs per visit, clinics (5) $ 82.79 $ 83.34 $ (0.55 ) (0.7 )% Working days 254 255 (1 ) (0.4 )% Number of clinics at the end of the period 671 640 31 4.8 % (1) See defined terms above for definitions.
Biggest change(2) A non-cash impairment charge of $2.4 million was recognized during the three months ended December 31, 2024, related to the impairment of assets held for sale, while $17.5 million of a non-cash impairment charge was recognized during the three months ended December 31, 2023, related to a reporting unit in the Company’s IIP segment. * Not meaningful 36 Table of Contents Physical Therapy Operations For the Year Ended Variance December 31, 2024 December 31, 2023 $ % (In thousands, except percentages) Revenue related to: Mature Clinics (1) $ 501,304 $ 489,233 $ 12,071 2.5 % Clinic additions (2) 52,943 12,406 40,537 326.8 % Clinics sold or closed (3) 6,306 12,917 (6,611 ) (51.2 )% Net Patient Revenue 560,553 514,556 45,997 8.9 % Other (4) 13,880 11,992 1,888 15.7 % Total 574,433 526,548 47,885 9.1 % Operating costs (4) 470,485 421,484 49,001 11.6 % Gross profit $ 103,948 $ 105,064 $ (1,116 ) (1.1 )% Financial and operating metrics (not in thousands): Net rate per patient visit (1) $ 104.71 $ 102.80 $ 1.91 1.9 % Patient visits (1) 5,353,189 5,005,426 347,763 6.9 % Average daily visits per clinic (1) 30.4 30.0 0.4 1.3 % Gross margin 18.1 % 20.0 % Gross margin excluding closure costs, non-GAAP (6) 18.9 % 20.0 % Salaries and related costs per visit, clinics (5) $ 61.66 $ 59.19 $ 2.47 4.2 % Operating costs per visit, clinics (5) $ 86.43 $ 82.79 $ 3.64 4.4 % Operating costs per visit, clinics, excluding closure costs, non-GAAP (6) $ 85.61 $ 82.75 $ 2.86 3.5 % Number of clinics at the end of the period 729 671 58.0 8.6 % (1) See defined terms above for definitions.
Revenues from the IIP business, which are also included in other revenues in the consolidated statements of net income, are derived from onsite services we provide to clients’ employees including injury prevention, rehabilitation, ergonomic assessments, and performance optimization. Revenue from the IIP business is recognized when obligations under the terms of the contract are satisfied.
Revenues from the IIP business, which are included in other revenues in the consolidated statements of net income, are derived from onsite services we provide to clients’ employees including injury prevention, rehabilitation, ergonomic assessments, and performance optimization. Revenue from the IIP business is recognized when obligations under the terms of the contract are satisfied.
The provision for credit losses is included in clinic operating costs in the statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for credit losses, includes only those amounts we estimate to be collectible.
The provision for credit losses is included in clinic operating costs in the statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and provision for credit losses, includes only those amounts we estimate to be collectible.
We will also pay to the Administrative Agent, for the account of each lender under the Revolving Facility, a commitment fee equal to the actual daily excess of each lender’s commitment over its outstanding credit exposure under the Revolving Facility (“unused fee”).
We also pay to the Administrative Agent, for the account of each lender under the Revolving Facility, a commitment fee equal to the actual daily excess of each lender’s commitment over its outstanding credit exposure under the Revolving Facility (“unused fee”).
Our provision for credit losses was 1.0% of total net revenue for each years ended December 31, 2023, 2022 and 2021, respectively. Management believes that this is reasonable because the majority of our payors consist of highly solvent, highly regulated, commercial insurance companies as well as government programs, including Medicare.
Our provision for credit losses was 1.0% of total net revenue for each years ended December 31, 2024, 2023 and 2022, respectively. Management believes that this is reasonable because the majority of our payors consist of highly solvent, highly regulated, commercial insurance companies as well as government programs, including Medicare.
The purchase price for the 80% equity interest was approximately $6.2 million, of which $5.8 million was paid in cash and $0.4 million in the form of a note payable. The note accrues interest at 4.5% per annum and the principal and interest are payable on February 28, 2025.
The purchase price for 80% equity interest was approximately $6.2 million, of which $5.8 million was paid in cash and $0.4 million in the form of a note payable. The note accrues interest at 4.5% per annum and the principal and interest were paid on February 28, 2025.
As a result, we believe that a reasonable likely change in the contractual allowance reserve estimate would not be more than 1.0% to 1.5% of gross billings in accounts receivable at December 31, 2023.
As a result, we believe that a reasonable likely change in the contractual allowance reserve estimate would not be more than 1.0% to 1.5% of gross billings in accounts receivable at December 31, 2024.
The Put Right or Call Right may be triggered by the owner or us, respectively, at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically three to five years, as defined in the limited partnership agreement.
Most of the Put Rights or Call Rights may be triggered by the owner or us, respectively, at such time as both of the following events have occurred: 1) termination of the owner’s employment, regardless of the reason for such termination, and 2) the passage of specified number of years after the closing of the transaction, typically three to five years, as defined in the limited partnership agreement.
