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What changed in SELECT MEDICAL HOLDINGS CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SELECT MEDICAL HOLDINGS CORP'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.

+474 added−426 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-22)

Top changes in SELECT MEDICAL HOLDINGS CORP's 2024 10-K

474 paragraphs added · 426 removed · 302 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

126 edited+58 added−61 removed78 unchanged
Biggest changeF-6 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Changes in Equity and Income (in thousands) Total Stockholders’ Equity Common Stock Issued Common Stock Par Value Capital in Excess of Par Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Non-controlling Interests Total Equity Balance at December 31, 2020 134,850 $ 135 $ 509,128 $ 553,244 $ (2,027) $ 1,060,480 $ 192,493 $ 1,252,973 Net income attributable to Select Medical Holdings Corporation 402,225 402,225 402,225 Net income attributable to non-controlling interests — 47,571 47,571 Cash dividends declared for common stockholders ($0.375 per share) (50,600) (50,600) (50,600) Issuance of restricted stock 1,363 1 (1) — — Forfeitures of unvested restricted stock (18) 0 0 — — Vesting of restricted stock 28,798 28,798 28,798 Repurchase of common shares (2,311) (2) (33,322) (46,152) (79,476) (79,476) Issuance of non-controlling interests 3,646 3,646 17,540 21,186 Non-controlling interests acquired in business combination — 11,153 11,153 Distributions to and purchases of non-controlling interests (3,757) (15,440) (19,197) (52,961) (72,158) Redemption value adjustment on non-controlling interests (250,083) (250,083) (250,083) Other comprehensive income 14,309 14,309 14,309 Other (178) 57 (121) 125 4 Balance at December 31, 2021 133,884 $ 134 $ 504,314 $ 593,251 $ 12,282 $ 1,109,981 $ 215,921 $ 1,325,902 Net income attributable to Select Medical Holdings Corporation 158,994 158,994 158,994 Net income attributable to non-controlling interests — 31,460 31,460 Cash dividends declared for common stockholders ($0.50 per share) (64,589) (64,589) (64,589) Issuance of restricted stock 1,642 1 (1) — — Forfeitures of unvested restricted stock (98) 0 0 64 64 64 Vesting of restricted stock 35,550 35,550 35,550 Repurchase of common shares (8,255) (8) (87,838) (107,682) (195,528) (195,528) Issuance of non-controlling interests 665 665 9,505 10,170 Non-controlling interests acquired in business combination, measurement period adjustment — 12,463 12,463 Distributions to and purchases of non-controlling interests (507) (2,450) (2,957) (34,707) (37,664) Redemption value adjustment on non-controlling interests 3,385 3,385 3,385 Other comprehensive income 76,320 76,320 76,320 Other 37 37 37 Balance at December 31, 2022 127,173 $ 127 $ 452,183 $ 581,010 $ 88,602 $ 1,121,922 $ 234,642 $ 1,356,564 Net income attributable to Select Medical Holdings Corporation 243,491 243,491 243,491 Net income attributable to non-controlling interests — 48,153 48,153 Cash dividends declared for common stockholders ($0.50 per share) (63,904) (63,904) (63,904) Issuance of restricted stock 1,651 1 (1) — — Forfeitures of unvested restricted stock (12) 0 0 12 12 12 Vesting of restricted stock 43,619 43,619 43,619 Repurchase of common shares (443) 0 (5,184) (7,575) (12,759) (12,759) Issuance of non-controlling interests 1,870 1,870 21,181 23,051 Non-controlling interests acquired in business combination — 9,007 9,007 Distributions to and purchases of non-controlling interests 927 (2,672) (1,745) (53,569) (55,314) Redemption value adjustment on non-controlling interests 1,527 1,527 1,527 Other comprehensive income (45,695) (45,695) (45,695) Other (1) (33) (34) (34) Balance at December 31, 2023 128,369 $ 128 $ 493,413 $ 751,856 $ 42,907 $ 1,288,304 $ 259,414 $ 1,547,718 The accompanying notes are an integral part of these consolidated financial statements.
Biggest changeF-6 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Changes in Equity and Income (in thousands) Total Stockholders’ Equity Common Stock Issued Common Stock Par Value Capital in Excess of Par Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Non-controlling Interests Total Equity Balance at December 31, 2021 133,884 $ 134 $ 504,314 $ 593,251 $ 12,282 $ 1,109,981 $ 215,921 $ 1,325,902 Net income attributable to Select Medical Holdings Corporation 158,994 158,994 158,994 Net income attributable to non-controlling interests — 31,460 31,460 Cash dividends declared for common stockholders ($0.50 per share) (64,589) (64,589) (64,589) Issuance of restricted stock 1,642 1 (1) — — Forfeitures of unvested restricted stock (98) 0 0 64 64 64 Vesting of restricted stock 35,550 35,550 35,550 Repurchase of common shares (8,255) (8) (87,838) (107,682) (195,528) (195,528) Issuance of non-controlling interests 665 665 9,505 10,170 Non-controlling interests acquired in business combination, measurement period adjustment — 12,463 12,463 Distributions to and purchases of non-controlling interests (507) (2,450) (2,957) (34,707) (37,664) Redemption value adjustment on non-controlling interests 3,385 3,385 3,385 Other comprehensive income 76,320 76,320 76,320 Other 37 37 37 Balance at December 31, 2022 127,173 $ 127 $ 452,183 $ 581,010 $ 88,602 $ 1,121,922 $ 234,642 $ 1,356,564 Net income attributable to Select Medical Holdings Corporation 243,491 243,491 243,491 Net income attributable to non-controlling interests — 48,153 48,153 Cash dividends declared for common stockholders ($0.50 per share) (63,904) (63,904) (63,904) Issuance of restricted stock 1,651 1 (1) — — Forfeitures of unvested restricted stock (12) 0 0 12 12 12 Vesting of restricted stock 43,619 43,619 43,619 Repurchase of common shares (443) 0 (5,184) (7,575) (12,759) (12,759) Issuance of non-controlling interests 1,870 1,870 21,181 23,051 Non-controlling interests acquired in business combination — 9,007 9,007 Distributions to and purchases of non-controlling interests 927 (2,672) (1,745) (53,569) (55,314) Redemption value adjustment on non-controlling interests 1,527 1,527 1,527 Other comprehensive loss (45,695) (45,695) (45,695) Other (1) (33) (34) (34) Balance at December 31, 2023 128,369 $ 128 $ 493,413 $ 751,856 $ 42,907 $ 1,288,304 $ 259,414 $ 1,547,718 Net income attributable to Select Medical Holdings Corporation 214,038 214,038 214,038 Net income attributable to non-controlling interests — 73,264 73,264 Cash dividends declared for common stockholders ($0.50 per share) (64,617) (64,617) (64,617) Issuance of restricted stock 1,728 2 (2) — — Forfeitures of unvested restricted stock (69) 0 0 71 71 71 Vesting of restricted stock 100,599 100,599 100,599 Repurchase of common shares (1,065) (1) (18,176) (19,728) (37,905) (37,905) Issuance of non-controlling interests — 27,200 27,200 Non-controlling interests acquired in business combination — 13,009 13,009 Distributions to and purchases of non-controlling interests 394 394 (50,670) (50,276) Redemption value adjustment on non-controlling interests (1,947) (1,947) (1,947) Concentra Separation and Distribution 334,852 (109,656) 225,196 (16,644) 208,552 Other comprehensive loss (42,907) (42,907) (42,907) Other 129 129 129 Balance at December 31, 2024 128,963 $ 129 $ 911,080 $ 770,146 $ — $ 1,681,355 $ 305,573 $ 1,986,928 The accompanying notes are an integral part of these consolidated financial statements.
The transaction price is variable in nature and the Company recognizes revenue in amounts which are commensurate with the level of services provided during the period. The Company’s transaction price is determined such that the amount of cumulative revenue recognized will not be subject to significant reversal in future periods.
The transaction price is variable in nature and the Company recognizes revenue in amounts which are commensurate with the level of services provided during the period. The Company’s transaction price is determined such that the amount of cumulative revenue recognized will not be subject to significant reversal in future periods. 2.
These renewal options vary for hospitals which operate as a hospital within a hospital, or “HIH.” The Company’s outpatient rehabilitation clinics generally have lease terms of five years with two, three to five year renewal options.
These renewal options vary for hospitals which operate as a hospital within a hospital, or “HIH.” The Company’s outpatient rehabilitation clinics generally have lease terms of five to 10 years with two, three to five year renewal options.
Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate. Holdings is funding this program with cash on hand and borrowings under the revolving facility. The common stock repurchase program has available capacity of $399.7 million as of December 31, 2023.
Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate. Holdings is funding this program with cash on hand and borrowings under the revolving facility. The common stock repurchase program has available capacity of $399.7 million as of December 31, 2024.
The changes in the Company’s valuation allowance were recognized as a result of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. F-33 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 18.
The changes in the Company’s valuation allowance were recognized as a result of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. F-35 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 18.
The Company accrues for losses under an occurrence-based approach whereby the Company estimates the losses that will be incurred in a respective accounting period and accrues that estimated liability using actuarial methods. At December 31, 2022 and 2023, provisions for losses for professional liability risks retained by the Company have been discounted at 3%.
The Company accrues for losses under an occurrence-based approach whereby the Company estimates the losses that will be incurred in a respective accounting period and accrues that estimated liability using actuarial methods. At December 31, 2023 and 2024, provisions for losses for professional liability risks retained by the Company have been discounted at 3%.
The Company’s principal revenue source comes from providing healthcare services to patients. For patients treated within the Company’s outpatient rehabilitation clinics and Concentra centers, performance obligations are generally satisfied upon completion of the patient’s visit. For patients treated within the Company’s critical illness recovery and rehabilitation hospitals, the Company’s performance obligation is satisfied over the duration of the patient’s stay.
The Company’s principal revenue source comes from providing healthcare services to patients. For patients treated within the Company’s outpatient rehabilitation clinics, performance obligations are generally satisfied upon completion of the patient’s visit. For patients treated within the Company’s critical illness recovery and rehabilitation hospitals, the Company’s performance obligation is satisfied over the duration of the patient’s stay.
At December 31, 2023, the Company’s other indefinite-lived intangible assets consist of trademarks, certificates of need, and accreditations. To determine the fair values of its trademarks, the Company uses a relief from royalty income approach. For the Company’s certificates of need and accreditations, the Company performs qualitative assessments.
At December 31, 2024, the Company’s other indefinite-lived intangible assets consist of trademarks, certificates of need, and accreditations. To determine the fair values of its trademarks, the Company uses a relief from royalty income approach. For the Company’s certificates of need and accreditations, the Company performs qualitative assessments.
Organization and Significant Accounting Policies (Continued) Equity Method Investments The Company applies the equity method of accounting for investments in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, but does not possess a controlling financial interest in the investee.
Equity Method Investments The Company applies the equity method of accounting for investments in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, but does not possess a controlling financial interest in the investee.
These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The Company is and has been a defendant in these cases in the past, and may be named as a defendant in similar cases from time to time in the future.
These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The Company is and has been a defendant in these cases in the past, and may be named as a defendant in similar cases from time to time in the future. Oklahoma City Investigation.
Fair Value of Financial Instruments (Continued) The Company does not measure its indebtedness at fair value in its consolidated balance sheets. The fair value of the credit facilities is based on quoted market prices for this debt in the syndicated loan market. The fair value of the senior notes is based on quoted market prices.
The Company does not measure its indebtedness at fair value in its consolidated balance sheets. The fair value of the credit facilities is based on quoted market prices for this debt in the syndicated loan market. The fair value of the senior notes is based on quoted market prices.
Recent Accounting Guidance Not Yet Adopted Leases In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-01, Leases (Topic 842): Common Control Arrangements , which requires companies to amortize leasehold improvements associated with related party leases under common control over the useful life of the leasehold improvement to the common control group.
Recently Adopted Accounting Guidance Leases In March 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-01, Leases (Topic 842): Common Control Arrangements , which requires companies to amortize leasehold improvements associated with related party leases under common control over the useful life of the leasehold improvement to the common control group.
The Company’s interest rate cap contract is recorded at its fair value in the consolidated balance sheets on a recurring basis. The fair value of the interest rate cap contract is based upon a model-derived valuation using observable market inputs, such as interest rates and interest rate volatility, and the strike price.
The Company’s interest rate cap contract was recorded at its fair value in the consolidated balance sheets on a recurring basis. The fair value of the interest rate cap contract was based upon a model-derived valuation using observable market inputs, such as interest rates and interest rate volatility, and the strike price (Level 2).
The carrying value of the Company’s other debt, as disclosed in Note 11 – Long-Term Debt and Notes Payable, approximates fair value.
The carrying value of the Company’s other debt, as disclosed in Note 12 – Long-Term Debt and Notes Payable, approximates fair value.
Leases The Company has operating and finance leases for its facilities. The Company leases its corporate office space from related parties. The Company’s critical illness recovery hospitals, rehabilitation hospitals, and Concentra centers generally have lease terms of 10 years with two, five year renewal options.
Leases The Company has operating and finance leases for its facilities. The Company leases its corporate office space from related parties. The Company’s critical illness recovery hospitals and rehabilitation hospitals generally have lease terms of 10 to 20 years with two, five year renewal options.
Although realization is not assured, based on the Company’s assessment, it has concluded that it is more likely than not that such assets, net of the determined valuation allowance, will be realized. The total state net operating losses are approximately $628.3 million.
Although realization is not assured, based on the Company’s assessment, it has concluded that it is more likely than not that such assets, net of the determined valuation allowance, will be realized. The total state net operating losses are approximately $518.1 million.
For the Company’s wholly owned hospital and outpatient clinic operations, the Company currently maintains insurance coverages under a combination of policies with a total annual aggregate limit of up to $37.0 million for professional malpractice liability insurance and $40.0 million for general liability insurance.
For the Company’s wholly owned hospital and outpatient clinic operations, the Company currently maintains insurance coverages under a combination of policies with a total annual aggregate limit of up to $42.0 million for professional malpractice liability insurance and $45.0 million for general liability insurance.
Revenue earned from providing services to patients is variable in nature, as the Company is required to make judgments which impact the transaction price, such as a patient’s condition and length of stay. These factors, among others, impact the payment the Company expects to receive for providing services.
Organization and Significant Accounting Policies (Continued) Revenue earned from providing services to patients is variable in nature, as the Company is required to make judgments which impact the transaction price, such as a patient’s condition and length of stay. These factors, among others, impact the payment the Company expects to receive for providing services.
During the year ended December 31, 2023, the Company made acquisitions consisting of critical illness recovery hospital, rehabilitation hospital, outpatient rehabilitation, and Concentra businesses. The consideration given for these acquired businesses consisted principally of $29.6 million of cash and the issuance of $9.0 million of non-controlling interests.
Acquisitions and Dispositions (Continued) During the year ended December 31, 2023, the Company made acquisitions consisting of critical illness recovery hospital, rehabilitation hospital, and outpatient rehabilitation businesses. The consideration given for these acquired businesses consisted principally of $23.6 million of cash and the issuance of $9.0 million of non-controlling interests.
Insurance Risk Programs Under a number of the Company’s insurance programs, which include the Company’s employee health insurance, workers’ compensation, and professional malpractice liability insurance programs, the Company is liable for a portion of its losses before it can attempt to recover from the applicable insurance carrier.
Organization and Significant Accounting Policies (Continued) Insurance Risk Programs Under a number of the Company’s insurance programs, which include the Company’s employee health insurance, workers’ compensation, and professional malpractice liability insurance programs, the Company is liable for a portion of its losses before it can attempt to recover from the applicable insurance carrier.
For the year ended December 31, 2022, the Company recorded a net valuation allowance increase of $2.7 million. These changes resulted from net changes in state net operating losses. For the year ended December 31, 2023, the Company recorded a net valuation allowance decrease of $3.0 million.
For the year ended December 31, 2023, the Company recorded a net valuation allowance decrease of $2.4 million. These changes resulted from net changes in state net operating losses. For the year ended December 31, 2024, the Company recorded a net valuation allowance increase of $0.7 million.
As of December 31, 2023, the term loan borrowings bear interest at a rate that is indexed to one-month Term SOFR plus 3.00%. As of December 31, 2023, the revolving facility borrowings bear interest either at a rate indexed to one-month Adjusted Term SOFR plus 2.50% or the Alternative Base Rate plus 1.50%.
As of December 31, 2024, the term loan borrowings bear interest at a rate that is indexed to one-month Term SOFR plus 2.00%. As of December 31, 2024, the revolving facility borrowings bear interest either at a rate indexed to one-month Adjusted Term SOFR plus 2.25% or the Alternative Base Rate plus 1.25%.
The Company has receivables from related parties of $18.2 million and $4.5 million, which are included as part of other current assets and other assets in the consolidated balance sheet, respectively, as of December 31, 2023. The Company had liabilities for the operating cash it holds on behalf of certain rehabilitation businesses in which it has an equity method investment.
The Company had receivables from related parties of $17.8 million and $2.2 million, which are included as part of other current assets and other assets in the consolidated balance sheet, respectively, as of December 31, 2024. The Company had liabilities for the operating cash it holds on behalf of certain rehabilitation businesses in which it has an equity method investment.