The purchase price for the 75% equity interest was approximately $3.1 million, of which $1.7 million was paid in cash by us, $1.1 million was paid in cash by the local partner, and $0.3 million was in the form of a note payable (of which $0.2 million will be paid by us and $0.1 million will be paid by the local partner).
The purchase price for the 75% equity interest was approximately $3.1 million, of which $1.7 million was paid in cash by us, $1.1 million was paid in cash by the local partner, and $0.3 million was in the form of a note payable (of which $0.2 million was to be paid by us and $0.1 million was to be paid by the local partner).
(4) Includes variable non-lease components, including but not limited to common area maintenance. CRITICAL ACCOUNTING POLICIES Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States.
(4) Includes variable non-lease components, including but not limited to common area maintenance. 44 Table of Contents CRITICAL ACCOUNTING POLICIES Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States.
The purchase price for the 70% equity interest was approximately $2.1 million, of which $1.8 million was paid in cash and $0.3 million is a deferred payment due on June 30, 2025. On May 31, 2023, we and a local partner together acquired a 75% interest in a four-clinic physical therapy practice.
The practice’s owners retained a 30% equity interest. The purchase price for the 70% equity interest was approximately $2.1 million, of which $1.8 million was paid in cash and $0.3 million is a deferred payment due on June 30, 2025. On May 31, 2023, we and a local partner together acquired a 75% interest in a four-clinic physical therapy practice.
If the services are paid in advance, revenue is recorded as a contract liability over the period of the agreement and recognized at the point in time when the services are performed. We determine allowances for credit losses based on the specific agings of receivables and payor classifications at each clinic.
If the services are paid in advance, revenue is recorded as a contract liability over the period of the agreement and recognized at the point in time when the services are performed. 45 Table of Contents We determine allowances for credit losses based on the specific agings of receivables and payor classifications at each clinic.
For purposes of demonstrating the sensitivity of this estimate on our Company’s financial condition, a 1.0% to 1.5% increase or decrease in our aggregate contractual allowance reserve percentage would decrease or increase, respectively, net patient revenue by approximately $1.4 million to $1.5 million for the year ended December 31, 2023.
For purposes of demonstrating the sensitivity of this estimate on our Company’s financial condition, a 1.0% to 1.5% increase or decrease in our aggregate contractual allowance reserve percentage would decrease or increase, respectively, net patient revenue by approximately $1.0 million to $1.5 million for the year ended December 31, 2024.
Redeemable Non-Controlling Interest Certain of our limited partnership agreements, as amended, provide that, upon the triggering events, we have a call right and the selling entity or individual has a put right for the purchase and sale of the limited partnership interest held by the partner.
Redeemable Non-Controlling Interest Certain of our limited partnership agreements and operating agreements provide that, upon the triggering events, we have a call right and the selling entity or individual has a put right for the purchase and sale of the limited partnership interest held by the partner.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on February 28, 2023.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
Contractual Obligations We have future obligations for debt repayments and associated interest payments as well as future minimum rentals under our non-cancellable operating leases.
Contractual Obligations We have future obligations for debt repayments and associated interest payments as well as future minimum lease payments under our non-cancellable operating leases.
The purchase price for the 70% equity interest was approximately $7.8 million, of which $7.4 million was paid in cash and $0.4 million is a deferred payment due on June 30, 2025. On July 31, 2023, we acquired a 70% equity interest in a five-clinic practice. The practice’s owners retained a 30% equity interest.
The owner of the practice retained 30% of the equity interests. The purchase price for the 70% equity interest was approximately $7.8 million, of which $7.4 million was paid in cash and $0.4 million is a deferred payment due on June 30, 2025. On July 31, 2023, we acquired a 70% equity interest in a five-clinic practice.
This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
This section of this Annual Report on Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
The interest rate for the 2023 Year on our Senior Credit Facilities, net of savings from the interest rate swap described below, was 5.1%, with an all-interest rate, including all associated costs, of 5.7%. Interest is payable at the end of the selected interest period but no less frequently than quarterly and on the date of maturity.
The interest rate for the 2024 Year on our Senior Credit Facilities, net of savings from the interest rate swap described below, was 4.7%, with an all-in interest rate, including all associated costs, of 5.5%. Interest is payable at the end of the selected interest period but no less frequently than quarterly and on the date of maturity.
The fair value of the interest rate swap is included in other assets (current and long term) in our consolidated balance sheet while the increase in fair value is presented as unrealized loss in our unaudited consolidated statements of comprehensive income. The interest rate swap arrangement generated $3.3 million in interest savings for the Full Year 2023.
The fair value of the interest rate swap is included in other assets (current and long term) in our consolidated balance sheet while the increase in fair value is presented as unrealized loss in our consolidated statements of comprehensive income. The interest rate swap arrangement generated $3.4 million in interest savings for the 2024 Year.
Services provided by the IIP segment include onsite injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional evaluations and ergonomic assessments. The majority of these services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include large insurers and their contractors.
Services provided in this business include onsite injury prevention and rehabilitation, performance optimization, post-offer employment testing, functional capacity evaluations and ergonomic assessments. The majority of the IIP services are contracted with and paid for directly by employers, including a number of Fortune 500 companies. Other clients include large insurers and their contractors.
With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the balance has been outstanding for 120 days or longer. As of December 31, 2023, we have accrued $8.8 million related to credit balances (included in accrued expenses), a portion of which is due to patients and payors.
With managed care, commercial health plans and self-pay payor type receivables, the write-off generally occurs after the balance has been outstanding for 120 days or longer. As of December 31, 2024, we have accrued $6.4 million related to credit balances (including in accrued expenses), a portion of which is due to patients and payors.
The average interest rate for the term facility, net of the savings from the swap in the Full Year 2023 was 4.9%. Notes Payable and Deferred Payments Related to Acquisitions We generally enter into various notes payable as a means of financing our acquisitions.
The average interest rate for the term facility, net of the savings from the swap in the 2024 Year was 4.7%. Notes Payable and Deferred Payments Related to Acquisitions We generally enter into various notes payable as a means of financing our acquisitions.
The purchase price for the 70% equity interest was approximately $6.0 million, of which $5.4 million was paid in cash, and $0.6 million was in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and interest are payable in two installments.
The owner of the practice retained 30% of the equity interests. The purchase price for the 70% equity interest was approximately $6.0 million, of which $5.4 million was paid in cash, and $0.6 million was in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and interest are payable in two installments.
On May 30, 2023, we completed a secondary offering of our common stock resulting in net proceeds of $163.6 million after deducting fees associated with the transaction. A portion of the net proceeds was used to repay the $35.0 million then outstanding under our Credit Agreement while the remainder is expected to be used primarily for acquisitions.
On May 30, 2023, we completed a secondary offering of our common stock resulting in net proceeds of $163.6 million after deducting fees associated with the transaction. A portion of the net proceeds was used to repay the $35.0 million then outstanding under our Credit Agreement while the remainder was used primarily for acquisitions from May 2023 through December 2024.
The first payment of principal and interest of $0.3 million was paid January 2024, and the second installment of $0.3 million is due on September 30, 2025. In a separate transaction, on September 29, 2023, we acquired a 70% equity interest in a single clinic physical therapy practice. The owner of the practice retained 30% of the equity interests.
The first payment of principal and interest of $0.3 million was paid in January 2024, and the second installment of $0.3 million is due on September 30, 2025. 43 Table of Contents In a separate transaction, on September 29, 2023, we acquired a 70% equity interest in a single clinic physical therapy practice.
In the Full Year 2023, our interest rate including the applicable margin was 4.9%. Unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax.
In the 2024 Year, our interest rate including the applicable margin was 4.7%. Unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulated other comprehensive income (loss), net of tax.
The following reflect the significant estimates and judgments used in the preparation of our consolidated financial statements. 43 Table of Contents Revenue Recognition Revenues are recognized in the period in which services are rendered.
The following reflect the significant estimates and judgments used in the preparation of our consolidated financial statements. Revenue Recognition Patient revenue Revenues are recognized in the period in which services are rendered.
Net income attributable to non-controlling interest (permanent equity) was $4.6 million for the Full Year 2023 and $4.3 million for the Full Year 2022. Other Comprehensive Income We entered into an interest rate swap agreement in May 2022, which became effective on June 30, 2022. The maturity date of the swap agreement is June 30, 2027.
Net income attributable to non-controlling interest (permanent equity) was $4.1 million for the 2024 Year and $4.6 million for the 2023 Year. 39 Table of Contents Other Comprehensive Income We entered into an interest rate swap agreement in May 2022, which became effective on June 30, 2022. The maturity date of the swap agreement is June 30, 2027.
The collection process is time consuming and typically involves the submission of claims to multiple payors whose payment of claims may be dependent upon the payment of another payor. Claims under litigation and vehicular incidents can take a year or longer to collect.
When possible, we submit our claims electronically. The collection process is time-consuming and typically involves the submission of claims to multiple payors whose payment of claims may be dependent upon the payment of another payor. Claims under litigation and vehicular incidents can take a year or longer to collect.
On the date we acquire a controlling interest in a partnership and the limited partnership agreement for such partnerships contains redemption rights not under our control, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption— Redeemable non-controlling interest .
On the date we acquire a controlling interest in a Subsidiary and the limited partnership agreement or operating agreement, as applicable, for such Subsidiary contains redemption rights not under our control, the fair value of the non-controlling interest is recorded in the consolidated balance sheet under the caption— Redeemable non-controlling interest .
The credit balances are expected to be resolved or paid in the next twelve months. The average accounts receivable days outstanding was 29 days on December 31, 2023, and 31 days on December 31, 2022. Net patient receivables in the amounts of $6.3 million and $5.5 million were written-off in 2023 and 2022, respectively.
The credit balances are expected to be resolved or paid in the next twelve months. 40 Table of Contents The average accounts receivable days outstanding was 31 days on December 31, 2024, and 29 days on December 31, 2023. Net patient receivables in the amounts of $6.1 million and $6.3 million were written off in 2024 and 2023, respectively.
(2) Amounts due related to certain acquisitions discussed above. (3) Interest on our Senior Credit Facility was estimated using the average outstanding balance for the respective periods and our effective interest rate on our Term Facility at December 31, 2023, of 4.7%. Interest on our other debt was estimated using the stated rate in the debt agreement.