These liabilities were $37.0 million and $66.3 million as of December 31, 2022 and 2023, respectively, and are included as part of accrued other in the consolidated balance sheets.
These liabilities were $66.3 million and $59.0 million as of December 31, 2023 and 2024, respectively, and are included as part of accrued other in the consolidated balance sheets.
(2) Valuation allowance deductions relate to the disposition of certain subsidiaries. F-39
(2) Valuation allowance deductions relate to the disposition of certain subsidiaries. F-41
At December 31, 2023, the accreditations and trademarks have a weighted average time until next renewal of 1.5 years and 5.7 years, respectively. The Company’s finite-lived intangible assets amortize over their estimated useful lives. Amortization expense was $29.5 million, $31.0 million, and $31.7 million for the years ended December 31, 2021, 2022, and 2023, respectively.
At December 31, 2024, the accreditations and trademarks have a weighted average time until next renewal of 1.5 years and 5.8 years, respectively. The Company’s finite-lived intangible assets amortize over their estimated useful lives. Amortization expense was $1.8 million, $1.6 million, and $1.6 million for the years ended December 31, 2022, 2023, and 2024, respectively.
Stock-based Compensation Holdings’ equity incentive plan provides for the issuance of various stock-based awards. Under its current plan, Holdings has issued restricted stock awards. The equity plan currently allows for the issuance of 7,612,000 awards, as adjusted for cancelled or forfeited awards through December 31, 2023.
Stock-based Compensation Holdings’ equity incentive plan provides for the issuance of various stock-based awards. Under its current plan, Holdings has issued restricted stock awards. The equity plan currently allows for the issuance of 5,995,000 awards, as adjusted for cancelled or forfeited awards through December 31, 2024.
The Company operates through four business segments: the critical illness recovery hospital segment, the rehabilitation hospital segment, the outpatient rehabilitation segment, and the Concentra segment.
The Company operates through three business segments: the critical illness recovery hospital segment, the rehabilitation hospital segment, and the outpatient rehabilitation segment.
The Company allocated the purchase price of these acquired businesses to assets acquired and liabilities assumed, principally property and equipment and operating lease right-of-use assets and lease liabilities, based on their estimated fair values. The Company recognized goodwill of $6.5 million, $10.9 million, and $4.7 million in our critical illness recovery hospital, outpatient rehabilitation, and Concentra reporting units, respectively.
The Company allocated the purchase price of these acquired businesses to assets acquired and liabilities assumed, principally property and equipment and operating lease right-of-use assets and lease liabilities, based on their estimated fair values. The Company recognized goodwill of $6.6 million, $16.2 million, and $2.3 million in our critical illness recovery hospital, rehabilitation hospital, and outpatient rehabilitation reporting units, respectively.
F-35 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 20. Commitments and Contingencies Construction Commitments At December 31, 2023, the Company had outstanding commitments under construction contracts related to new construction, improvements, and renovations totaling approximately $16.4 million.
F-37 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 20. Commitments and Contingencies Construction Commitments At December 31, 2024, the Company had outstanding commitments under construction contracts related to new construction, improvements, and renovations totaling approximately $158.0 million.
Interest on the senior notes accrues at the rate of 6.250% per annum and is payable semi-annually in arrears on February 15 and August 15 of each year. The senior notes are Select’s senior unsecured obligations which are subordinated to all of Select’s existing and future secured indebtedness, including its credit facilities.
Interest on the 2032 senior notes accrues at the rate of 6.250% per annum and is payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2025. The senior notes are Select’s senior unsecured obligations which are subordinated to all of Select’s existing and future secured indebtedness, including its credit facilities.
At December 31, 2022 and 2023, the Company recorded insurance proceeds receivable of $13.1 million and $11.6 million, respectively, for liabilities which exceeded its deductibles and self-insured retention limits and are recoverable through its insurance policies. F-22 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11.
At December 31, 2023 and 2024, the Company recorded insurance proceeds receivable of $8.1 million and $8.5 million, respectively, for liabilities which exceeded its deductibles and self-insured retention limits and are recoverable through its insurance policies. F-24 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9.
Borrowings under the credit facilities are guaranteed by Holdings and substantially all of Select’s current domestic subsidiaries, other than certain non-guarantor subsidiaries, and will be guaranteed by substantially all of Select’s future domestic subsidiaries.
Long-Term Debt and Notes Payable (Continued) Borrowings under the credit facilities are guaranteed by Holdings and substantially all of Select’s current domestic subsidiaries, other than certain non-guarantor subsidiaries, and will be guaranteed by substantially all of Select’s future domestic subsidiaries.
The share repurchases and the cost associated with those repurchases are as follows: For the Year Ended December 31, 2021 2022 2023 Shares repurchased 1,770,720 7,883,195 — Cost of shares repurchased (in thousands) $ 58,598 $ 185,119 $ — 15.
The share repurchases and the cost associated with those repurchases are as follows: For the Year Ended December 31, 2022 2023 2024 Shares repurchased 7,883,195 — — Cost of shares repurchased (in thousands) $ 185,119 $ — $ — 15.
Earnings per Share The following table sets forth the net income attributable to the Company, its common shares outstanding, and its participating securities outstanding. There were no contractual dividends paid for the years ended December 31, 2021, 2022, and 2023.
Earnings per Share The following table sets forth the income attributable to the Company from continuing operations, net of tax, and the Company’s common shares outstanding, and its participating securities outstanding. There were no contractual dividends paid for the years ended December 31, 2022, 2023, and 2024.
The Company had receivables from related parties affiliated through its equity method investments of $16.3 million and $4.3 million, which are included as part of other current assets and other assets in the consolidated balance sheet, respectively, as of December 31, 2022.
Equity Method Investments (Continued) The Company had receivables from related parties affiliated through its equity method investments of $18.2 million and $4.5 million, which are included as part of other current assets and other assets in the consolidated balance sheet, respectively, as of December 31, 2023.
As of December 31, 2023, Holdings has capacity to issue 1,477,956 stock-based awards under its equity plan. The equity plan allows for authorized but previously unissued shares or shares previously issued and outstanding and reacquired by Holdings to satisfy these awards.
As of December 31, 2024, Holdings has capacity to issue 4,266,900 stock-based awards under its equity plan. The equity plan allows for authorized but previously unissued shares or shares previously issued and outstanding and reacquired by Holdings to satisfy these awards.
F-38 Table of Contents The following Financial Statement Schedule along with the report thereon of PricewaterhouseCoopers LLP dated February 22, 2024, should be read in conjunction with the consolidated financial statements.
F-40 Table of Contents The following Financial Statement Schedule along with the report thereon of PricewaterhouseCoopers LLP dated February 20, 2025, should be read in conjunction with the consolidated financial statements.
Equity method investments of $292.6 million and $316.0 million are presented as part of other assets in the consolidated balance sheets as of December 31, 2022 and 2023, respectively.
Equity method investments of $316.0 million and $320.9 million are presented as part of other assets in the consolidated balance sheets as of December 31, 2023 and 2024, respectively.
Income Taxes (Continued) At December 31, 2022 and 2023, the Company’s net deferred tax liabilities of approximately $152.8 million and $122.2 million, respectively, consist of items which have been recognized for tax reporting purposes, but which will increase tax on returns to be filed in the future.
Income Taxes (Continued) At December 31, 2023 and 2024, the Company’s net deferred tax liabilities of approximately $98.9 million and $54.4 million, respectively, consist of items which have been recognized for tax reporting purposes, but which will increase tax on returns to be filed in the future.
The Company recognized goodwill of $59.9 million, $9.4 million, $7.7 million, and $8.6 million in our critical illness recovery hospital, rehabilitation hospital, outpatient rehabilitation, and Concentra reporting units, respectively. F-16 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4.
The Company recognized goodwill of $6.5 million and $10.9 million in our critical illness recovery hospital and outpatient rehabilitation reporting units, respectively. F-18 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2.
Organization and Significant Accounting Policies (Continued) Earnings per Share The Company’s capital structure includes common stock and unvested restricted stock awards. To compute earnings per share (“EPS”), the Company applies the two-class method because the Company’s unvested restricted stock awards are participating securities which are entitled to participate equally with the Company’s common stock in undistributed earnings.
To compute earnings per share (“EPS”), the Company applies the two-class method because the Company’s unvested restricted stock awards are participating securities which are entitled to participate equally with the Company’s common stock in undistributed earnings.
The senior notes are unconditionally guaranteed on a joint and several basis by each of Select’s direct or indirect existing and future domestic restricted subsidiaries, other than certain non-guarantor subsidiaries. Select is able to redeem some or all of the notes prior to maturity.
The senior notes are unconditionally guaranteed on a joint and several basis by each of Select’s direct or indirect existing and future domestic restricted subsidiaries, other than certain non-guarantor subsidiaries. Select may redeem some or all of the notes prior to December 1, 2027 by paying a “make-whole” premium.
The Company allocated the purchase price of these acquired businesses to assets acquired, principally cash, accounts receivable, property and equipment, and operating lease right-of-use assets, and liabilities assumed based on their estimated fair values.
The consideration given for these acquired businesses consisted principally of $17.3 million of cash. The Company allocated the purchase price of these acquired businesses to assets acquired and liabilities assumed, principally property and equipment and operating lease right-of-use assets and lease liabilities, based on their estimated fair values.
Holdings and Select and its subsidiaries are collectively referred to as the “Company.” The Company is, based on number of facilities, one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States.
Holdings and Select and its subsidiaries are collectively referred to as the “Company.” The Company is, based on number of facilities, one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics in the United States. As of December 31, 2024, the Company had operations in 40 states and the District of Columbia.
The prices which would be paid if redeemed during the twelve-month period beginning on August 15 of the years indicated below are as follows: Year Percentage 2023 102.083 % 2024 101.042 % 2025 100.000 % Select is obligated to offer to repurchase the senior notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events.
The prices which would be paid if redeemed during the twelve-month period beginning on December 1 of the years indicated below are as follows: Year Percentage 2027 103.125 % 2028 101.563 % 2029 and thereafter 100.000 % Select is obligated to offer to repurchase the senior notes at a price of 101% of their principal amount plus accrued and unpaid interest, if any, as a result of certain change of control events.
The Company evaluates the performance of its segments based on Adjusted EBITDA. Adjusted EBITDA is defined as earnings excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries.
Adjusted EBITDA is defined as earnings from continuing operations excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries.
Maintenance and repairs of property and equipment are expensed as incurred. Improvements that increase the estimated useful life of an asset are capitalized. Direct internal and external costs of developing software for internal use, including programming and enhancements, are capitalized and depreciated over the estimated useful lives once the software is placed in service.
Direct internal and external costs of developing software for internal use, including programming and enhancements, are capitalized and depreciated over the estimated useful lives once the software is placed in service. Capitalized software costs are included within furniture and equipment. Software training costs, maintenance, and repairs are expensed as incurred.
Organization and Significant Accounting Policies (Continued) Income Taxes In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve the transparency and decision usefulness of income tax disclosures.
Recent Accounting Guidance Not Yet Adopted Income Taxes In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve the transparency and decision usefulness of income tax disclosures.
If the Company did not discount the provisions for losses for professional liability risks, the aggregate liability for all of the insurance risk programs would be approximately $197.2 million and $183.7 million at December 31, 2022 and 2023, respectively.
If the Company did not discount the provisions for losses for professional liability risks, the aggregate liability for all of the insurance risk programs would be approximately $135.6 million and $145.4 million at December 31, 2023 and 2024, respectively.
The inability of any of the Company’s critical illness recovery hospitals, rehabilitation hospitals, or outpatient rehabilitation clinics to comply with Medicare regulations can result in the Company receiving significantly less Medicare payments than the Company currently receives for the services it provides to its patients. 4.
The inability of any of the Company’s critical illness recovery hospitals, rehabilitation hospitals, or outpatient rehabilitation clinics to comply with Medicare regulations can result in the Company receiving significantly less Medicare payments than the Company currently receives for the services it provides to its patients. F-19 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4.
F-5 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Comprehensive Income (in thousands) For the Year Ended December 31, 2021 2022 2023 Net income $ 499,949 $ 198,026 $ 299,731 Other comprehensive income (loss), net of tax: Gain on interest rate cap contract 14,270 90,730 15,783 Reclassification adjustment for (gains) losses included in net income 39 (14,410) (61,478) Net change, net of tax expense of $(4,799), $(24,658) and $(15,202) 14,309 76,320 (45,695) Comprehensive income 514,258 274,346 254,036 Less: Comprehensive income attributable to non-controlling interests 97,724 39,032 56,240 Comprehensive income attributable to Select Medical Holdings Corporation $ 416,534 $ 235,314 $ 197,796 The accompanying notes are an integral part of these consolidated financial statements.
F-5 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Comprehensive Income (in thousands) For the Year Ended December 31, 2022 2023 2024 Net income $ 198,026 $ 299,731 $ 296,704 Other comprehensive income (loss), net of tax: Gain on interest rate cap contract 90,730 15,783 5,723 Reclassification adjustment for gains included in net income (14,410) (61,478) (48,630) Net change, net of tax (expense) benefit of $(24,658), $(15,202) and $13,550 76,320 (45,695) (42,907) Comprehensive income 274,346 254,036 253,797 Less: Comprehensive income attributable to non-controlling interests 39,032 56,240 82,666 Comprehensive income attributable to Select Medical Holdings Corporation $ 235,314 $ 197,796 $ 171,131 The accompanying notes are an integral part of these consolidated financial statements.
Segment Information The Company identifies its segments according to how the chief operating decision maker evaluates financial performance and allocates resources. The Company’s reportable segments consist of the critical illness recovery hospital segment, rehabilitation hospital segment, outpatient rehabilitation segment, and Concentra segment.
Segment Information The Company identifies its segments according to how the chief operating decision maker evaluates financial performance and allocates resources. The Company’s reportable segments consist of the critical illness recovery hospital segment, rehabilitation hospital segment, and outpatient rehabilitation segment. The accounting policies of the segments are the same as those described in the summary of significant accounting policies.
The changes in redeemable non-controlling interests are as follows: For the Year Ended December 31, 2021 2022 2023 (in thousands) Balance as of January 1 $ 398,171 $ 39,033 $ 34,043 Net income attributable to redeemable non-controlling interests 50,153 7,572 8,087 Distributions to and purchases of redeemable non-controlling interests (911) (5,443) (8,217) Redemption value adjustment on redeemable non-controlling interests 250,083 (3,385) (1,527) Purchase of membership interests of Concentra Group Holdings Parent (660,658) (5,876) (6,268) Other 2,195 2,142 179 Balance as of December 31 $ 39,033 $ 34,043 $ 26,297 3.
The changes in redeemable non-controlling interests are as follows: For the Year Ended December 31, 2022 2023 2024 (in thousands) Balance as of January 1 $ 39,033 $ 34,043 $ 26,297 Net income attributable to redeemable non-controlling interests 7,572 8,087 9,402 Distributions to and purchases of redeemable non-controlling interests (5,443) (8,217) (9,725) Redemption value adjustment on redeemable non-controlling interests (3,385) (1,527) 1,947 Purchase of membership interests of Concentra Group Holdings Parent (5,876) (6,268) — Concentra Separation and Distribution — — (17,754) Other 2,142 179 — Balance as of December 31 $ 34,043 $ 26,297 $ 10,167 14.
In these states, the Company enters into long-term management agreements with medical practices that are owned by licensed physicians which, in turn, employ or contract with physicians who provide professional medical services in certain of its occupational health centers and clinics.
In these states, the Company enters into long-term management agreements with medical practices that are owned by licensed physicians which, in turn, employ or contract with physicians who provide professional medical services in certain of its clinics. The agreements provide for the Company to direct the transfer of ownership of the medical practices to new licensed physicians at any time.
The ASU can be applied either prospectively or retrospectively. The Company is currently reviewing the impact that ASU 2023-09 will have on the disclosures in our consolidated financial statements.
The ASU can be applied either prospectively or retrospectively. The Company is currently reviewing ASU 2023-09, but does not expect it to have a significant impact on the disclosures in our consolidated financial statements.
The Company recorded a liability of $192.3 million and $179.1 million related to these programs at December 31, 2022 and 2023, respectively.
The Company recorded a liability of $132.1 million and $141.6 million related to these programs at December 31, 2023 and 2024, respectively.
As a result, the fixed payments that would otherwise be allocated to the non-lease components are accounted for as lease payments and are included in the measurement of the Company’s right-of-use asset and lease liability.
The Company has elected to account for lease and non-lease components, such as common area maintenance, as a single lease component for its facility leases. As a result, the fixed payments that would otherwise be allocated to the non-lease components are accounted for as lease payments and are included in the measurement of the Company’s right-of-use asset and lease liability.