(2) Amounts due related to certain acquisitions discussed above. (3) Interest on our Senior Credit Facilities was estimated using the average outstanding balance for the respective periods and our effective interest rate on our Term Facility and Revolving Facility at December 31, 2024. Interest on our other debt was estimated using the stated rate in the debt agreement.
RESULTS OF OPERATIONS The defined terms with their respective description used in the following discussion are listed below: Mature Clinics are clinics opened or acquired prior to January 1, 2022, and are still operating as of December 31, 2023.
RESULTS OF OPERATIONS The defined terms with their respective description used in the following discussion are listed below: Mature clinics are clinics opened or acquired prior to January 1, 2023, and are still operating as of the balance sheet date.
The fair value of the interest rate swap at December 31, 2023, was $3.7 million, and $5.4 million at December 31, 2022, which has been included within Other assets (current and long term) in the accompanying Consolidated Balance Sheet.
The fair value of the interest rate swap was $3.8 million, and $3.7 million at December 31, 2024 and December 31, 2023 respectively, which has been included within other assets (current and long term) in the Consolidated Balance Sheet.
Corporate Office Costs Corporate office costs were $52.0 million, or 8.6% of net revenue, for the Full Year 2023 compared to $46.1 million, or 8.3% of net revenue, for the Full Year 2022. The increase in corporate office costs was primarily due to higher salaries and related costs to support the larger number of clinics.
Corporate Office Costs Corporate office costs were $58.3 million, or 8.7% of net revenue, in the 2024 Year, compared to $52.0 million, or 8.6% of net revenue, in the 2023 Year. The increase in corporate office costs was primarily due to higher salaries and related costs to support the larger number of clinics.
CMS allows a timed service to be billed without the CQ or CO modifier when a PTA or OTA participates in providing care, but the physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes. This occurs when the physical therapist or occupational therapist provides more minutes than the 15-minute midpoint.
CMS allows a timed service to be billed without a CQ (for PTA’s) or CO (for OTA’s) modifier when a PTA or OTA participates in providing care, but the physical therapist or occupational therapist meets the Medicare billing requirements without including the PTA’s or OTA’s minutes.
Our present outstanding notes payable primarily relate to the acquisitions of a business or acquisitions of majority interests in such businesses. At December 31, 2023, our remaining outstanding balance on these notes aggregated $5.3 million. $1.6 million of the outstanding notes payable are payable in 2023, $2.4 million is payable in 2024, and $1.3 million is payable in 2025.
Our present outstanding notes payable primarily relate to the acquisitions of a business or acquisitions of majority interests in such businesses. At December 31, 2024, our remaining outstanding balance on these notes aggregated $3.0 million, of which $2.0 million are payable in 2025, $0.9 million are payable in 2026, and $0.1 million are payable in 2027.
Notes are generally payable in equal annual installments of principal over two years plus any accrued and unpaid interest. Interest accrues at various interest rates ranging from 3.25% to 8.0% per annum. On September 29, 2023, we acquired a 70% equity interest in a four-clinic physical therapy practice. The owner of the practice retained 30% of the equity interests.
Notes are generally payable in equal annual installments of principal over two years plus any accrued and unpaid interest. Interest accrues at various interest rates ranging from 4.0% to 8.5% per annum. On November 30, 2024, we acquired a 75% equity interest in an eight-clinic physical therapy practice. The owner of the practice retained 25% of the equity interests.
Average daily visits per clinic is patient visits divided by the number of days in which normal business operations were conducted during the periods presented and further divided by the average number clinics in operation during the periods presented. Full Year 2023 refers to the year ended December 31, 2023.
Average daily visits per clinic is patient visits divided by the number of days in which normal business operations were conducted during the periods presented and further divided by the average number of clinics in operation during the periods presented.
(2) Clinic additions during the years ended 2023 and 2022. (3) Revenue from closed clinics includes revenues from the 15 and 16 clinics closed during the full year December 31, 2023 and 2022, respectively. (4) Includes revenues and costs from management contracts. (5) Excludes management contract costs. (6) Not meaningful.
(2) Clinic additions during the years ended 2024 and 2023. (3) Revenue from closed clinics includes revenue from the 45 and 15 clinics closed during the full year December 31, 2024 and 2023, respectively. (4) Includes revenues and costs from management contracts. (5) Per visit costs excludes management contract costs.
We do not have any ownership interest in these clinics. Typically, revenues are determined based on the number of visits conducted at the clinic and recognized at the point in time when services are performed. Costs, typically salaries for our employees, are recorded when incurred.
Typically, revenues are determined based on the number of visits conducted at the clinic and recognized at the point in time when services are performed. Costs, typically salaries for our employees, are recorded when incurred.
Total cash and cash equivalents were $152.8 million as of December 31, 2023, compared to $31.6 million as of December 31, 2022.
Total cash and cash equivalents were $41.4 million as of December 31, 2024, compared to $152.8 million as of December 31, 2023.
As part of the impairment analysis, we are first required to assess qualitatively if we can conclude whether goodwill is more likely than not impaired. If goodwill is more likely than not impaired, we are then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount.
If goodwill is more likely than not impaired, we are then required to complete a quantitative analysis of whether a reporting unit’s fair value is less than its carrying amount.
During the last three years, we completed the following acquisitions of clinic practices and IIP businesses detailed below: % Interest Number of Acquisition Date Acquired Clinics October 2023 Acquisition October 31, 2023 ** * September 2023 Acquisition 1 September 29, 2023 70% 4 September 2023 Acquisition 2 September 29, 2023 70% 1 July 2023 Acquisition July 31, 2023 70% 7 May 2023 Acquisition May 31, 2023 45% 4 February 2023 Acquisition February 28, 2023 80% 1 November 2022 Acquisition November 30, 2022 80% 13 October 2022 Acquisition October 31, 2022 60% 14 September 2022 Acquisition September 30, 2022 80% 2 August 2022 Acquisition August 31, 2022 70% 6 March 2022 Acquisition March 31, 2022 70% 6 December 2021 Acquisition December 31, 2021 75% 3 November 2021 Acquisition November 30, 2021 70% * September 2021 Acquisition September 30, 2021 100% * June 2021 Acquisition June 30, 2021 65% 8 March 2021 Acquisition March 31, 2021 70% 6 * IIP business ** On October 31, 2023, we concurrently acquired 100% of an IIP business and a 55% equity interest in an ergonomics software business (“October 2023 Acquisition”). 30 Table of Contents The following table provides a roll forward of our clinic count for the periods presented.
During the last three years, we completed the following acquisitions of outpatient physical therapy practices, companies that manage and/or provide administrative services to outpatient physical therapy practices, and IIP businesses detailed below: Acquisition Date % Interest Acquired Number of Clinics November 2024 Acquisition November 30, 2024 75% 8 October 2024 Acquisition October 31, 2024 50% 50 August 2024 Acquisition August 31, 2024 70% 8 April 2024 Acquisition April 30, 2024 ** * March 2024 Acquisition March 29, 2024 50% 9 October 2023 Acquisition October 31, 2023 *** * September 2023 Acquisition 1 September 29, 2023 70% 4 September 2023 Acquisition 2 September 29, 2023 70% 1 July 2023 Acquisition July 31, 2023 70% 7 May 2023 Acquisition May 31, 2023 45% 4 February 2023 Acquisition February 28, 2023 80% 1 November 2022 Acquisition November 30, 2022 80% 13 October 2022 Acquisition October 31, 2022 60% 14 September 2022 Acquisition September 30, 2022 80% 2 August 2022 Acquisition August 31, 2022 70% 6 March 2022 Acquisition March 31, 2022 70% 6 * IIP business ** On April 30, 2024, one of our primary IIP businesses, Briotix Health Limited Partnership, acquired 100% of an IIP business. *** On October 31, 2023, we concurrently acquired 100% of an IIP business and a 55% equity interest in an ergonomics software business (“October 2023 Acquisition”). 30 Table of Contents The following table provides a roll forward of our clinic count for the periods presented.
As of December 31, 2023, $144.4 million was outstanding on the Term Facility while none was outstanding under the Revolving Facility, resulting in $175.0 million of credit availability. As of December 31, 2023, we were in compliance with all of the covenants contained in the Credit Agreement.
As of December 31, 2024, $140.6 million was outstanding on the Term Facility while $11.0 million was outstanding under the Revolving Facility, resulting in $164.0 million of credit availability. As of December 31, 2024, we were in compliance with all of the covenants contained in the Credit Agreement.
Additionally, we had $144.4 million of outstanding borrowings and $175.0 million in available credit under our credit facilities as of December 31, 2023, compared to $179.1 million of outstanding borrowings and $145.9 million in available credit under our credit facilities as of December 31, 2022.
Additionally, we had $151.6 million of outstanding borrowings and $164.0 million in available credit under our credit facilities as of December 31, 2024, compared to $144.4 million of outstanding borrowings and $175.0 million in available credit under our credit facilities as of December 31, 2023.
These services are performed through Industrial Sports Medicine Professionals, consisting of both physical therapists and specialized certified athletic trainers (“ATCs”).
These services are performed through Industrial Sports Medicine Professionals, consisting primarily of specialized certified athletic trainers.
The Term Facility amortizes in quarterly installments of: (a) 0.625% in each of the first two years, (b) 1.250% in the third and fourth year, and (c) 1.875% in the fifth year of the Credit Agreement. The remaining outstanding principal balance of all term loans is due on the maturity date.
The Term Facility amortizes in quarterly installments of: (a) 0.625% in each of the first two years, (b) 1.250% in the third and fourth year, and (c) 1.875% in the fifth year of the Credit Agreement.
Gross profit increased $0.5 million, or 3.0%, to $16.4 million for Full Year 2023 from $16.0 million for the Full Year 2022 while gross profit margin percentage from IIP operations increased slightly to 21.0% for Full Year 2023 from 20.7% for the Full Year 2022.
Gross profit from IIP operations increased $3.5 million, or 21.5%, to $20.0 million for the 2024 Year from $16.4 million for the 2023 Year while the gross profit margin from IIP operations was 20.6% for the 2024 Year compared to 21.0% for the 2023 Year.