F-7 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2021 2022 2023 Operating activities Net income $ 499,949 $ 198,026 $ 299,731 Adjustments to reconcile net income to net cash provided by operating activities: Distributions from unconsolidated subsidiaries 37,002 21,911 23,417 Depreciation and amortization 202,645 205,825 208,742 Provision for expected credit losses 236 174 1,030 Equity in earnings of unconsolidated subsidiaries (44,428) (26,407) (40,813) Loss on extinguishment of debt — — 175 Gain on sale of assets and businesses (2,409) (2,714) (57) Stock compensation expense 30,940 37,755 43,809 Amortization of debt discount, premium and issuance costs 2,217 2,272 2,647 Deferred income taxes 5,055 7,521 (16,119) Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable 23,101 (52,183) 1,156 Other current assets (2,418) (4,866) (29,374) Other assets (7,196) 16,491 10,031 Accounts payable 53,392 (48,042) (6,412) Accrued expenses (73,159) 12,839 84,095 Government advances (241,185) (83,790) — Unearned government assistance (82,514) 13 — Net cash provided by operating activities 401,228 284,825 582,058 Investing activities Business combinations, net of cash acquired (81,911) (26,987) (29,567) Purchases of property, equipment, and other assets (180,537) (190,372) (229,200) Investment in businesses (20,967) (17,323) (9,873) Proceeds from sale of assets and businesses 26,821 8,343 163 Net cash used in investing activities (256,594) (226,339) (268,477) Financing activities Borrowings on revolving facilities 160,000 1,120,000 905,000 Payments on revolving facilities — (835,000) (1,070,000) Proceeds from term loans — — 2,092,232 Payments on term loans — — (2,113,952) Borrowings of other debt 33,013 25,666 31,399 Principal payments on other debt (39,668) (35,594) (46,946) Dividends paid to common stockholders (50,600) (64,589) (63,904) Repurchase of common stock (79,476) (195,528) (12,759) Increase (decrease) in overdrafts 42,353 (10,392) (1,687) Proceeds from issuance of non-controlling interests 20,732 9,530 22,935 Distributions to and purchases of non-controlling interests (73,081) (43,107) (63,531) Purchase of membership interests of Concentra Group Holdings Parent (Note 2) (660,658) (5,876) (6,268) Net cash used in financing activities (647,385) (34,890) (327,481) Net increase (decrease) in cash and cash equivalents (502,751) 23,596 (13,900) Cash and cash equivalents at beginning of period 577,061 74,310 97,906 Cash and cash equivalents at end of period $ 74,310 $ 97,906 $ 84,006 Supplemental information: Cash paid for interest, excluding amounts received of $19,584 and $82,818 under the interest rate cap contract for the years ended December 31, 2022 and 2023, respectively. $ 132,203 $ 183,453 $ 272,261 Cash paid for taxes 181,184 32,290 88,510 Non-cash investing and financing activities: Liabilities for purchases of property and equipment $ 23,441 $ 51,529 $ 18,403 The accompanying notes are an integral part of these consolidated financial statements.
F-7 Table of Contents Select Medical Holdings Corporation Consolidated Statements of Cash Flows (in thousands) For the Year Ended December 31, 2022 2023 2024 Operating activities Net income $ 198,026 $ 299,731 $ 296,704 Adjustments to reconcile net income to net cash provided by operating activities: Distributions from unconsolidated subsidiaries 21,911 23,417 39,178 Depreciation and amortization 205,825 208,742 203,894 Provision for expected credit losses 174 1,030 4,279 Equity in earnings of unconsolidated subsidiaries (26,407) (40,813) (60,228) Loss on extinguishment of debt — 175 19,038 Gain on sale of assets and businesses (2,714) (57) (1,063) Stock compensation expense 37,755 43,809 100,670 Amortization of debt discount, premium and issuance costs 2,272 2,647 2,963 Deferred income taxes 7,521 (16,119) (32,434) Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable (52,183) 1,156 (95,845) Other current assets (4,866) (29,374) 18,072 Other assets 16,491 10,031 12,933 Accounts payable (48,042) (6,412) (16,789) Accrued expenses 12,852 84,095 26,492 Government advances (83,790) — — Net cash provided by operating activities 284,825 582,058 517,864 Investing activities Business combinations, net of cash acquired (26,987) (29,567) (13,097) Purchases of property, equipment, and other assets (190,372) (229,200) (222,177) Investment in businesses (17,323) (9,873) — Proceeds from sale of assets and businesses 8,343 163 4,263 Net cash used in investing activities (226,339) (268,477) (231,011) Financing activities Borrowings on revolving facilities 1,120,000 905,000 1,240,000 Payments on revolving facilities (835,000) (1,070,000) (1,415,000) Proceeds from term loans, net of issuance costs — 2,092,232 1,880,052 Payments on term loans — (2,113,952) (2,092,485) Payment on senior notes, including call premium — — (1,237,764) Proceeds from senior notes, net of issuance costs — — 1,176,598 Borrowings of other debt 25,666 31,399 24,892 Principal payments on other debt (35,594) (46,946) (65,280) Dividends paid to common stockholders (64,589) (63,904) (64,617) Repurchase of common stock (195,528) (12,759) (37,905) Decrease in overdrafts (10,392) (1,687) (4,471) Proceeds from issuance of non-controlling interests 9,530 22,935 15,713 Distributions to and purchases of non-controlling interests (43,107) (63,531) (60,001) Purchase of membership interests of Concentra Group Holdings Parent (5,876) (6,268) — Proceeds from Concentra initial public offering — — 511,198 Cash transferred to Concentra at separation — — (182,095) Net cash used in financing activities (34,890) (327,481) (311,165) Net increase (decrease) in cash and cash equivalents 23,596 (13,900) (24,312) Cash and cash equivalents at beginning of period 74,310 97,906 84,006 Cash and cash equivalents at end of period $ 97,906 $ 84,006 $ 59,694 Supplemental information: Cash paid for interest, excluding amounts received of $19,584, $82,818, and $68,069 under the interest rate cap contract for the years ended December 31, 2022, 2023 and 2024, respectively. $ 183,453 $ 272,261 $ 256,229 Cash paid for taxes 32,290 88,510 133,187 Non-cash investing and financing activities: Liabilities for purchases of property and equipment $ 51,529 $ 18,403 $ 21,784 The accompanying notes are an integral part of these consolidated financial statements.
If the expected undiscounted future cash flows are less than the carrying amount of such assets or asset groups, the Company recognizes an impairment loss to the extent the carrying amount exceeds its estimated fair value. F-12 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1.
If the expected undiscounted future cash flows are less than the carrying amount of such assets or asset groups, the Company recognizes an impairment loss to the extent the carrying amount exceeds its estimated fair value.
ASU 2023-01 will not have a material impact on the Company’s consolidated financial statements upon adoption. Segment Reporting In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which is intended to improve disclosure of segment information so that investors can better understand an entity’s overall performance.
Segment Reporting In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which is intended to improve disclosure of segment information so that investors can better understand an entity’s overall performance.
Estimated amortization expense of the Company’s finite-lived intangible assets for each of the five succeeding years is as follows: 2024 2025 2026 2027 2028 (in thousands) Amortization expense $ 23,249 $ 16,535 $ 15,385 $ 14,441 $ 13,337 9. Equity Method Investments The Company’s equity method investments consist principally of minority ownership interests in rehabilitation businesses.
Estimated amortization expense of the Company’s finite-lived intangible assets for each of the five succeeding years is as follows: 2025 2026 2027 2028 2029 (in thousands) Amortization expense $ 1,613 $ 1,613 $ 1,613 $ 1,613 $ 1,613 7. Equity Method Investments The Company’s equity method investments consist principally of minority ownership interests in rehabilitation businesses.
Transactions related to restricted stock awards are as follows: Shares Weighted Average Grant Date Fair Value (share amounts in thousands) Unvested balance, January 1, 2023 4,622 $ 26.99 Granted 1,651 29.06 Vested (1,750) 19.36 Forfeited (12) 26.75 Unvested balance, December 31, 2023 4,511 $ 30.71 For the years ended December 31, 2021, 2022, and 2023, the weighted average grant date fair values of restricted stock awards granted were $38.59, $28.41, and $29.06, respectively.
Stock-based Compensation (Continued) Transactions related to restricted stock awards are as follows: Shares Weighted Average Grant Date Fair Value (share amounts in thousands) Unvested balance, January 1, 2024 4,511 $ 30.71 Granted 1,728 28.38 Vested (3,567) 30.90 Forfeited (70) 28.87 Unvested balance, December 31, 2024 2,602 $ 28.94 For the years ended December 31, 2022, 2023, and 2024, the weighted average grant date fair values of restricted stock awards granted were $28.41, $29.06, and $28.38, respectively.
The Company has elected the optional exemption which allows for the exclusion of disclosures regarding the transaction price allocated to unsatisfied performance obligations of contracts with a duration of less than one year.
The Company has elected the optional exemption which allows for the exclusion of disclosures regarding the transaction price allocated to unsatisfied performance obligations of contracts with a duration of less than one year. F-15 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1.
On August 16, 2022, Congress passed the Inflation Reduction Act of 2022, which enacted a 1% excise tax on stock repurchases that exceed $1.0 million, effective January 1, 2023.
On August 16, 2022, Congress passed the Inflation Reduction Act of 2022, which enacted a 1% excise tax on stock repurchases that exceed $1.0 million, effective January 1, 2023. Holdings was not subject to this excise tax during the years ended December 31, 2023 and 2024.
December 31, 2022 December 31, 2023 Financial Instrument Level Carrying Value Fair Value Carrying Value Fair Value (in thousands) 6.250% senior notes Level 2 $ 1,235,607 $ 1,163,689 $ 1,232,596 $ 1,228,063 Credit facilities: Revolving facility Level 2 445,000 443,331 280,000 278,600 Term loan Level 2 2,094,290 2,056,110 2,077,216 2,092,485 The Company’s other financial instruments, which primarily consist of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short-term maturities of these instruments. 14.
December 31, 2023 December 31, 2024 Financial Instrument Level Carrying Value Fair Value Carrying Value Fair Value (in thousands) 6.250% senior notes due 2026 Level 2 $ 1,232,596 $ 1,228,063 $ — $ — 6.250% senior notes due 2032 Level 2 — — 539,363 528,000 Credit facilities: Revolving facility Level 2 280,000 278,600 105,000 102,900 Term loan Level 2 2,077,216 2,092,485 1,041,661 1,051,313 The Company’s other financial instruments, which primarily consist of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short-term maturities of these instruments. 12.
The Company did not identify any instances of impairment with respect to goodwill or other indefinite-lived intangible assets. Finite-lived identifiable intangible assets Finite-lived intangible assets are amortized based on the pattern in which the economic benefits are consumed or otherwise depleted.
Organization and Significant Accounting Policies (Continued) The Company’s most recent impairment assessments were completed as of October 1, 2024. The Company did not identify any instances of impairment with respect to goodwill or other indefinite-lived intangible assets. Finite-lived intangible assets Finite-lived intangible assets are amortized based on the pattern in which the economic benefits are consumed or otherwise depleted.
F-15 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. Redeemable Non-Controlling Interests The Company’s redeemable non-controlling interests are comprised of common shares held by equity holders other than the Company in eight less than wholly owned subsidiaries. These shares are subject to redemption rights.
Redeemable Non-Controlling Interests The Company’s redeemable non-controlling interests are comprised of common shares held by equity holders other than the Company in less than wholly owned subsidiaries. These shares are subject to redemption rights.
Acquisitions During the year ended December 31, 2021, the Company made acquisitions consisting of critical illness recovery hospital, rehabilitation hospital, outpatient rehabilitation, and Concentra businesses. The consideration given for these acquired businesses consisted principally of $89.7 million of cash and the issuance of $23.6 million of non-controlling interests.
During the year ended December 31, 2024, the Company made acquisitions consisting of critical illness recovery hospital, rehabilitation hospital, and outpatient rehabilitation businesses. The consideration given for these acquired businesses consisted of $12.1 million of cash, $20.3 million of previously held equity interests, and $24.5 million for the issuance of non-controlling interests.
As part of these assessments, the Company evaluates the current business environment, regulatory environment, legal and other company-specific factors. If it is more likely than not that the fair values are less than the carrying values, the Company will then perform a quantitative impairment assessment. The Company’s most recent impairment assessments were completed as of October 1, 2023.
As part of these assessments, the Company evaluates the current business environment, regulatory environment, legal and other company-specific factors. If it is more likely than not that the fair values are less than the carrying values, the Company will then perform a quantitative impairment assessment. F-13 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1.
Capitalized software costs are included within furniture and equipment. Software training costs, maintenance, and repairs are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the lease, as appropriate.
Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the term of the lease, as appropriate.
The general range of useful lives is as follows: Customer relationships 5 – 15 years Non-compete agreements 1 – 15 years The Company’s finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets or asset groups may not be recoverable.
The Company’s finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of those assets or asset groups may not be recoverable.
Schedule II—Valuation and Qualifying Accounts Balance at Beginning of Year Charged to Cost and Expenses Acquisitions (1) Deductions (2) Balance at End of Year (in thousands) Income Tax Valuation Allowance Year ended December 31, 2023 $ 20,444 $ (3,017) $ — $ — $ 17,427 Year ended December 31, 2022 $ 17,773 $ 2,671 $ — $ — $ 20,444 Year ended December 31, 2021 $ 17,339 $ 434 $ — $ — $ 17,773 _______________________________________________________________________________ (1) Includes valuation allowance reserves resulting from business combinations.
Schedule II—Valuation and Qualifying Accounts Balance at Beginning of Year Charged to Cost and Expenses Acquisitions (1) Deductions (2) Balance at End of Year (in thousands) Income Tax Valuation Allowance Year ended December 31, 2024 $ 14,493 $ 737 $ — $ — $ 15,230 Year ended December 31, 2023 $ 16,858 $ (2,365) $ — $ — $ 14,493 Year ended December 31, 2022 $ 13,688 $ 3,170 $ — $ — $ 16,858 _______________________________________________________________________________ (1) Includes valuation allowance reserves resulting from business combinations.
The amendments in the update also require annual disclosure of income taxes paid, disaggregated by federal, state, and foreign taxes, as well as any individual jurisdictions in which income taxes paid is greater than 5% of total income taxes paid. The ASU is effective for annual periods beginning after December 15, 2023; however early adoption is permitted.
The amendments in the update also require annual disclosure of income taxes paid, disaggregated by federal, state, and foreign taxes, as well as any individual jurisdictions in which income taxes paid is greater than 5% of total income taxes paid. The Company will adopt ASU 2023-09 beginning with our annual reporting period ending December 31, 2025.
Summarized combined financial information of the rehabilitation businesses in which the Company has a minority ownership interest is as follows: December 31, 2022 2023 (in thousands) Current assets $ 195,712 $ 229,920 Non-current assets 381,533 523,762 Total assets $ 577,245 $ 753,682 Current liabilities $ 82,626 $ 91,614 Non-current liabilities 108,629 225,209 Equity 385,990 436,859 Total liabilities and equity $ 577,245 $ 753,682 For the Year Ended December 31, 2021 2022 2023 (in thousands) Revenues $ 587,445 $ 624,348 $ 702,040 Cost of services and other operating expenses 503,880 566,014 621,107 Net income 87,528 57,811 81,122 10.
Summarized combined financial information of the rehabilitation businesses in which the Company has a minority ownership interest is as follows: December 31, 2023 2024 (in thousands) Current assets $ 229,920 $ 250,619 Non-current assets 523,762 522,412 Total assets $ 753,682 $ 773,031 Current liabilities $ 91,614 $ 100,721 Non-current liabilities 225,209 213,345 Equity 436,859 458,965 Total liabilities and equity $ 753,682 $ 773,031 For the Year Ended December 31, 2022 2023 2024 (in thousands) Revenues $ 624,348 $ 702,040 $ 766,197 Cost of services and other operating expenses 566,014 621,107 664,172 Net income 57,811 81,122 99,386 8.
Revenue generated from contracted services provided and management fees charged to related parties affiliated through the Company’s equity method investments was $332.0 million, $374.1 million, and $402.8 million for the years ended December 31, 2021, 2022, and 2023, respectively.
Revenue generated from contracted services provided and management fees charged to related parties affiliated through the Company’s equity method investments was $374.1 million, $402.8 million, and $430.3 million for the years ended December 31, 2022, 2023, and 2024, respectively. F-23 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7.
Variable Interest Entities Certain states prohibit the “corporate practice of medicine,” which restricts the Company from owning medical practices which directly employ physicians and from exercising control over medical decisions by physicians.
F-10 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Organization and Significant Accounting Policies (Continued) Variable Interest Entities Certain states prohibit the “corporate practice of medicine,” which restricts the Company from owning medical practices which directly employ physicians and from exercising control over medical decisions by physicians.
For these leases, the Company recognizes lease payments on a straight-line basis over the lease term and lease payments are expensed as incurred. These expenses are included as components of cost of services in the consolidated statements of operations. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation.
For these leases, the Company recognizes lease payments on a straight-line basis over the lease term and lease payments are expensed as incurred. These expenses are included as components of cost of services in the consolidated statements of operations. F-12 Table of Contents SELECT MEDICAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1.
Approximately 19% and 17% of the Company’s accounts receivable is due from Medicare at December 31, 2022 and 2023, respectively. Revenues from providing services to patients covered under the Medicare program represented approximately 23%, 23%, and 22% of the Company’s total revenue for the years ended December 31, 2021, 2022, and 2023, respectively.
Revenues from providing services to patients covered under the Medicare program represented approximately 31%, 31%, and 29% of the Company’s total revenue for the years ended December 31, 2022, 2023, and 2024, respectively. As a provider of services under the Medicare program, the Company is subject to extensive regulations.
Attorney’s Office for the Western District of Oklahoma seeking responses to interrogatories and the production of various documents principally relating to the documentation, billing and reviews of medical services furnished to patients at SSH-Oklahoma City.
On August 24, 2020, the Company and Select Specialty Hospital – Oklahoma City, Inc. (“SSH–Oklahoma City”) received civil investigative demands (“CIDs”) from the U.S. Attorney’s Office for the Western District of Oklahoma seeking responses to interrogatories and the production of various documents principally relating to the documentation, billing and reviews of medical services furnished to patients at SSH-Oklahoma City.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

46 edited+36 added−21 removed163 unchanged
Biggest changeThis influence may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest. 45 Table of Contents Risks Related to Our Capital Structure Our substantial indebtedness may limit the amount of cash flow available to invest in the ongoing needs of our business.
Biggest changeIn addition, our indemnity obligations to Concentra may be significant, and these risks could negatively affect our results of operations and financial condition. 46 Table of Contents Risks Related to Our Capital Structure Our substantial indebtedness may limit the amount of cash flow available to invest in the ongoing needs of our business. We have a substantial amount of indebtedness.
When CMS increases the fixed loss amount, our LTCHs have fewer cases that qualify for outlier payments and often lower payments for the cases that do qualify. In the FY 2024 IPPS/LTCH Proposed Rule, CMS proposed an unprecedented increase to the fixed loss amount, from $38,518 to $94,378.
When CMS increases the fixed loss amount, our LTCHs have fewer cases that qualify for outlier payments and often lower payments for the cases that do qualify. In the FY 2024 IPPS/LTCH-PPS Proposed Rule, CMS proposed an unprecedented increase to the fixed loss amount, from $38,518 to $94,378.
In addition, MVP participants would select certain quality measures and improvement activities and then report data for such measures and activities. At this time, it is unclear the impact that the transition to MVPs will have on our business and operating results, however, any resulting administrative burden or decrease in reimbursement rates may reduce our future revenue and profitability.
In addition, MVP participants select certain quality measures and improvement activities and then report data for such measures and activities. At this time, the impact that the transition to MVPs will have on our business and operating results is unclear, however, any resulting administrative burden or decrease in reimbursement rates may reduce our future revenue and profitability.
Therefore, even though the COVID-19 public health emergency ended on May 11, 2023, the data used to calculate the fixed-loss amount will continue to be affected by abnormal LTCH utilization and case-mix that occurred during the COVID-19 pandemic until June 2026.
Therefore, even though the COVID-19 public health emergency ended on May 11, 2023, the cost report data used to calculate the fixed-loss amount will continue to be affected by abnormal LTCH utilization and case-mix that occurred during the COVID-19 pandemic until June 2026.
In addition, the Indenture requires us, among other things, to provide financial and current reports to holders of the notes or file such reports electronically with the SEC. 46 Table of Contents Our inability to comply with any of these covenants could result in a default under our credit facilities or our Indenture.
In addition, the Indenture requires us, among other things, to provide financial and current reports to holders of the notes or file such reports electronically with the SEC. 47 Table of Contents Our inability to comply with any of these covenants could result in a default under our credit facilities or our Indenture.
We may not control the board of certain joint ventures and, as a result, such joint ventures may take certain actions that could have adverse effects on our financial condition and results of operations. 42 Table of Contents If we fail to compete effectively with other hospitals, clinics, occupational health centers, and healthcare providers in the local areas we serve, our revenue and profitability may decline.
We may not control the board of certain joint ventures and, as a result, such joint ventures may take certain actions that could have adverse effects on our financial condition and results of operations. 42 Table of Contents If we fail to compete effectively with other hospitals, clinics, and healthcare providers in the local areas we serve, our revenue and profitability may decline.
The loss of the services of certain of these individuals could disrupt significant aspects of our business, could prevent us from successfully executing our business strategy, and could have a material adverse effect on our results of operations. 43 Table of Contents In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.
The loss of the services of certain of these individuals could disrupt significant aspects of our business, could prevent us from successfully executing our business strategy, and could have a material adverse effect on our results of operations. In conducting our business, we are required to comply with applicable laws regarding fee-splitting and the corporate practice of medicine.
CMS finalized a record increase to the high cost outlier fixed loss amount for LTCH-PPS standard Federal payment rate cases in FY 2024 and, unless there are significant reforms, the fixed loss amount will likely increase again in FY 2025, which will result in fewer cases qualifying for high cost outlier payments and often lower payments for the cases that do qualify.
CMS finalized record increases to the high cost outlier fixed loss amount for LTCH-PPS standard Federal payment rate cases in FY 2024 and FY 2025 and, unless there are significant reforms, the fixed loss amount will likely increase again in FY 2026, which will result in fewer cases qualifying for high cost outlier payments and often lower payments for the cases that do qualify.
Public health threats, such as the ongoing effects of COVID-19 or any other pandemic, may have an impact on our business and results of operations, financial position, and cash flows. Prolonged volatility or significant disruption of global financial markets due in part to a public health threat could have a negative impact on our business and overall financial position.
Public health threats, such as COVID-19 or any other pandemic, may have an impact on our business and results of operations, financial position, and cash flows. Prolonged volatility or significant disruption of global financial markets due in part to a public health threat could have a negative impact on our business and overall financial position.
If we are unable to compete effectively in the critical illness recovery hospital, rehabilitation hospital, outpatient rehabilitation, and occupational health services businesses, our ability to retain customers and physicians, or maintain or increase our revenue growth, price flexibility, control over medical cost trends, and marketing expenses may be compromised and our revenue and profitability may decline.
If we are unable to compete effectively in the critical illness recovery hospital, rehabilitation hospital, and outpatient rehabilitation businesses, our ability to retain customers and physicians, or maintain or increase our revenue growth, price flexibility, control over medical cost trends, and marketing expenses may be compromised and our revenue and profitability may decline.
These factors may continue to impact the LTCH-PPS rate setting in future years, including the upcoming FY 2025 rate setting for the Federal fiscal year that begins on October 1, 2024.
These factors may continue to impact the LTCH-PPS rate setting in future years, including the upcoming FY 2026 rate setting for the Federal fiscal year that begins on October 1, 2025.
On September 15, 2022, the HHS-OIG updated its work plan to conduct a nationwide audit of IRF claims in order to determine the extent to which CMS could clarify the Medicare IRF claim payment criteria. The HHS-OIG expects to issue a report on this in fiscal year 2024.
On September 15, 2022, the HHS-OIG updated its work plan to conduct a nationwide audit of IRF claims in order to determine the extent to which CMS could clarify the Medicare IRF claim payment criteria. The HHS-OIG expects to issue a report on this audit.
Payments at rates applicable to general acute care hospitals would result in our hospitals receiving significantly less Medicare reimbursement than they currently receive for their patient services. Decreases in Medicare reimbursement rates received by our outpatient rehabilitation clinics may reduce our future revenue and profitability.
Payments at rates applicable to general acute care hospitals would result in our hospitals receiving significantly less Medicare reimbursement than they currently receive for their patient services. 37 Table of Contents Decreases in Medicare reimbursement rates received by our outpatient rehabilitation clinics may reduce our future revenue and profitability.
If our critical illness recovery hospitals fail to maintain their certifications as LTCHs or if our facilities operated as HIHs fail to qualify as hospitals separate from their host hospitals, our revenue and profitability may decline. As of December 31, 2023, we operated 107 critical illness recovery hospitals, all of which are currently certified by Medicare as LTCHs.
If our critical illness recovery hospitals fail to maintain their certifications as LTCHs or if our facilities operated as HIHs fail to qualify as hospitals separate from their host hospitals, our revenue and profitability may decline. As of December 31, 2024, we operated 104 critical illness recovery hospitals, all of which are currently certified by Medicare as LTCHs.
Risks Related to Our Business If there are changes in the rates or methods of Medicare reimbursements for our services, our revenue and profitability could decline. Revenues from providing services to patients covered under the Medicare program represented approximately 23%, 23%, and 22% of our revenue for the years ended December 31, 2021, 2022, and 2023, respectively.
Risks Related to Our Business If there are changes in the rates or methods of Medicare reimbursements for our services, our revenue and profitability could decline. Revenues from providing services to patients covered under the Medicare program represented approximately 31%, 31%, and 29% of our revenue for the years ended December 31, 2022, 2023, and 2024, respectively.
For our wholly owned hospital and outpatient clinic operations, we currently maintain insurance coverages under a combination of policies with a total annual aggregate limit of up to $37.0 million for professional malpractice liability insurance and $40.0 million for general liability insurance.
For our wholly owned hospital and outpatient clinic operations, we currently maintain insurance coverages under a combination of policies with a total annual aggregate limit of up to $42.0 million for professional malpractice liability insurance and $45.0 million for general liability insurance.
For example, HITECH permits HHS to conduct audits of HIPAA compliance and impose penalties even if we did not know or reasonably could not have known about the violation and increases civil monetary penalty amounts up to $50,000 per violation with a maximum of $1.5 million in a calendar year for violations of the same requirement.
For example, HITECH permits HHS to conduct audits of HIPAA compliance and impose penalties even if we did not know or reasonably could not have known about the violation and increases civil monetary penalty amounts up to $71,162 per violation with a maximum of $2.1 million in a calendar year for violations of the same requirement.
If our rehabilitation hospitals fail to comply with the 60% Rule or admissions to IRFs are limited due to changes to the diagnosis codes on the presumptive compliance list, our revenue and profitability may decline. As of December 31, 2023, we operated 33 rehabilitation hospitals, all of which were certified by Medicare as IRFs.
If our rehabilitation hospitals fail to comply with the 60% Rule or admissions to IRFs are limited due to changes to the diagnosis codes on the presumptive compliance list, our revenue and profitability may decline. As of December 31, 2024, we operated 35 rehabilitation hospitals, 34 of which were certified by Medicare as IRFs.
For example, patients who have lost their jobs or healthcare coverage may no longer be covered by an employer-sponsored health insurance plan and patients reducing their overall spending may elect to decrease the frequency of visits to our facilities or forgo elective treatments or procedures, thereby reducing demand for our services.
For example, patients who have lost their jobs or healthcare coverage may no longer be covered by an employer-sponsored health insurance plan and patients reducing their overall spending may elect to decrease the frequency of visits to our facilities or forgo elective treatments or procedures, thereby reducing demand for our services. Inflation has increased throughout the U.S. economy.
Beginning August 21, 2023, CMS implemented a five-year review choice demonstration (“RCD”) for IRF services in Alabama. CMS plans to expand RCD to Pennsylvania, Texas, and California, but the timing of this expansion is not known. We operate inpatient rehabilitation hospitals in Pennsylvania, Texas and California.
Beginning August 21, 2023, CMS implemented a five-year review choice demonstration (“RCD”) for IRF services in Alabama. On March 1, 2024, CMS expanded RCD to IRFs in Pennsylvania. CMS plans to further expand RCD to Texas and California, but the timing of this expansion is not known. We operate inpatient rehabilitation hospitals in Pennsylvania, Texas and California.
The healthcare business is highly competitive, and we compete with other hospitals, rehabilitation clinics, occupational health centers, and other healthcare providers for patients.
The healthcare business is highly competitive, and we compete with other hospitals, rehabilitation clinics, and other healthcare providers for patients.
As of December 31, 2023, we were required to maintain our leverage ratio (the ratio of total indebtedness to consolidated EBITDA for the prior four consecutive fiscal quarters) at less than 7.00 to 1.00. At December 31, 2023, our leverage ratio was 4.54 to 1.00.
As of December 31, 2024, we were required to maintain our leverage ratio (the ratio of total indebtedness to consolidated EBITDA for the prior four consecutive fiscal quarters) at less than 7.00 to 1.00. At December 31, 2024, our leverage ratio was 3.18 to 1.00.
Beginning in 2026, multispecialty groups must form subgroups to report MVPs. CMS plans to develop more MVPs from 2024 to 2027 and is considering that MVP reporting would become mandatory in 2028. Each MVP would include population health claims-based measures and require clinicians to report on the Promoting Interoperability performance category measures.
Beginning in 2026, multispecialty groups must form subgroups to report MVPs. CMS plans to develop more MVPs from 2024 to 2027 and is considering that MVP reporting could become mandatory in 2029. Each MVP includes population health claims-based measures and requires clinicians to report on the Promoting Interoperability performance category measures.
CMS issued temporary waivers that exempt LTCHs from the 25 day average length of stay requirement for all cost reporting periods that include the COVID-19 pandemic public health emergency. Medicare cost reporting periods for our LTCHs that begin after May 11, 2023, will again be required to comply with this rule.
CMS issued temporary waivers that exempted LTCHs from the 25 day average length of stay requirement for all cost reporting periods that included the COVID-19 pandemic public health emergency. Medicare cost reporting periods for our LTCHs that began after May 11, 2023, are again required to comply with this rule.
See “Business—Government Regulations—Other Healthcare Regulations” 44 Table of Contents Concentration of ownership among our existing executives and directors may prevent new investors from influencing significant corporate decisions. Our executives and directors, beneficially own, in the aggregate, approximately 17.53% of Holdings’ outstanding common stock as of February 1, 2024.
See “Business—Government Regulations—Other Healthcare Regulations” Concentration of ownership among our existing executives and directors may prevent new investors from influencing significant corporate decisions. Our executives and directors, beneficially own, in the aggregate, approximately 11.56% of Holdings’ outstanding common stock as of February 1, 2025.
The healthcare industry is subject to extensive federal, state, and local laws and regulations relating to: (i) facility and professional licensure, including certificates of need; (ii) conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral; (iii) addition of facilities and services and enrollment of newly developed facilities in the Medicare program; (iv) payment for services; and (v) safeguarding protected health information. 36 Table of Contents Both federal and state regulatory agencies inspect, survey, and audit our facilities to review our compliance with these laws and regulations.
The healthcare industry is subject to extensive federal, state, and local laws and regulations relating to: (i) facility and professional licensure, including certificates of need; (ii) conduct of operations, including financial relationships among healthcare providers, Medicare fraud and abuse, and physician self-referral; (iii) addition of facilities and services and enrollment of newly developed facilities in the Medicare program; (iv) payment for services; and (v) safeguarding protected health information.
Also, these restrictions do not prevent us or our subsidiaries from incurring obligations that do not constitute indebtedness. As of December 31, 2023, we had $434.2 million of availability under our revolving facility (as defined below) (after giving effect to $280.0 million of outstanding borrowings and $55.8 million of outstanding letters of credit).
Also, these restrictions do not prevent us or our subsidiaries from incurring obligations that do not constitute indebtedness. As of December 31, 2024, we had $453.3 million of availability under our revolving facility (as defined below) (after giving effect to $105.0 million of outstanding borrowings and $41.7 million of outstanding letters of credit).
While our facilities intend to comply with existing licensing, Medicare certification requirements, and accreditation standards, there can be no assurance that these regulatory authorities will determine that all applicable requirements are fully met at any given time.
Both federal and state regulatory agencies inspect, survey, and audit our facilities to review our compliance with these laws and regulations. While our facilities intend to comply with existing licensing, Medicare certification requirements, and accreditation standards, there can be no assurance that these regulatory authorities will determine that all applicable requirements are fully met at any given time.
These payors attempt to control healthcare costs by contracting with hospitals and other healthcare providers to obtain services on a discounted basis. We believe that this trend may continue and may limit reimbursements for healthcare services.
Initiatives undertaken by major insurers and managed care companies to contain healthcare costs affect our profitability. These payors attempt to control healthcare costs by contracting with hospitals and other healthcare providers to obtain services on a discounted basis. We believe that this trend may continue and may limit reimbursements for healthcare services.
It is unclear what impact, if any, the MIPS and incentives for participation in alternative payment models will have on our business and operating results, but any resulting administrative burden or decrease in payment may reduce our future revenue and profitability.
Providers in facility-based outpatient therapy settings are excluded from MIPS eligibility and therefore not subject to this payment adjustment. It is unclear what impact, if any, the MIPS and incentives for participation in alternative payment models will have on our business and operating results, but any resulting administrative burden or decrease in payment may reduce our future revenue and profitability.
Our indenture, dated August 1, 2019, by and among Select, the guarantors named therein and U.S.
Our indenture, dated December 3, 2024, by and among Select, the guarantors named therein and U.S.
If CMS does not address these factors, it is likely that the fixed loss amount for FY 2025 will increase further, which will reduce the Medicare payment for high cost outlier cases.
If CMS does not address these factors, it is likely that the fixed loss amount for FY 2026 will increase further, which will reduce the Medicare payment for high cost outlier cases. CMS changed the criteria for reconciliation of outlier payments, which could lead to more recoupments of Medicare outlier payments from our LTCHs.
Unfavorable global economic conditions brought about by material global crises, military conflicts or war, geopolitical and trade disputes or other factors, may adversely affect our business and financial results.
These risks and their impacts are difficult to predict and could continue to otherwise disrupt and adversely affect our operations and our financial performance. Unfavorable global economic conditions brought about by material global crises, military conflicts or war, geopolitical and trade disputes or other factors, may adversely affect our business and financial results.
Changing interest rates may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such interest rates and/or volatility.