We believe that Adjusted EBITDA and Operating Results are useful measures for investors to use in comparing the Company's period-to-period results as well as for comparing with other similar businesses since most do not have redeemable instruments and therefore have different equity structures.
Management believes providing Adjusted EBITDA, Operating Results, and other non-GAAP measures to investors is useful information for comparing the Company’s period-to-period results as well as for comparing with other similar businesses since most do not have redeemable instruments and therefore have different equity structures.
The interest rate on the Company’s term loan, was 4.9% for the Full Year 2023, with an all-in effective interest rate, including all associated costs, of 5.3%. Interest income from investment Interest income from investment amounted to $3.8 million for the Full Year 2023.
The interest rate on the Company’s term loan was 4.7% for the 2024 Year and 4.9% for the 2023 Year, with an all-in effective interest rate on the credit facility including all associated costs, of 5.5% and 5.3% over the same periods, respectively. 38 Table of Contents Interest income from investment Interest income from investment amounted to $3.9 million for the 2024 Year and $3.8 million for 2023 Year.
In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, the CQ modifier is not required.
In the final 2020 MPFS rule, CMS clarified that when the physical therapist is involved for the entire duration of the service and the physical therapist assistant (“PTA”) provides skilled therapy alongside the physical therapist, an identification of the PTA’s participation (as denoted by a “CQ modifier”) is not required.
Operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest partner. When we purchase a non-controlling interest and the purchase differs from the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.
When we purchase a non-controlling interest and the purchase differs from the book value at the time of purchase, any excess or shortfall is recognized as an adjustment to additional paid-in capital.
The proceeds of the Revolving Facility have been and shall continue to be used by us for working capital and other general corporate purposes of our Company and its subsidiaries, including to fund future acquisitions and invest in growth opportunities.
The remaining outstanding principal balance of all term loans is due on the maturity date. 41 Table of Contents The proceeds of the Revolving Facility have been and shall continue to be used by us for working capital and other general corporate purposes of our Company and its subsidiaries, including to fund future acquisitions and invest in growth opportunities.
The purchase price of the partner’s limited partnership interest upon the exercise of either the put right or the call right is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets.
The purchase price of the underlying equity interest upon the exercise of either the put right or the call right is calculated per the terms of the respective agreements and classified as redeemable non-controlling interest (temporary equity) in our consolidated balance sheets. The fair value of the redeemable non-controlling interest at December 31, 2024 was $269.0 million.
We plan to continue developing new clinics and making additional acquisitions. We have, from time to time, purchased the non-controlling interests of limited partners in our existing partnerships. We may purchase additional non-controlling interests in the future. Generally, any acquisition or purchase of non-controlling interests is expected to be accomplished using our cash, financing, or a combination of the two.
We plan to continue developing new clinics and making additional acquisitions. We have, from time to time, purchased from or sold to non-controlling interests of limited partners in our existing partnerships. We may purchase or sell additional non-controlling interests in the future.
The note will be paid on July 1, 2024. We guaranteed the full payment of $0.3 million on its due date. 41 Table of Contents On February 28, 2023, we acquired an 80% interest in a one-clinic physical therapy practice. The practice’s owners retained 20% of the equity interests.
The note was paid in full on July 1, 2024. On February 28, 2023, we acquired 80% interest in a one-clinic physical therapy practice. The practice’s owners retained 20% of the equity interests.
The purchase price for the 80% equity interest was approximately $4.2 million, of which $3.9 million was paid in cash and $0.3 million in the form of a note payable. The note accrues interest at 5.5% per annum and the principal and interest are payable on September 30, 2024.
The purchase price for the 50% equity interest was approximately $16.4 million, of which $0.5 million was in the form of a note payable. The note accrues interest at 4.5% per annum and the principal and the interest are payable on March 29, 2026.
The provision for credit losses was $6.2 million for the Full Year 2023 and $5.5 million for the Full Year 2022. As a percentage of net revenues, the provision for credit losses were 1.0% for both 2023 and 2022.
As a percentage of net revenues, the provision for credit losses were 1.0% for both 2024 and 2023.
The Put Rights and Call Rights are not automatic (even upon death) and require either the owner or us to exercise our rights when the conditions triggering the Put or Call Rights have been satisfied.
Other Put Rights may be triggered at the discretion of the owner after a set period of time has passed. The Put Rights and Call Rights are not automatic (even upon death) and require either the owner or us to exercise our rights when the conditions triggering the Put or Call Rights have been satisfied.
Outpatient rehabilitation providers may enroll in Medicare as institutional outpatient rehabilitation facilities (i.e., rehab agencies) or individual physical or occupational therapists in private practice. The majority of our clinicians are enrolled as individual physical or occupational therapists in private practice while the remaining balance of providers are reimbursed through enrolled rehab agencies.
Outpatient rehabilitation providers may enroll in Medicare as institutional outpatient rehabilitation facilities (i.e., rehab agencies) or individual physical or occupational therapists in private practice.
The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statement of income. We believe the redemption value (i.e. the carrying amount) and fair value are the same.
The amount of net income attributable to redeemable non-controlling interest owners is included in consolidated net income on the face of the consolidated statement of income.