In addition, to the extent new debt is added to us and our subsidiaries’ current debt levels, the substantial leverage risks described above would increase. Changing interest rates may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such interest rates and/or volatility.
We have a substantial amount of indebtedness. As of December 31, 2023, we had approximately $3,658.0 million of total indebtedness. Our indebtedness could have important consequences to you.
As of December 31, 2024, we had approximately $1,711.8 million of total indebtedness. Our indebtedness could have important consequences to you.
For these therapists in private practice, payments under the fee schedule are subject to adjustment in a later year based on their performance in MIPS according to established performance standards. Calendar year 2021 was the first year that payments were adjusted, based upon the therapist’s performance under MIPS in 2019.
In 2019, CMS added physical and occupational therapists to the list of MIPS eligible clinicians. For these therapists in private practice, payments under the fee schedule are subject to adjustment in a later year based on their performance in MIPS according to established performance standards.
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. 43 Table of Contents We believe that the Company’s current and planned activities do not constitute fee-splitting or the unlawful corporate practice of medicine as contemplated by these state laws.
As required under the Consolidated Appropriations Act, 2023, the bonus payment will be 3.5% in 2025. The bonus payment for APM participation is intended to encourage participation and testing of new APMs and to promote the alignment of incentives across payors. Providers in facility-based outpatient therapy settings are excluded from MIPS eligibility and therefore not subject to this payment adjustment.
As required under the Consolidated Appropriations Act, 2023, the bonus payment will be 3.5% in 2025. The Consolidated Appropriations Act, 2024 established a 1.88% bonus payment for eligible clinicians in 2026. The bonus payment for APM participation is intended to encourage participation and testing of new APMs and to promote the alignment of incentives across payors.
The market for qualified healthcare professionals is highly competitive. Difficulties in attracting and retaining qualified healthcare personnel can limit our ability to staff our facilities. It has also led us to use agency clinical staff in our facilities, which can increase our costs and lower our margins.
It has also led us to use agency clinical staff in our facilities, which can increase our costs and lower our margins.
We believe that the Company’s current and planned activities do not constitute fee-splitting or the unlawful corporate practice of medicine as contemplated by these state laws. However, there can be no assurance that future interpretations of such laws will not require structural and organizational modification of our existing relationships with the practices.
However, there can be no assurance that future interpretations of such laws will not require structural and organizational modification of our existing relationships with the practices.
We conduct business in a heavily regulated industry, and changes in regulations, new interpretations of existing regulations, or violations of regulations may result in increased costs or sanctions that reduce our revenue and profitability.
Outlier reconciliations also delay final settlement of the cost report, which prevents the LTCH from pursuing a reimbursement appeal related to its cost report. 36 Table of Contents We conduct business in a heavily regulated industry, and changes in regulations, new interpretations of existing regulations, or violations of regulations may result in increased costs or sanctions that reduce our revenue and profitability.
Finally, recent increases to the fixed loss amount may be attributable to rising inflation in the United States, and in the healthcare sector specifically. LTCHs have been subject to relatively large increases in labor, supply, and drug costs in recent years. However, CMS has not directly accounted for these cost increases when calculating the fixed loss amount.
LTCHs have been subject to relatively large increases in labor, supply, and drug costs in recent years. for example, the American Hospital Association found that the growth in hospital labor costs from 2014 to 2023 significantly outpaced economy-wide inflation over the same period. However, CMS has not directly accounted for these cost increases when calculating the fixed loss amount.
However, these one-time increases have only partially offset CMS’s cuts to the physician fee schedule conversion factor.
However, these one-time increases have only partially offset CMS’s cuts to the physician fee schedule conversion factor. Even with the statutory 1.25% increase, the calendar year 2024 conversion factor was still 3.4% less than the calendar year 2023 conversion factor.
Even with the statutory 1.25% increase, the calendar year 2024 conversion factor is still 3.4% less than the calendar year 2023 conversion factor. 37 Table of Contents In addition, the Medicare Access and CHIP Reauthorization Act of 2015 requires that payments under the physician fee schedule be adjusted starting in 2019 based on performance in a MIPS and additional incentives for participation in APMs.
In addition, the Medicare Access and CHIP Reauthorization Act of 2015 requires that payments under the physician fee schedule be adjusted starting in 2019 based on performance in a MIPS and additional incentives for participation in APMs. The specifics of the MIPS and incentives for participation in APMs will be subject to future notice and comment rule-making.
Because the barriers to entry are not substantial and current customers have the flexibility to move easily to new healthcare service providers, we believe that new outpatient physical therapy competitors can emerge relatively quickly. Concentra’s primary competitors have typically been independent physicians, hospital emergency departments, and hospital-owned or hospital-affiliated medical facilities.
Because the barriers to entry are not substantial and current customers have the flexibility to move easily to new healthcare service providers, we believe that new outpatient physical therapy competitors can emerge relatively quickly. Future cost containment initiatives undertaken by private third-party payors may limit our future revenue and profitability.
Our critical illness recovery hospitals and our rehabilitation hospitals are highly dependent on nurses, our outpatient rehabilitation division is highly dependent on therapists for patient care, and Concentra is highly dependent upon the ability of its affiliated professional groups to recruit and retain qualified physicians and other licensed providers to provide services to our existing occupation health centers and onsite health clinics.
Our critical illness recovery hospitals and our rehabilitation hospitals are highly dependent on nurses and our outpatient rehabilitation division is highly dependent on therapists for patient care. The market for qualified healthcare professionals is highly competitive. Difficulties in attracting and retaining qualified healthcare personnel can limit our ability to staff our facilities.
Removed
A reduction in workforce may also lead to declines in workers’ compensation claims, which may adversely affect Concentra’s business. Approximately 60% of Concentra’s revenue was generated from the treatment of workers’ compensation claims in 2023. Inflation has increased throughout the U.S. economy.
Added
In the FY 35 Table of Contents 2025 IPPS/LTCH-PPS Proposed Rule, CMS proposed another significant increase to the fixed loss amount, to $90,921. However, after incorporating more recent data, CMS set the fixed-loss amount at $77,048 in the FY 2025 IPPS/LTCH-PPS Final Rule.
Removed
These risks and their impacts are difficult to predict and could continue to otherwise disrupt and adversely affect our operations and our financial performance.
Added
Finally, recent increases to the fixed loss amount may be attributable to rising inflation in the United States, and in the healthcare sector specifically.
Removed
Our critical illness recovery hospitals and rehabilitation hospitals may continue to experience constrained staffing levels and increased operating costs resulting from increased usage of contract clinical labor due to the overwhelming need for healthcare professionals, particularly in areas that are heavily impacted by the COVID-19 pandemic.
Added
Our LTCHs receive two types of outlier payments from Medicare: (1) high cost outlier payments, and (2) short stay outlier payments. If specific criteria are met, LTCH outlier payments may be subject to reconciliation by the MAC at the time of cost report settlement.
Removed
As a result of the COVID-19 pandemic and its aftermath, our hospitals have experienced and continue to experience more variable demand for its services as well as increases in costs relating to less efficient operating procedures, increased cost of supplies, and increased salaries, wages and benefits.
Added
The MAC will conduct the outlier reconciliation when the criteria are met and will determine if Medicare underpaid or overpaid the LTCH for outlier payments during the LTCH’s cost reporting period.
Removed
If Concentra loses several significant employer customers, payor partners, or relationships with workers’ compensation provider networks and employer services networks, its results may be adversely affected. Concentra has strong and longstanding relationships with major employer customers, payors, workers’ compensation provider networks and third-party employer services networks.
Added
If Medicare overpaid the LTCH for outlier payments, then the LTCH must repay Medicare the amount of the overpayment, plus an additional payment for the time value of money (i.e., interest). Our LTCH cost reports have been subject to outlier reconciliations in the past and the LTCHs have had to repay significant amounts to the Medicare program.
Removed
Concentra’s results may decline if we lose several significant employer customers, payor relationships, or ability to participate in networks. One or more of Concentra’s significant employer customers, payors, or networks could be acquired.
Added
For cost reports that started prior to October 1, 2024, the criteria for an outlier reconciliation were: (1) a change in the LTCH’s CCR of 10 percentage points or more when comparing the actual CCR to the CCR used during the cost reporting period to make outlier payments; and (2) the LTCH received at least $500,000 in outlier payments during the cost reporting period.
Removed
As employer customers, payor partners and networks make strategic business decisions in response to market conditions, financial pressure, competitive pricing pressures or other reasons, they may choose 35 Table of Contents to discontinue their relationship with us. The loss of several significant employer customers, payor or network relationships could cause a material decline in Concentra’s profitability and operating performance.
Added
CMS recently modified the first criterion for identifying cost reports subject to outlier reconciliation.
Removed
If the frequency of workplace injuries and illnesses decline, Concentra’s results may be negatively affected. Because of improvements in workplace safety, greater access to health insurance, and the continued transition from a manufacturing-based economy to a service-based economy, workers are generally healthier and less prone to injuries.
Added
Beginning with cost reporting periods starting on or after October 1, 2024, the first criterion now specifies that the LTCH is subject to reconciliation if the actual CCR is found to be plus or minus 20 percent or more from the CCR used during the cost reporting period to make outlier payments.
Removed
Increases in employer-sponsored wellness and health promotion programs have led to fitter and healthier employees who may be less likely to injure themselves on the job. A decline in workplace injuries and illness may cause the number of workers’ compensation claims to decrease, which may adversely affect Concentra’s business.
Added
CMS did not change the second criterion regarding the outlier payments exceeding $500,000. CMS’s change to the first criterion will likely result in the MACs conducting more outlier reconciliations when settling our LTCH cost reports.
Removed
The specifics of the MIPS and incentives for participation in APMs will be subject to future notice and comment rule-making. In 2019, CMS added physical and occupational therapists to the list of MIPS eligible clinicians.
Added
These outlier reconciliations could lead to the MACs recouping payments from our LTCHs if the MACs find that the Medicare program overpaid the LTCH for outlier payments during the cost reporting period.
Removed
The nature of the markets that Concentra serves may constrain its ability to raise prices at rates sufficient to keep pace with the inflation of its costs. Rates of reimbursement for work-related injury or illness visits in Concentra’s occupational health services business are established through a legislative or regulatory process within each state that Concentra serves.
Added
In the Consolidated Appropriations Act, 2024, Congress replaced the 1.25% increase in payments for calendar year 2024 with a 2.93% increase that applied starting on March 9, 2024. For calendar year 2025, CMS calculated the physician fee schedule conversion factor without the 1.25% and 2.93% statutory increases.
Removed
Currently, Concentra has operations in 36 states and the District of Columbia, which have fee schedules pursuant to which all healthcare providers are uniformly reimbursed. The fee schedules are determined by each state and generally prescribe the maximum amounts that may be reimbursed for a designated procedure.
Added
CMS does not expect its policies for 2025 will result in any increase or decrease in Medicare payments for the therapy specialty. However, without any further Congressional action, the calendar year 2025 conversion factor will be 2.83% less than the calendar year 2024 conversion factor.
Removed
In the states without fee schedules, healthcare providers are generally reimbursed based on usual, customary and reasonable rates charged in the particular state in which the services are provided.
Added
Calendar year 2021 was the first year that payments were adjusted, based upon the therapist’s performance under MIPS in 2019.
Removed
Given that Concentra does not control these processes, it may be subject to financial risks if individual jurisdictions reduce rates or do not routinely raise rates of reimbursement in a manner that keeps pace with the inflation of Concentra’s costs of service.
Added
In addition, the Company purchases additional primary care limits in certain patient compensation fund states, including Indiana, Kansas, Pennsylvania and Wisconsin.
Removed
Additionally, in Concentra’s employer services business, while we can directly set the price for these services, the market rates for this portion of Concentra’s business are substantially lower than the fees we receive for workers’ compensation services.
Added
This influence may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest. 44 Table of Contents If there is later a determination that certain steps of the Separation or the Distribution are taxable because the facts, assumptions, representations or undertakings underlying the IRS private letter ruling or any tax opinions are incorrect or for any other reason, then the Company and our stockholders could incur significant U.S. federal income tax liabilities and Concentra could incur significant liabilities through its indemnification obligations under the Tax Matters Agreement.
Removed
The average rate of reimbursement per visit could increase at rates lower than the rate of inflation in our costs and could cause us to have decreases in the rate of profitability we receive for services that are provided.
Added
We received a private letter ruling from the IRS substantially to the effect that, among other things, certain steps of the Separation together with the Distribution will qualify as a transaction that is tax-free for U.S. federal income tax purposes under Section 355 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).
Removed
In addition to the risks we face in Concentra’s occupational health services business, we also face competitive and market pressures in Concentra’s onsite health clinics that may constrain our ability to raise our pricing for services in a manner that is commensurate with the increases in our costs.
Added
The Distribution was conditioned on, among other things, the continuing effectiveness and validity of our private letter ruling from the IRS and the receipt of favorable opinions of our U.S. tax advisors.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

4 edited+2 added−1 removed12 unchanged
Biggest changeAs noted above, an assessment of the cybersecurity program leveraging the Cybersecurity Framework is completed annually by an independent and qualified external third-party cybersecurity assessor.
Biggest changeAs noted above, an assessment of the cybersecurity program leveraging the Cybersecurity Framework is completed annually by an independent and qualified external third-party cybersecurity assessor. The Company has not experienced a cybersecurity breach or information security breach during the past four fiscal years.
The team works with colleagues in various departments throughout the Company, including Information Technology, Legal, Risk Management and Compliance, to prevent, mitigate and remediate cybersecurity incidents impacting the Company. 48 Table of Contents Assessment of Cybersecurity Risk Management continuously assesses the potential impact of risks from cybersecurity threats on the Company, and regularly evaluates how such risks could materially affect the Company’s business strategy, operational results, and financial condition.
The team works with colleagues in various departments throughout the Company, including Information Technology, Human Resources, Legal, Risk Management and Compliance, to prevent, mitigate and remediate cybersecurity incidents impacting the Company. 49 Table of Contents Assessment of Cybersecurity Risk Management continuously assesses the potential impact of risks from cybersecurity threats on the Company, and regularly evaluates how such risks could materially affect the Company’s business strategy, operational results, and financial condition.
Although the Company did not experience a material cybersecurity incident during the year ended December 31, 2023, the scope and impact of any future incident cannot be predicted. 49 Table of Contents
Although the Company did not experience a material cybersecurity incident during the year ended December 31, 2024, the scope and impact of any future incident cannot be predicted. 50 Table of Contents
The Company’s cybersecurity program involves establishing information security policies, procedures and standards, investing in and implementing information protection processes, security measures and technologies, ongoing monitoring of systems and networks on which the Company relies, assessing cybersecurity risk profiles of key third-parties, implementing cybersecurity training and collaborating with public and private organizations on cyber threat information and best practices.
The Company’s cybersecurity program involves establishing information security policies, procedures and standards, investing in and implementing information protection processes, security measures and technologies, ongoing monitoring of systems and networks on which the Company relies, cybersecurity training and collaborating with public and private organizations on cyber threat information and best practices.
Removed
Additionally, Concentra receives a certified System and Organization Controls 2, Type 1 assessment, a voluntary compliance standard for ensuring that the Company properly manages and protects the sensitive data in its care, conducted by an independent and qualified external third-party assessor. The Company has not experienced a cybersecurity breach or information security breach during the past three fiscal years.
Added
We also assess and identify potential cyber and information security risks relating to third-party technology providers.
Added
These efforts may include due diligence to assess the party’s cybersecurity practices, controls, and compliance with relevant statutes and regulations; the use of contractual agreements that outline certain cybersecurity requirements; and using outside services to perform ongoing monitoring of select suppliers and third-party service providers. We may also collaborate with third-party suppliers to develop and align incident response plans.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following is a list by state of the number of facilities we operated as of December 31, 2023. 50 Table of Contents Critical Illness Recovery Hospitals (1) Rehabilitation Hospitals (1) Outpatient Rehabilitation Clinics (1) Concentra Occupational Health Centers (2) Total Facilities Alabama 1 — 21 — 22 Alaska — — 14 1 15 Arizona 4 4 61 16 85 Arkansas 2 — 1 2 5 California 1 1 100 101 203 Colorado — — 49 26 75 Connecticut — — 62 10 72 Delaware 1 — 12 3 16 District of Columbia — — 4 — 4 Florida 12 2 127 31 172 Georgia 4 1 70 15 90 Hawaii — — — 1 1 Illinois — — 84 17 101 Indiana 3 1 39 14 57 Iowa 2 — 26 3 31 Kansas 2 — 15 4 21 Kentucky 2 — 71 8 81 Louisiana — 2 2 3 7 Maine — — 35 7 42 Maryland — — 62 13 75 Massachusetts — — 22 2 24 Michigan 10 — 39 19 68 Minnesota 1 — 28 6 35 Mississippi 4 — 1 — 5 Missouri 3 3 108 15 129 Nebraska 1 — 2 3 6 Nevada — 1 20 7 28 New Hampshire — — 7 3 10 New Jersey 3 4 170 24 201 New Mexico — — — 4 4 North Carolina 2 — 45 8 55 Ohio 15 6 108 18 147 Oklahoma 2 — 30 8 40 Oregon — — 4 4 8 Pennsylvania 9 2 224 32 267 Rhode Island — — — 2 2 South Carolina 2 — 25 5 32 South Dakota 1 — — — 1 Tennessee 7 — 21 9 37 Texas 3 5 152 53 213 Utah — — — 6 6 Vermont — — — 2 2 Virginia 3 1 45 9 58 Washington — — 14 16 30 West Virginia 4 — 6 — 10 Wisconsin 3 — 7 14 24 Total Company 107 33 1,933 544 2,617 _______________________________________________________________________________ (1) Includes managed critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics, respectively.
Biggest changeThe following is a list by state of the number of facilities we operated as of December 31, 2024. 51 Table of Contents Critical Illness Recovery Hospitals (1) Rehabilitation Hospitals (1) Outpatient Rehabilitation Clinics (1) Total Facilities Alabama 1 — 15 16 Alaska — — 12 12 Arizona 4 4 60 68 Arkansas 1 — 1 2 California 1 1 92 94 Colorado — — 50 50 Connecticut — — 62 62 Delaware 1 — 13 14 District of Columbia — — 3 3 Florida 12 3 132 147 Georgia 4 1 70 75 Illinois 1 — 87 88 Indiana 3 1 43 47 Iowa 2 — 26 28 Kansas 2 — 16 18 Kentucky 2 — 71 73 Louisiana — 2 2 4 Maine — — 34 34 Maryland — — 60 60 Massachusetts — — 19 19 Michigan 10 — 38 48 Minnesota 1 — 27 28 Mississippi 4 — 1 5 Missouri 3 3 111 117 Nebraska 1 — 1 2 Nevada — 1 20 21 New Hampshire — — 7 7 New Jersey 3 4 168 175 North Carolina 2 — 45 47 Ohio 13 6 107 126 Oklahoma 2 1 30 33 Oregon — — 4 4 Pennsylvania 9 2 219 230 South Carolina 2 — 25 27 South Dakota 1 — — 1 Tennessee 7 — 20 27 Texas 2 5 155 162 Virginia 3 1 43 47 Washington — — 13 13 West Virginia 4 — 6 10 Wisconsin 3 — 6 9 Total Company 104 35 1,914 2,053 _______________________________________________________________________________ (1) Includes managed critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics, respectively.
As of December 31, 2023, our corporate headquarters is approximately 292,173 square feet and is located in Mechanicsburg, Pennsylvania.
As of December 31, 2024, our corporate headquarters is approximately 292,173 square feet and is located in Mechanicsburg, Pennsylvania.
Item 2. Properties. We currently lease most of our consolidated facilities, including critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, occupational health centers, and our corporate headquarters. We own 21 of our critical illness recovery hospitals, nine of our rehabilitation hospitals, one of our outpatient rehabilitation clinics, and nine of our Concentra occupational health centers throughout the United States.
Item 2. Properties. We currently lease most of our consolidated facilities, including critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and our corporate headquarters. We own 21 of our critical illness recovery hospitals, nine of our rehabilitation hospitals, and one of our outpatient rehabilitation clinics throughout the United States.
As of December 31, 2023, we leased 86 of our critical illness recovery hospitals, 12 of our rehabilitation hospitals, 1,632 of our outpatient rehabilitation clinics, and 535 of our Concentra occupational health centers. We lease our corporate headquarters from companies owned by a related party affiliated with us through common ownership or management.
As of December 31, 2024, we leased 83 of our critical illness recovery hospitals, 14 of our rehabilitation hospitals, and 1,616 of our outpatient rehabilitation clinics. We lease our corporate headquarters from companies owned by a related party affiliated with us through common ownership or management.
Removed
(2) Our Concentra segment also had operations in New York.
Added
Item 3. Legal Proceedings. Refer to the “Litigation” section contained within Note 20 – Commitments and Contingencies of the notes to our consolidated financial statements included herein. Item 4. Mine Safety Disclosures. None. 52 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividend Policy Holdings’ Board of Directors declared the following dividends during the year ended December 31, 2023: Declaration Date Record Date Payment Date Dividend Per Share Amount (in thousands) February 16, 2023 March 3, 2023 March 15, 2023 $ 0.125 $ 15,897 May 3, 2023 May 18, 2023 May 31, 2023 $ 0.125 $ 15,924 August 2, 2023 August 15, 2023 September 1, 2023 $ 0.125 $ 16,035 November 2, 2023 November 15, 2023 November 28, 2023 $ 0.125 $ 16,048 There is no assurance that future dividends will be declared.
Biggest changeDividend Policy Holdings’ Board of Directors declared the following dividends during the year ended December 31, 2024: Declaration Date Record Date Payment Date Dividend Per Share Amount (in thousands) February 13, 2024 March 1, 2024 March 13, 2024 $ 0.125 $ 16,045 May 1, 2024 May 16, 2024 May 30, 2024 $ 0.125 $ 16,254 July 31, 2024 August 14, 2024 August 30, 2024 $ 0.125 $ 16,194 October 30, 2024 November 15, 2024 November 26, 2024 $ 0.125 $ 16,124 There is no assurance that future dividends will be declared.
On August 16, 2022, Congress passed the Inflation Reduction Act of 2022, which enacted a 1% excise tax on stock repurchases that exceed $1.0 million, effective January 1, 2023. The following table provides information regarding repurchases of our common stock during the three months ended December 31, 2023.
On August 16, 2022, Congress passed the Inflation Reduction Act of 2022, which enacted a 1% excise tax on stock repurchases that exceed $1.0 million, effective January 1, 2023. The following table provides information regarding repurchases of our common stock during the three months ended December 31, 2024.
Securities Authorized For Issuance Under Equity Compensation Plans For information regarding securities authorized for issuance under equity compensation plans, see Part III “Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” 53 Table of Contents Stock Performance Graph The graph below compares the cumulative total stockholder return on $100 invested at the close of the market on December 31, 2018, with dividends being reinvested on the date paid through and including the market close on December 31, 2023, with the cumulative total return of the same time period on the same amount invested in the Standard & Poor’s 500 Index (S&P 500) and the S&P Health Care Services Select Industry Index (SPSIHP).
Securities Authorized For Issuance Under Equity Compensation Plans For information regarding securities authorized for issuance under equity compensation plans, see Part III “Item 12—Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.” 53 Table of Contents Stock Performance Graph The graph below compares the cumulative total stockholder return on $100 invested at the close of the market on December 31, 2019, with dividends being reinvested on the date paid through and including the market close on December 31, 2024, with the cumulative total return of the same time period on the same amount invested in the Standard & Poor’s 500 Index (S&P 500) and the S&P Health Care Services Select Industry Index (SPSIHP).
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Select Medical Holdings Corporation common stock is quoted on the New York Stock Exchange under the symbol “SEM.” Holders At the close of business on February 1, 2024, Holdings had 128,361,492 shares of common stock issued and outstanding.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Select Medical Holdings Corporation common stock is quoted on the New York Stock Exchange under the symbol “SEM.” Holders At the close of business on February 1, 2025, Holdings had 128,962,850 shares of common stock issued and outstanding.
Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs October 1 – October 31, 2023 (1) 73,673 $ 22.61 — $ 399,677,961 November 1 – November 31, 2023 (1) 1,940 22.56 — 399,677,961 December 1 – December 31, 2023 — — — 399,677,961 Total 75,613 $ 22.61 — $ 399,677,961 _______________________________________________________________________________ (1) The shares purchased represent common stock surrendered to us to satisfy tax withholding obligations associated with the vesting of restricted shares issued to employees, pursuant to the provisions of our equity incentive plans. 55 Table of Contents Item 6. [Reserved] 56 Table of Contents
Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs October 1 – October 31, 2024 (1) 73,877 $ 31.74 — $ 399,677,961 November 1 – November 31, 2024 (1) 474,083 37.20 — 399,677,961 December 1 – December 31, 2024 — — — 399,677,961 Total 547,960 $ 35.68 — $ 399,677,961 _______________________________________________________________________________ (1) The shares purchased represent common stock surrendered to us to satisfy tax withholding obligations associated with the vesting of restricted shares issued to employees, pursuant to the provisions of our equity incentive plans. 55 Table of Contents Item 6. [Reserved] 56 Table of Contents
The chart below the graph sets forth the actual numbers depicted on the graph. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Select Medical Holdings Corporation (SEM) $ 100.00 $ 152.05 $ 180.20 $ 193.68 $ 166.94 $ 161.08 S&P Health Care Services Select Industry Index (SPSIHP) $ 100.00 $ 118.40 $ 157.48 $ 172.35 $ 137.77 $ 144.10 S&P 500 $ 100.00 $ 128.88 $ 149.83 $ 190.13 $ 153.16 $ 190.27 54 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers Holdings’ Board of Directors authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock.
The chart below the graph sets forth the actual numbers depicted on the graph. 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Select Medical Holdings Corporation (SEM) $ 100.00 $ 118.51 $ 128.59 $ 112.79 $ 110.62 $ 169.23 S&P Health Care Services Select Industry Index (SPSIHP) $ 100.00 $ 133.00 $ 145.57 $ 116.36 $ 121.70 $ 123.45 S&P 500 $ 100.00 $ 116.26 $ 147.52 $ 118.84 $ 147.64 $ 182.05 54 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Purchasers Holdings’ Board of Directors authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeFor purposes of this computation for our Concentra segment, patient service revenue does not include onsite clinics or revenues generated from COVID-19 screening and testing services. 68 Table of Contents Results of Operations The following table outlines selected operating data as a percentage of revenue for the periods indicated: For the Year Ended December 31, 2021 2022 2023 Revenue 100.0 % 100.0 % 100.0 % Costs and expenses: Cost of services, exclusive of depreciation and amortization (1) 85.2 88.4 86.0 General and administrative 2.4 2.4 2.6 Depreciation and amortization 3.2 3.3 3.1 Total costs and expenses 90.8 94.1 91.7 Other operating income 2.3 0.5 — Income from operations 11.5 6.4 8.3 Loss on early retirement of debt — — (0.2) Equity in earnings of unconsolidated subsidiaries 0.7 0.4 0.6 Gain on sale of businesses 0.0 — — Interest income 0.1 — — Interest expense (2.2) (2.7) (3.0) Income before income taxes 10.1 4.1 5.7 Income tax expense 2.0 1.0 1.2 Net income 8.1 3.1 4.5 Net income attributable to non-controlling interests 1.6 0.6 0.8 Net income attributable to Select Medical Holdings Corporation 6.5 % 2.5 % 3.7 % _______________________________________________________________________________ (1) Cost of services includes salaries, wages and benefits, operating supplies, lease and rent expense, and other operating costs. 69 Table of Contents The following table summarizes selected financial data by segment for the periods indicated: Year Ended December 31, 2021 2022 2023 % Change 2021 – 2022 % Change 2022 – 2023 (in thousands, except percentages) Revenue: Critical illness recovery hospital $ 2,246,772 $ 2,234,132 $ 2,299,773 (0.6) % 2.9 % Rehabilitation hospital 849,340 916,763 979,585 7.9 6.9 Outpatient rehabilitation 1,084,361 1,125,282 1,188,914 3.8 5.7 Concentra 1,732,041 1,724,359 1,838,081 (0.4) 6.6 Other (1) 292,001 333,002 357,705 14.0 7.4 Total Company $ 6,204,515 $ 6,333,538 $ 6,664,058 2.1 % 5.2 % Income (loss) from operations: (2) Critical illness recovery hospital $ 214,899 $ 49,779 $ 182,150 (76.8) % 265.9 % Rehabilitation hospital 157,027 170,220 193,820 8.4 13.9 Outpatient rehabilitation 108,683 69,197 76,658 (36.3) 10.8 Concentra 305,264 258,529 287,632 (15.3) 11.3 Other (1) (72,099) (144,442) (185,386) N/M N/M Total Company $ 713,774 $ 403,283 $ 554,874 (43.5) % 37.6 % Adjusted EBITDA: (2) Critical illness recovery hospital $ 267,993 $ 111,344 $ 246,015 (58.5) % 121.0 % Rehabilitation hospital 184,704 198,034 221,875 7.2 12.0 Outpatient rehabilitation 138,275 101,860 111,868 (26.3) 9.8 Concentra 389,616 334,337 361,334 (14.2) 8.1 Other (1) (33,229) (98,712) (133,667) N/M N/M Total Company $ 947,359 $ 646,863 $ 807,425 (31.7) % 24.8 % Adjusted EBITDA margins: (2) Critical illness recovery hospital 11.9 % 5.0 % 10.7 % Rehabilitation hospital 21.7 21.6 22.6 Outpatient rehabilitation 12.8 9.1 9.4 Concentra 22.5 19.4 19.7 Other (1) N/M N/M N/M Total Company 15.3 % 10.2 % 12.1 % Total assets: Critical illness recovery hospital $ 2,304,116 $ 2,484,542 $ 2,496,886 Rehabilitation hospital 1,194,136 1,200,767 1,233,888 Outpatient rehabilitation 1,348,316 1,371,123 1,380,447 Concentra 2,275,345 2,281,647 2,330,206 Other (1) 238,258 327,214 248,204 Total Company $ 7,360,171 $ 7,665,293 $ 7,689,631 Purchases of property, equipment and other assets: Critical illness recovery hospital $ 65,690 $ 79,524 $ 93,036 Rehabilitation hospital 13,003 14,426 21,922 Outpatient rehabilitation 36,301 40,677 38,776 Concentra 46,787 45,983 69,340 Other (1) 18,756 9,762 6,126 Total Company $ 180,537 $ 190,372 $ 229,200 _______________________________________________________________________________ (1) Other includes our corporate administration and shared services, as well as employee leasing services with our non-consolidating subsidiaries.
Biggest changeRevenue per visit is calculated by dividing patient service revenue, excluding revenues from certain other ancillary services, by the total number of visits. 68 Table of Contents Results of Operations The following table outlines selected operating data as a percentage of revenue for the periods indicated: For the Year Ended December 31, 2022 2023 2024 Revenue 100.0 % 100.0 % 100.0 % Costs and expenses: Cost of services, exclusive of depreciation and amortization (1) 91.3 88.2 87.8 General and administrative 3.3 3.5 4.4 Depreciation and amortization 2.9 2.8 2.8 Total costs and expenses 97.5 94.5 95.0 Other operating income 0.6 — 0.2 Income from continuing operations before other income and expense 3.1 5.5 5.2 Loss on early retirement of debt — (0.3) (0.6) Equity in earnings of unconsolidated subsidiaries 0.6 0.9 1.2 Interest expense (2.9) (3.2) (2.4) Income from continuing operations before income taxes 0.8 2.9 3.4 Income tax expense from continuing operations 0.4 0.6 0.9 Income from continuing operations, net of tax 0.4 2.3 2.5 Discontinued operations: Income from discontinued business 4.9 5.0 4.3 Income tax expense from discontinued business 1.0 1.1 1.1 Income from discontinued operations, net of tax 3.9 3.9 3.2 Net income 4.3 6.2 5.7 Net income attributable to non-controlling interests 0.9 1.2 1.6 Net income attributable to Select Medical Holdings Corporation 3.4 % 5.0 % 4.1 % _______________________________________________________________________________ (1) Cost of services includes personnel expense, facilities expense, and other operating costs. 69 Table of Contents The following table summarizes selected financial data by segment for the periods indicated: Year Ended December 31, 2022 2023 2024 % Change 2022 – 2023 % Change 2023 – 2024 (in thousands, except percentages) Revenue: Critical illness recovery hospital $ 2,234,132 $ 2,299,773 $ 2,444,196 2.9 % 6.3 % Rehabilitation hospital 916,763 979,585 1,110,592 6.9 13.4 Outpatient rehabilitation 1,125,282 1,188,914 1,250,294 5.7 5.2 Other (1) 333,002 357,705 382,023 7.4 6.8 Total Company $ 4,609,179 $ 4,825,977 $ 5,187,105 4.7 % 7.5 % Income (loss) from continuing operations before other income and expense: (2) Critical illness recovery hospital $ 49,779 $ 182,150 $ 231,792 265.9 % 27.3 % Rehabilitation hospital 170,220 193,820 217,306 13.9 12.1 Outpatient rehabilitation 69,197 76,658 71,998 10.8 (6.1) Other (1) (144,442) (185,386) (252,781) N/M N/M Total Company $ 144,754 $ 267,242 $ 268,315 84.6 % 0.4 % Adjusted EBITDA: (2) Critical illness recovery hospital $ 111,344 $ 246,015 $ 301,634 121.0 % 22.6 % Rehabilitation hospital 198,034 221,875 245,748 12.0 10.8 Outpatient rehabilitation 101,860 111,868 108,577 9.8 (2.9) Other (1) (98,712) (133,667) (145,564) N/M N/M Total Company $ 312,526 $ 446,091 $ 510,395 42.7 % 14.4 % Adjusted EBITDA margins: (2) Critical illness recovery hospital 5.0 % 10.7 % 12.3 % Rehabilitation hospital 21.6 22.6 22.1 Outpatient rehabilitation 9.1 9.4 8.7 Other (1) N/M N/M N/M Total Company 6.8 % 9.2 % 9.8 % Total assets: Critical illness recovery hospital $ 2,484,542 $ 2,496,886 $ 2,654,474 Rehabilitation hospital 1,200,767 1,233,888 1,366,922 Outpatient rehabilitation 1,371,123 1,380,447 1,404,379 Other (1) 327,214 248,204 182,176 Total Company $ 5,383,646 $ 5,359,425 $ 5,607,951 Purchases of property, equipment and other assets: Critical illness recovery hospital $ 79,524 $ 93,036 $ 65,861 Rehabilitation hospital 14,426 21,922 53,620 Outpatient rehabilitation 40,677 38,776 36,142 Other (1) 9,762 6,126 3,285 Total Company $ 144,389 $ 159,860 $ 158,908 _______________________________________________________________________________ (1) Other includes our corporate administration and shared services, as well as employee leasing services with our non-consolidating subsidiaries.