The purchase price for the 70% equity interest was approximately $11.5 million, of which $11.2 million was paid in cash and $0.3 million is in the form of a note payable. The note accrues interest at 3.5% per annum and the principal and interest are payable on March 31, 2024.
The purchase price for the 75% equity interest was approximately $15.9 million, of which $15.7 million was paid in cash, and $0.2 million was in the form of a note payable. The note accrues interest at 5.0% per annum and the principal and interest is payable in one installment which is due on December 1, 2026.
In accordance with Generally Accepted Accounting Principles (“GAAP”), the revaluation of non-controlling interest, net of taxes, is not included in net income but is charged directly to retained earnings; however, this change is included in the computation of earnings per share. Earnings per share for Full Year 2023 were $1.28 compared to $2.25 for Full Year 2022.
In accordance with GAAP, the revaluation of noncontrolling interest, net of taxes, is not included in net income but is charged directly to retained earnings; however, this change is included in the computation of earnings per share. Earnings per share, was $1.84 for the 2024 Year compared to $1.28 in the 2023 Year. (1) These are non-GAAP Measures.
Year Ended December 31, 2023 December 31, 2022 December 31, 2021 Net cash provided by operating activities $ 81,978 $ 58,537 $ 76,406 Net cash used in investing activities 45,015 81,269 124,136 Net cash provided by financing activities 84,268 25,759 43,379 Operating Activities Cash provided by operating activities increased $23.4 million to $82.0 million for the year ended December 31, 2023 as compared to $58.5 million for the year ended December 31, 2022.
Year Ended December 31, 2024 December 31, 2023 December 31, 2022 Net cash provided by operating activities $ 74,940 $ 81,978 $ 58,537 Net cash used in financing activities (149,450 ) (45,015 ) (81,269 ) Net cash (used in) provided by financing activities (36,953 ) 84,268 25,759 Operating Activities Cash provided by operating activities decreased $7.0 million to $74.9 million for the year ended December 31, 2024, as compared to $82.0 million for the year ended December 31, 2023.
The put-right relates to the potential future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.
For the 2024 Year, we recorded a loss of $0.1 million on the valuation of the put-right liability compared to a $2.6 million gain for the 2023 Year. The put-right relates to the potential future purchase of a company that provides physical therapy and rehabilitation services to hospitals and other ancillary providers in a distinct market area.
Impairment of Goodwill and Other Intangible Assets A non-cash impairment charge of $17.5 million was recognized during the Full Year 2023 related to a reporting unit in our IIP segment. This compares to a $9.1 million non-cash impairment charge to goodwill in the comparable prior year period related to the same reporting unit.
Impairment of Goodwill and Other Intangible Assets, and Assets Held for Sale A non-cash impairment charge of $2.4 million was recognized during the 2024 Year related to the impairment of assets held for sale while a non-cash impairment charge of $17.5 million was recognized during the 2023 Year related to the reporting unit in the Company’s IIP segment.
Investing Activities Cash used in investing activities during the year ended December 31, 2023 totaled $45.0 million and consisted of $9.3 million of fixed assets purchases and $37.8 million used in the purchase of majority interests in businesses and non-controlling interest, temporary and permanent equity.
Investing Activities Cash used in investing activities during the year ended December 31, 2024, totaled $149.5 million and consisted of $142.1 million used in the purchase of majority interests in businesses and non-controlling interest, temporary and permanent equity, and $9.2 million of fixed assets purchases. These were partially offset by $1.0 million in distributions from an unconsolidated affiliate.
Equity in earnings of unconsolidated affiliate For the Full Year 2023, we recognized income of $1.0 million compared to $1.2 million for the Full Year 2022 from a joint venture which provides physical therapy services for patients at hospitals.
Equity in earnings of unconsolidated affiliate We recognized income of $1.0 million for both the 2024 Year and the 2023 Year from a joint venture which provides physical therapy services for patients at hospitals. Since we are deemed to not have a controlling interest in the joint venture, our investment is accounted for using the equity method of accounting.
On August 31, 2022, we acquired a 70% interest in a six-clinic physical therapy practice. The practice’s owners retained 30% of the equity interests. The purchase price for the 70% equity interest was approximately $3.5 million, of which $3.3 million was paid in cash and $0.2 million in the form of a note payable.
The value of the contingent consideration at December 31, 2024 was $11.3 million. On August 31, 2024, we acquired a 70% equity interest in an eight-clinic practice physical therapy and the original practice owners retained a 30% equity interest. The purchase price for the 70% equity interest was approximately $2.0 million.
Non-Controlling Interest We recognize non-controlling interests, in which we have no obligation but the right to purchase the non-controlling interests, as equity in the consolidated financial statements separate from the parent entity’s equity. The amount of net income attributable to non-controlling interests is included in consolidated net income on the face of the consolidated statements of net income.
We believe the redemption value (i.e. the carrying amount) and fair value are the same. 47 Table of Contents Non-Controlling Interest We recognize non-controlling interests, in which we have no obligation but the right to purchase the non-controlling interests, as equity in the consolidated financial statements separate from the parent entity’s equity.
We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts. Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor’s requirements. When possible, we submit our claims electronically.