Fiscal Year 2024. On August 28, 2023, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2024 (affecting discharges and cost reporting periods beginning on or after October 1, 2023, through September 30, 2024). Certain errors in the final rule were corrected in documents published October 4, 2023 and November 9, 2023.
On August 28, 2023, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2024 (affecting discharges and cost reporting periods beginning on or after October 1, 2023, through September 30, 2024). Certain errors in the final rule were corrected in documents published October 4, 2023 and November 9, 2023.
For the year ended December 31, 2022, the principal uses of cash were $190.4 million for purchases of property and equipment and $44.3 million for investments in and acquisitions of businesses. The cash outflows were offset in part by proceeds received from the sale of assets and business of $8.3 million.
For the year ended December 31, 2022, the principal uses of cash were $190.4 million for purchases of property, equipment, and other assets, and $44.3 million for investments in and acquisitions of businesses. The cash outflows were offset in part by proceeds received from the sale of assets and business of $8.3 million.
Holdings funds this program with cash on hand and borrowings under its revolving facility. During the year ended December 31, 2023, Holdings did not repurchase shares under the program. Since the inception of the program through December 31, 2023, Holdings has repurchased 48,234,823 shares at a cost of approximately $600.3 million, or $12.45 per share, which includes transaction costs.
Holdings funds this program with cash on hand and borrowings under its revolving facility. During the year ended December 31, 2024, Holdings did not repurchase shares under the program. Since the inception of the program through December 31, 2024, Holdings has repurchased 48,234,823 shares at a cost of approximately $600.3 million, or $12.45 per share, which includes transaction costs.
The calendar year 2024 MPFS final rule did not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapy assistants. 64 Table of Contents Critical Accounting Estimates Revenue Recognition and Accounts Receivable Our principal revenue source comes from providing healthcare services to patients.
The calendar year 2025 MPFS final rule did not contain any policy changes concerning the modifiers for services provided by physical therapy and occupational therapy assistants. 64 Table of Contents Critical Accounting Estimates Revenue Recognition and Accounts Receivable Our principal revenue source comes from providing healthcare services to patients.
Other operating income during the year ended December 31, 2022, was $28.8 million, principally related to the recognition of payments received under the Provider Relief Fund for health care related expenses and lost revenues attributable to COVID-19. Revenue Critical Illness Recovery Hospital Segment.
Other operating income during the year ended December 31, 2022, was $28.5 million, principally related to the recognition of payments received under the Provider Relief Fund for health care related expenses and lost revenues attributable to COVID-19. Revenue Critical Illness Recovery Hospital Segment.
Each calendar quarter, Select is required to pay each lender a commitment fee in respect of any unused commitments under the revolving facility, which is currently 0.50% per annum and subject to adjustment based on Select’s leverage ratio, as specified in the credit agreement.
Each calendar quarter, Select is required to pay each lender a commitment fee in respect of any unused commitments under the revolving facility, which is currently 0.375% per annum and subject to adjustment based on Select’s leverage ratio, as specified in the credit agreement.
The principal uses of cash were net payments of $165.0 million under our revolving facility, $63.9 million of dividend payments to common stockholders, and $63.5 million for distributions to and purchases of non-controlling interests. Financing activities used $34.9 million of cash flows for the year ended December 31, 2022.
The principal use of cash were net payments of $165.0 million under our revolving facility, $63.9 million of dividend payments to common stockholders, and $63.5 million for distributions to and purchases of non-controlling interests. Financing activities used $34.9 million of cash flows for the year ended December 31, 2022.
The Term SOFR rate was 5.35% at December 31, 2023 , compared to the one-month LIBOR rate of 4.39% at December 31, 2022 . The one-month LIBOR rate first exceeded 1.0% in June 2022 and the interest rate cap has since mitigated our exposure to increases in the one-month LIBOR and Term SOFR rates on the term loan .
The Term SOFR rate was 5.35% at December 31, 2023, compared to the one-month LIBOR rate of 4.39% at December 31, 2022. The one-month LIBOR rate first exceeded 1.0% in June 2022 and the interest rate cap mitigated our exposure to increases in the one-month LIBOR and Term SOFR rates on the term loan.
The following is a summary of significant regulatory changes which have affected our results of operations as well as the policies and payment rates that may affect our future results of operations. For calendar years 2021 and 2022,CMS’s expected decreases in Medicare reimbursement were mostly offset by one-time increases in payments as a result of other legislation passed by Congress.
The following is a summary of significant regulatory changes which have affected our results of operations as well as the policies and payment rates that may affect our future results of operations. 63 Table of Contents For calendar years 2021 and 2022, CMS’s expected decreases in Medicare reimbursement were mostly offset by one-time increases in payments as a result of other legislation passed by Congress.
The decrease in labor costs resulted from our efforts in 2022 to hire additional full-time nursing staff, improve retention among our employees, and decrease our reliance on contract labor, as well as the lower contract labor rates due to reduced demand in the marketplace.
The decrease in labor costs resulted from our efforts in 2022 to hire additional full-time nursing staff, improve retention among our employees, and decrease our reliance on contract labor, as well as the lower contract labor rates attributable to reduced demand in the marketplace.
Revenue increased 5.7% to $1,188.9 million for the year ended December 31, 2023, compared to $1,125.3 million for the year ended December 31, 2022. The increase was due to patient visits, which increased 11.3% to 10,657,558 for the year ended December 31, 2023, compared to 9,573,980 visits for the year ended December 31, 2022.
Revenue increased 5.7% to $1,188.9 million for the year ended December 31, 2023, compared to $1,125.3 million for the year ended December 31, 2022. The increase was attributable to patient visits, which increased 11.3% to 10,657,558 for the year ended December 31, 2023, compared to 9,573,980 visits for the year ended December 31, 2022.
The increases in Adjusted EBITDA and Adjusted EBITDA margin were principally due to an increase in revenue. Outpatient Rehabilitation Segment. Adjusted EBITDA increased 9.8% to $111.9 million for the year ended December 31, 2023, compared to $101.9 million for the year ended December 31, 2022.
The increases in Adjusted EBITDA and Adjusted EBITDA margin were principally attributable to an increase in revenue. Outpatient Rehabilitation Segment. Adjusted EBITDA increased 9.8% to $111.9 million for the year ended December 31, 2023, compared to $101.9 million for the year ended December 31, 2022.
Revenue, Adjusted EBITDA, and Adjusted EBITDA margin increased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, in each of our other operating segments. Other operating income during the year ended December 31, 2023, was $1.8 million.
Revenue, Adjusted EBITDA, and Adjusted EBITDA margin increased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, in each of our other operating segments. Other operating income during the year ended December 31, 2023, was $1.5 million.
The other operating income for the year ended December 31, 2022, is included within the operating results of our other activities, and is principally related to the recognition of payments received under the Provider Relief Fund for health care related expenses and lost revenues attributable to COVID-19. Adjusted EBITDA Critical Illness Recovery Hospital Segment.
The other operating income for the year ended December 31, 2022, is included within the operating results of our other activities, and is principally related to the recognition of payments received under the Provider Relief Fund for health care related expenses and lost revenues attributable to COVID-19. 73 Table of Contents Adjusted EBITDA Critical Illness Recovery Hospital Segment.
Medicare payments to our rehabilitation hospitals are made in accordance with IRF-PPS. Fiscal Year 2022. On August 4, 2021, CMS published the final rule updating policies and payment rates for the IRF-PPS for fiscal year 2022 (affecting discharges and cost reporting periods beginning on or after October 1, 2021 through September 30, 2022).
Medicare payments to our rehabilitation hospitals are made in accordance with IRF-PPS. Fiscal Year 2023. On August 1, 2022, CMS published the final rule updating policies and payment rates for the IRF-PPS for fiscal year 2023 (affecting discharges and cost reporting periods beginning on or after October 1, 2022, through September 30, 2023).
Revenue increased 2.9% to $2,299.8 million for the year ended December 31, 2023, compared to $2,234.1 million for the year ended December 31, 2022. The increase was due to revenue per patient day, which increased 4.8% to $2,067 for the year ended December 31, 2023, compared to $1,973 for the year ended December 31, 2022.
Revenue increased 2.9% to $2,299.8 million for the year ended December 31, 2023, compared to $2,234.1 million for the year ended December 31, 2022. The increase was attributable to revenue per patient day, which increased 4.8% to $2,067 for the year ended December 31, 2023, compared to $1,973 for the year ended December 31, 2022.
The decrease in our operating expenses relative to our revenue was principally due to the decreased labor costs within our critical illness recovery hospital segment, as explained further within the “ Adjusted EBITDA ” discussion.
The decrease in our operating expenses relative to our revenue was principally attributable to the decreased labor costs within our critical illness recovery hospital segment, as explained further within the “ Adjusted EBITDA ” discussion.
The increases in our Adjusted EBITDA and Adjusted EBITDA margin during the year ended December 31, 2023, as compared to the year ended December 31, 2022, were due to lower labor costs as well as an increase in net revenue.
The increases in our Adjusted EBITDA and Adjusted EBITDA margin during the year ended December 31, 2023, as compared to the year ended December 31, 2022, were attributable to lower labor costs as well as an increase in net revenue.
This allows health care professionals who were previously ineligible to furnish and bill for Medicare telehealth services, including physical therapists, occupational therapists, speech language pathologists, and others, to receive payment for Medicare telehealth services.
This allowed health care professionals who were previously ineligible to furnish and bill for Medicare telehealth services, including physical therapists, occupational therapists, speech language pathologists, and others, to receive payment for Medicare telehealth services.
Our annual assessment did not indicate that goodwill impairment was likely for any of our reporting units. We did not identify any goodwill impairment events during the quarter ended December 31, 2023.
Our annual assessment did not indicate that goodwill impairment was likely for any of our reporting units. We did not identify any goodwill impairment events during the quarter ended December 31, 2024.
Medicare payments to our critical illness recovery hospitals are made in accordance with LTCH-PPS. Fiscal Year 2022. On August 13, 2021, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2022 (affecting discharges and cost reporting periods beginning on or after October 1, 2021, through September 30, 2022).
Medicare payments to our critical illness recovery hospitals are made in accordance with LTCH-PPS. Fiscal Year 2023 . On August 10, 2022, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2023 (affecting discharges and cost reporting periods beginning on or after October 1, 2022, through September 30, 2023).
The Medicare patient day percentage is calculated by dividing the total number of patient days which are paid by Medicare by the total number of patient days, as presented above. (10) Represents the number of visits in which patients were treated at our outpatient rehabilitation clinics and Concentra centers during the periods presented.
The Medicare patient day percentage is calculated by dividing the total number of patient days which are paid by Medicare by the total number of patient days, as presented above. (10) Represents the number of visits in which patients were treated at our outpatient rehabilitation clinics during the periods presented.
Our Adjusted EBITDA margin for the outpatient rehabilitation segment was 9.4% for the year ended December 31, 2023, compared to 9.1% for the year ended December 31, 2022. The increases in Adjusted EBITDA and Adjusted EBITDA margin were principally due to an increase in revenue. Concentra Segment.
Our Adjusted EBITDA margin for the outpatient rehabilitation segment was 9.4% for the year ended December 31, 2023, compared to 9.1% for the year ended December 31, 2022. The increases in Adjusted EBITDA and Adjusted EBITDA margin were principally attributable to an increase in revenue.
These covenants are subject to a number of exceptions, limitations and qualifications. Stock Repurchase Program. Holdings’ Board of Directors has authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock.
These covenants are subject to a number of exceptions, limitations and qualifications. 77 Table of Contents Stock Repurchase Program. Holdings’ Board of Directors has authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock.
The decline in labor costs and increase in revenue experienced within our critical illness recovery hospital segment was the primary cause of the increase in income from operations, as discussed above under “ Adjusted EBITDA .” We recognized other operating income of $1.8 million during the year ended December 31, 2023, compared to $28.8 million for the year ended December 31, 2022, as described further under “ Other Operating Income. ” Loss on Early Retirement of Debt For the year ended December 31, 2023, we had a loss on early retirement of debt of $14.7 million related to an amendment to the Select credit agreement, as described in Note 11 - Long-Term Debt and Notes Payable.
The decline in labor costs and increase in revenue experienced within our critical illness recovery hospital segment was the primary cause of the increase in income from operations, as discussed above under “ Adjusted EBITDA .” We recognized other operating income of $1.5 million during the year ended December 31, 2023, compared to $28.5 million for the year ended December 31, 2022, as described further under “ Other Operating Income. ” Loss on Early Retirement of Debt For the year ended December 31, 2023, we had a loss on early retirement of debt of $14.7 million related to an amendment to the Select credit agreement, as described in Note 12.
The program is governed by the Social Security Act of 1965 and is administered primarily by the Department of Health and Human Services and CMS. Revenues from providing services to patients covered under the Medicare program represented approximately 23%, 23%, and 22% of our revenue for the years ended December 31, 2021, 2022, and 2023, respectively.
The program is governed by the Social Security Act of 1965 and is administered primarily by the Department of Health and Human Services and CMS. Revenues from providing services to patients covered under the Medicare program represented approximately 31%, 31%, and 29% of our revenue for the years ended December 31, 2022, 2023, and 2024, respectively.
In the Health Extenders, Improving Access to Medicare, Medicaid, and CHIP, and Strengthening Public Health Act of 2022, Congress 61 Table of Contents extended several telehealth flexibilities that were scheduled to expire 151 days after the end of the COVID-19 public health emergency, including the expansion of permitted originating sites for telehealth, expansion of eligible practitioners for furnishing telehealth, and coverage of audio-only telehealth services.
In the Health Extenders, Improving Access to Medicare, Medicaid, and CHIP, and Strengthening Public Health Act of 2022, Congress extended to December 31, 2024 several telehealth flexibilities that were scheduled to expire 151 days after the end of the COVID-19 public health emergency, including the expansion of permitted originating sites for telehealth, expansion of eligible practitioners for furnishing telehealth, and coverage of audio-only telehealth services.
Adjusted EBITDA should not be considered in isolation, or as an alternative to, or substitute for, net income, income from operations, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity.
Adjusted EBITDA should not be considered in isolation, or as an alternative to, or substitute for, income from continuing operations, income from continuing operations before other income and expense, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity.
Such repurchases or exchanges, if any, may be funded from operating cash flows or other sources and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Such repurchases or exchanges, if any, may be funded from operating cash flows or other sources and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
Pursuant to the Coronavirus Preparedness and Response Supplemental Appropriations Act, Public Law 116-123, CMS waived Medicare telehealth payment requirements during the emergency so that beneficiaries in all areas of the country (not just rural areas) could receive telehealth services, including in their homes, beginning on March 6, 2020.
Pursuant to the Coronavirus Preparedness and Response Supplemental Appropriations Act, Public Law 116-123, CMS also waived Medicare telehealth payment requirements during the emergency so that beneficiaries in all areas of the country (not just rural areas) could receive telehealth services, including in their homes.
Risk Factors .” 63 Table of Contents Medicare Reimbursement of IRF Services The following is a summary of significant regulatory changes to the Medicare prospective payment system for our rehabilitation hospitals, which are certified by Medicare as IRFs, which have affected our results of operations, as well as the policies and payment rates that may affect our future results of operations.
Medicare Reimbursement of IRF Services The following is a summary of significant regulatory changes to the Medicare prospective payment system for our rehabilitation hospitals, which are certified by Medicare as IRFs, which have affected our results of operations, as well as the policies and payment rates that may affect our future results of operations.
The standard federal rate also includes an area wage budget neutrality factor of 1.0031599. The fixed-loss amount for high cost outlier cases paid under LTCH-PPS is $59,873, an increase from the fixed-loss amount in the 2023 fiscal year of $38,518.
The standard federal rate also included an area wage budget neutrality factor of 1.0031599. The fixed-loss amount for high cost outlier cases paid under LTCH-PPS was set at $59,873, an increase from the fixed-loss amount in the 2023 fiscal year of $38,518.
As of December 31, 2023, Select’s leverage ratio (its ratio of total indebtedness to consolidated EBITDA for the prior four consecutive fiscal quarters), which is required to be maintained at less than 7.00 to 1.00 under the terms of the revolving facility, was 4.54 to 1.00.
As of December 31, 2024, Select’s leverage ratio (its ratio of total indebtedness to consolidated EBITDA for the prior four consecutive fiscal quarters), which is required to be maintained at less than 7.00 to 1.00 under the terms of the revolving facility, was 3.18 to 1.00.