Generally, any acquisition or purchase of non-controlling interests is expected to be accomplished using our cash, financing, or a combination of the two. We make reasonable and appropriate efforts to collect accounts receivable, including applicable deductible and co-payment amounts. Claims are submitted to payors daily, weekly or monthly in accordance with our policy or payor’s requirements.
The total interest rate in any period also includes an applicable margin based on our consolidated leverage ratio. In connection with the swap, no cash was exchanged between us and the counterparty. We designated our interest rate swap as a cash flow hedge and structured it to be highly effective.
Beginning in July 2022, we receive 1-month SOFR, and pay a fixed rate of interest of 2.815% on 1-month SOFR on a quarterly basis. The total interest rate in any period also includes an applicable margin based on our consolidated leverage ratio. In connection with the swap, no cash was exchanged between us and the counterparty.
The difference between our established rate and the anticipated reimbursement rate is accounted for as an offset to revenue—contractual allowance. Management contract revenue, which is included in other revenue in the consolidated statements of net income, is derived from contractual arrangements whereby we manage a clinic owned by a third party.
The difference between our established rate and the anticipated reimbursement rate is accounted for as an offset to revenue—contractual allowance. Other Revenues Revenue derived from management agreements with physicians and hospitals is included in other revenue in the consolidated statements of net income. We do not have any ownership interest in these clinics.
It has a $150 million notional value adjusted concurrently with scheduled principal payments made on the term loan and has a maturity date of June 30, 2027. Beginning in July 2022, we receive 1-month SOFR, and pay a fixed rate of interest of 2.815% on 1-month SOFR on a quarterly basis.
Interest Rate Swap In May 2022, we entered into an interest rate swap agreement, effective on June 30, 2022, with Bank of America, N.A, which became effective on June 30, 2022. It has a $150 million notional value adjusted concurrently with scheduled principal payments made on the term loan and has a maturity date of June 30, 2027.
Operating Results per share also exclude the impact of the revaluation of redeemable non-controlling interest and the associated tax impact.
Operating Results per share also excludes the impact of the revaluation of redeemable non-controlling interest and the associated tax impact. Adjusted EBITDA, Operating Results and other non-GAAP measures presented are not measures of financial performance under GAAP.
Consequently, unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulate other comprehensive income (loss), net of tax.
Consequently, unrealized gains and losses related to the fair value of the interest rate swap are recorded to accumulate other comprehensive income (loss), net of tax. 42 Table of Contents As of December 31, 2024, the fair value of the interest rate swap was $3.8 million, an increase of $0.1 million, net of any income tax effect, as compared to December 31, 2023.
Adjusted EBITDA is defined as net income attributable to our shareholders before interest income, interest expense, taxes, depreciation, amortization, non-cash asset impairment charge, change in fair value of contingent earn-out consideration, Relief Funds, changes in revaluation of put-right liability, equity-based awards compensation expense, and related portions for non-controlling interests. 32 Table of Contents Operating Results equals net income attributable to our shareholders less non-cash asset impairment charge, changes in revaluation of put-right liability, Relief Funds, changes in fair value of contingent earn-out consideration, and any allocations to non-controlling interests, all net of taxes.
Adjusted EBITDA, a non-GAAP measure, is defined as net income attributable to our shareholders before interest income, interest expense, taxes, depreciation, amortization, change in fair value of contingent earn-out consideration, payments received from the federal government under the Corona virus Aid, Relief and Economic Security Act (“Relief Funds”), non-cash impairment charges, changes in revaluation of put-right liability, equity-based awards compensation expense, clinic closure costs, business acquisition related costs and other income and related portions for non-controlling interests.
For purposes of goodwill impairment analysis, each of our segments is further broken down into reporting units. Reporting units within our physical therapy business comprise of regions primarily based on each clinic’s location. In addition to the six regions, in 2023 and 2022, the IIP business consisted of two reporting units.
Reporting units within our physical therapy business comprise of regions primarily based on each clinic’s location. In addition to the six regions, in 2024 and 2023, the IIP business consisted of two reporting units. As part of the impairment analysis, we are first required to assess qualitatively if we can conclude whether goodwill is more likely than not impaired.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−1 removed0 unchanged
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We maintain an interest rate swap arrangement which is considered a derivative instrument.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We maintain an interest rate swap arrangement which is considered a derivative instrument. Our indebtedness as of December 31, 2024, was the outstanding balance of seller notes from our acquisitions of $2.9 million, and an outstanding balance on our Credit Facilities of $151.6 million.
The Revolving Facility does not have a balance as of December 31, 2023, and is subject to fluctuating interest rates. A 1% change in the interest rate would yield an additional $1.5 million of interest expense. See Note 10 to our consolidated financial statements included in Item 8. 46 Table of Contents
The Revolving Facility within our Credit Facilities has a balance of $11.0 million as of December 31, 2024, and is subject to fluctuating interest rates. A 1% change in the interest rate would yield an additional $0.1 million of interest expense. See Note 11 to our consolidated financial statements included in Item 8.
Removed
Our indebtedness as of December 31, 2023, was the outstanding balance of seller notes from our acquisitions of $3.8 million, and an outstanding balance on our Credit Agreement of $144.4 million, which includes a term note with a balance of $144.4 million.

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