The standard federal rate for fiscal year 2024 is $48,117, an increase from the standard federal rate applicable during fiscal year 2023 of $46,433. The update to the standard federal rate for fiscal year 2024 includes a market basket increase of 3.5%, less a productivity adjustment of 0.2%.
The standard federal rate for fiscal year 2024 was set at $48,117, an increase from the standard federal rate applicable during fiscal year 2023 of $46,433. The update to the standard federal rate for fiscal year 2024 included a market basket increase of 3.5%, less a productivity adjustment of 0.2%.
CMS decreased the outlier threshold amount for fiscal year 2024 to $10,423 from $12,526 established in the final rule for fiscal year 2023. Medicare Reimbursement of Outpatient Rehabilitation Clinic Services The Medicare program reimburses outpatient rehabilitation providers based on the MPFS.
CMS increased the outlier threshold amount for fiscal year 2025 to $12,043 from $10,423 established in the final rule for fiscal year 2024. Medicare Reimbursement of Outpatient Rehabilitation Clinic Services The Medicare program reimburses outpatient rehabilitation providers based on the MPFS.
If any one of the above assumptions or judgments used to estimate the fair value of the reporting unit fails to materialize, the resulting decline in our estimated fair value could result in an impairment charge to the goodwill associated with the critical illness recovery hospital reporting unit.
If any one of the above assumptions or judgments used to estimate the fair value of the reporting unit fails to materialize, the resulting decline in our estimated fair value could result in an impairment charge to the goodwill associated with the outpatient rehabilitation reporting unit.
(2) Represents the number of hospitals which are managed by us at the end of each period presented. We have minority ownership interests in these businesses. (3) Data excludes locations managed by the Company. For purposes of our Concentra segment, onsite clinics are excluded. (4) Represents the number of patients admitted to our hospitals during the periods presented.
(2) Represents the number of hospitals which are managed by us at the end of each period presented. We have minority ownership interests in these businesses. (3) Data excludes locations managed by the Company. (4) Represents the number of patients admitted to our hospitals during the periods presented.
The fixed-loss amount for high cost outlier cases paid under LTCH-PPS was set at $38,518, an increase from the fixed-loss amount in the 2022 fiscal year of $33,015. The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $38,788, an increase from the fixed-loss amount in the 2022 fiscal year of $30,988.
The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $38,788, an increase from the fixed-loss amount in the 2022 fiscal year of $30,988. Fiscal Year 2024.
Interest payments – Our expected interest payments on the 6.250% senior notes, term loan, and revolving facility total $756.3 million, with $210.6 million payable within the next twelve months. Interest payments for the 6.250% senior notes were calculated using the stated interest rate.
Interest payments – Our expected interest payments on the 6.250% senior notes, term loan, and revolving facility total $763.7 million, with $111.6 million payable within the next twelve months. Interest payments for the 6.250% senior notes were calculated using the stated interest rate.
The amounts payable within the next twelve months are recorded in accrued other in the consolidated balance sheet as of December 31, 2023. The remaining amounts are recorded in other non-current liabilities. vi. Other current liabilities recorded in the consolidated balance sheet as of December 31, 2023, such as accounts payable and accrued expenses, which are not specifically identified above.
The remaining amounts are recorded in other non-current liabilities. vi. Other current liabilities recorded in the consolidated balance sheet as of December 31, 2024, such as accounts payable and accrued expenses, which are not specifically identified above.
The increase in equity in earnings is principally due to the improved operating performance of our rehabilitation businesses in which we are a minority owner. 72 Table of Contents Interest Our term loan is subject to an interest rate cap, which limits the variable interest rate index to 1.0% on $2.0 billion of principal outstanding under the term loan.
The increase in equity in earnings is principally attributable to the improved operating performance of our rehabilitation businesses in which we are a minority owner. Interest Our term loan was subject to an interest rate cap, which limited the variable interest rate index to 1.0% on $2.0 billion of principal outstanding under the term loan.
Overview We began operations in 1997 and, based on number of facilities, are one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States. As of December 31, 2023, we had operations in 46 states and the District of Columbia.
Overview We began operations in 1997 and, based on number of facilities, are one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics in the United States. As of December 31, 2024, we had operations in 40 states and the District of Columbia.
We have recorded total goodwill of $3.5 billion at December 31, 2023, of which $1.2 billion related to our critical illness recovery hospital reporting unit, $458.3 million related to our rehabilitation hospital reporting unit, $667.3 million related to our outpatient rehabilitation reporting unit, and $1.2 billion related to the Concentra reporting unit. 66 Table of Contents Operating Statistics The following table sets forth operating statistics for each of our segments for the periods presented.
We have recorded total goodwill of $2.3 billion at December 31, 2024, of which $1.2 billion related to our critical illness recovery hospital reporting unit, $497.1 million related to our rehabilitation hospital reporting unit, and $668.9 million related to our outpatient rehabilitation reporting unit. 66 Table of Contents Operating Statistics The following table sets forth operating statistics for each of our segments for the periods presented.
We also recorded insurance proceeds receivable of $13.1 million and $11.6 million at December 31, 2022 and 2023, respectively, for liabilities which exceed our deductibles and self-insured retention limits and are recoverable through our insurance policies. 65 Table of Contents Goodwill We operate four reporting units which include the critical illness recovery hospital reporting unit, the rehabilitation hospital reporting unit, the outpatient rehabilitation reporting unit, and the Concentra reporting unit.
We also recorded insurance proceeds receivable of $8.1 million and $8.5 million, respectively, at December 31, 2023 and 2024, for liabilities which exceed our deductibles and self-insured retention limits and are recoverable through our insurance policies. 65 Table of Contents Goodwill We operate three reporting units which include the critical illness recovery hospital reporting unit, the rehabilitation hospital reporting unit, and the outpatient rehabilitation reporting unit.
Medicare expanded the types of health care professionals who can furnish telehealth services to include all those who are eligible to bill Medicare for their professional services.
One of the blanket waivers expanded the types of health care professionals who could furnish telehealth services to include all those who are eligible to bill Medicare for their professional services.
Total assets include certain non-consolidating joint ventures and minority investments in other healthcare related businesses. (2) For the years ended December 31, 2023, 2022, and 2021, we recognized other operating income of $1.8 million, $28.8 million, and $144.0 million, respectively.
Total assets include certain non-consolidating joint ventures and minority investments in other healthcare related businesses. (2) For the years ended December 31, 2024, 2023, and 2022, we recognized other operating income of $3.4 million, $1.5 million, and $28.5 million, respectively.
We monitor these programs quarterly and revise our estimates as necessary to take into account additional information. We recorded a liability of $192.3 million and $179.1 million for our estimated losses under these insurance programs at December 31, 2022 and 2023, respectively.
We monitor these programs quarterly and revise our estimates as necessary to take into account additional information. We recorded a liability of $132.1 million and $141.6 million for our estimated losses under these insurance programs at December 31, 2023 and 2024, respectively.
We considered both the income and market approaches in determining the fair value of the critical illness recovery hospital reporting unit. Included in the income approach are assumptions regarding revenue growth rates, future Adjusted EBITDA margin estimates, future capital expenditure requirements, the industry’s weighted average cost of capital, and industry specific, market observable implied Adjusted EBITDA multiples.
We used the income approach in determining the fair value of the outpatient rehabilitation reporting unit. Included in the income approach are assumptions regarding revenue growth rates, future Adjusted EBITDA margin estimates, future capital expenditure requirements, the industry’s weighted average cost of capital, and industry specific, market observable implied Adjusted EBITDA multiples.
Investing activities used $268.5 million, $226.3 million, and $256.6 million of cash flows for the years ended December 31, 2023, 2022, and 2021, respectively. For the year ended December 31, 2023, the principal uses of cash were $229.2 million for purchases of property and equipment, and other assets, and $39.4 million for investments in and acquisitions of businesses.
Investing activities used $231.0 million, $268.5 million, and $226.3 million of cash flows for the years ended December 31, 2024, 2023, and 2022, respectively. For the year ended December 31, 2024, the principal uses of cash were $222.2 million for purchases of property, equipment, and other assets, and $13.1 million for investments in and acquisitions of businesses.
Our cost of services, a major component of which is labor expense, was $5,732.0 million, or 86.0% of revenue, for the year ended December 31, 2023, compared to $5,600.2 million, or 88.4% of revenue, for the year ended December 31, 2022.
Our cost of services, a major component of which is labor expense, was $4,553.5 million, or 87.8% of revenue, for the year ended December 31, 2024, compared to $4,254.4 million, or 88.2% of revenue, for the year ended December 31, 2023.
For the year ended December 31, 2023, Adjusted EBITDA was $807.4 million, with an Adjusted EBITDA margin of 12.1%, as compared to Adjusted EBITDA of $646.9 million and an Adjusted EBITDA margin of 10.2% in the prior year.
For the year ended December 31, 2024, Adjusted EBITDA was $510.4 million, with an Adjusted EBITDA margin of 9.8%, as compared to Adjusted EBITDA of $446.1 million and an Adjusted EBITDA margin of 9.2% in the prior year.
The impact of this income on the operating results of our segments and other activities is outlined within the tables presented under “ Summary Financial Results. ” N/M Not meaningful. 70 Table of Contents Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 For the year ended December 31, 2023, we had revenue of $6,664.1 million and income from operations of $554.9 million, as compared to revenue of $6,333.5 million and income from operations of $403.3 million for the year ended December 31, 2022.
The impact of this income on the operating results of our segments and other activities is outlined within the tables presented under “ Summary Financial Results. ” N/M Not meaningful. 70 Table of Contents Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 For the year ended December 31, 2024, we had revenue of $5,187.1 million and income from continuing operations before other income and expense of $268.3 million, as compared to revenue of $4,826.0 million and income from continuing operations before other income and expense of $267.2 million for the year ended December 31, 2023.
The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $30,988, an increase from the fixed-loss amount in the 2021 fiscal year of $29,064. Fiscal Year 2023 .
The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $42,750, an increase from the fixed-loss amount in the 2023 fiscal year of $38,788. Fiscal Year 2025.
Our revenue per visit was $100 for the year ended December 31, 2023, compared to $103 for the year ended December 31, 2022, principally due to a decrease in Medicare reimbursement, changes in payor mix, and an increase in variable discounts. Concentra Segment.
Our revenue per visit was $100 for the year ended December 31, 2023, compared to $103 for the year ended December 31, 2022, principally attributable to a decrease in Medicare reimbursement, changes in payor mix, and an increase in variable discounts. Operating Expenses Our operating expenses consist principally of cost of services and general and administrative expenses.
As of October 1, 2023, we performed a qualitative impairment assessment for the rehabilitation hospital reporting unit, the outpatient rehabilitation reporting unit, and the Concentra reporting unit.
As of October 1, 2024, we performed a qualitative impairment assessment for the rehabilitation hospital reporting unit, the critical illness recovery hospital reporting unit, and the former Concentra reporting unit.
On August 10, 2022, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2023 (affecting discharges and cost reporting periods beginning on or after October 1, 2022, through September 30, 2023). Certain errors in the final rule were corrected in documents published November 4, 2022, and December 13, 2022.
On August 28, 2024, CMS published a final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2025 (affecting discharges and cost reporting periods beginning on or after October 1, 2024, through September 30, 2025). Certain errors in the final rule were corrected in a document published on October 2, 2024.
A significant component of our net working capital is our accounts receivable. Collection of these accounts receivable is our primary source of cash and is critical to our liquidity and capital resources. Most of our patients are subject to healthcare coverage through third party payor arrangements, including Medicare and Medicaid.
Collection of these accounts receivable is our primary source of cash and is critical to our liquidity and capital resources. Most of our patients are subject to healthcare coverage through third party payor arrangements, including Medicare and Medicaid. It is our general policy to verify healthcare coverage prior to providing services.
For the Year Ended December 31, 2021 2022 2023 Critical illness recovery hospital data: Number of consolidated hospitals—start of period (1) 99 104 103 Number of hospitals acquired 6 2 2 Number of hospital start-ups — 1 4 Number of hospitals closed/sold (1) (4) (2) Number of consolidated hospitals—end of period (1) 104 103 107 Available licensed beds (3) 4,518 4,386 4,538 Admissions (3)(4) 37,921 36,594 36,225 Patient days (3)(5) 1,133,039 1,127,911 1,108,492 Average length of stay (days) (3)(6) 30 31 31 Revenue per patient day (3)(7) $ 1,972 $ 1,973 $ 2,067 Occupancy rate (3)(8) 71 % 69 % 68 % Percent patient days—Medicare (3)(9) 38 % 39 % 38 % Rehabilitation hospital data: Number of consolidated hospitals—start of period (1) 19 20 20 Number of hospitals acquired 1 — 1 Number of hospital start-ups — — — Number of hospitals closed/sold — — — Number of consolidated hospitals—end of period (1) 20 20 21 Number of unconsolidated hospitals managed—end of period (2) 10 11 12 Total number of hospitals (all)—end of period 30 31 33 Available licensed beds (3) 1,361 1,391 1,479 Admissions (3)(4) 28,868 29,736 31,627 Patient days (3)(5) 414,701 430,547 446,145 Average length of stay (days) (3)(6) 14 15 14 Revenue per patient day (3)(7) $ 1,868 $ 1,953 $ 2,017 Occupancy rate (3)(8) 83 % 85 % 85 % Percent patient days—Medicare (3)(9) 49 % 48 % 49 % Outpatient rehabilitation data: Number of consolidated clinics—start of period 1,503 1,572 1,622 Number of clinics acquired 33 30 16 Number of clinic start-ups 53 44 37 Number of clinics closed/sold (17) (24) (42) Number of consolidated clinics—end of period 1,572 1,622 1,633 Number of unconsolidated clinics managed—end of period 309 306 300 Total number of clinics (all)—end of period 1,881 1,928 1,933 Number of visits (3)(10) 9,193,624 9,573,980 10,657,558 Revenue per visit (3)(11) $ 102 $ 103 $ 100 67 Table of Contents For the Year Ended December 31, 2021 2022 2023 Concentra data: Number of consolidated centers—start of period 517 518 540 Number of centers acquired 6 21 4 Number of center start-ups 2 4 3 Number of centers closed/sold (7) (3) (3) Number of consolidated centers—end of period 518 540 544 Number of onsite clinics operated—end of period 134 147 150 Number of visits (3)(10) 12,052,724 12,579,468 12,777,632 Revenue per visit (3)(11) $ 125 $ 127 $ 135 _______________________________________________________________________________ (1) Represents the number of hospitals included in our consolidated financial results at the end of each period presented.
For the Year Ended December 31, 2022 2023 2024 Critical illness recovery hospital data: Number of consolidated hospitals—start of period (1) 104 103 107 Number of hospitals acquired 2 2 — Number of hospital start-ups 1 4 1 Number of hospitals closed/sold (4) (2) (4) Number of consolidated hospitals—end of period (1) 103 107 104 Available licensed beds (3) 4,386 4,538 4,450 Admissions (3)(4) 36,594 36,225 35,784 Patient days (3)(5) 1,127,911 1,108,492 1,118,757 Average length of stay (days) (3)(6) 31 31 31 Revenue per patient day (3)(7) $ 1,973 $ 2,067 $ 2,177 Occupancy rate (3)(8) 69 % 68 % 68 % Percent patient days—Medicare (3)(9) 39 % 38 % 35 % Rehabilitation hospital data: Number of consolidated hospitals—start of period (1) 20 20 21 Number of hospitals acquired — 1 1 Number of hospital start-ups — — 1 Number of hospitals closed/sold — — — Number of consolidated hospitals—end of period (1) 20 21 23 Number of unconsolidated hospitals managed—end of period (2) 11 12 12 Total number of hospitals (all)—end of period 31 33 35 Available licensed beds (3) 1,391 1,479 1,639 Admissions (3)(4) 29,736 31,627 33,665 Patient days (3)(5) 430,547 446,145 470,594 Average length of stay (days) (3)(6) 15 14 14 Revenue per patient day (3)(7) $ 1,953 $ 2,017 $ 2,134 Occupancy rate (3)(8) 85 % 85 % 84 % Percent patient days—Medicare (3)(9) 48 % 49 % 48 % Outpatient rehabilitation data: Number of consolidated clinics—start of period 1,572 1,622 1,633 Number of clinics acquired 30 16 11 Number of clinic start-ups 44 37 17 Number of clinics closed/sold (24) (42) (44) Number of consolidated clinics—end of period 1,622 1,633 1,617 Number of unconsolidated clinics managed—end of period 306 300 297 Total number of clinics (all)—end of period 1,928 1,933 1,914 Number of visits (3)(10) 9,573,980 10,657,558 11,147,920 Revenue per visit (3)(11) $ 103 $ 100 $ 101 67 Table of Contents _______________________________________________________________________________ (1) Represents the number of hospitals included in our consolidated financial results at the end of each period presented.
As of December 31, 2023, we had cash and cash equivalents of $84.0 million and $434.2 million of availability under our revolving facility, after giving effect to $280.0 million of outstanding borrowings and $55.8 million of outstanding letters of credit. Our material cash requirements from known contractual and other obligations include: i.
As of December 31, 2024, we had cash and cash equivalents of $59.7 million and $453.3 million of availability under our revolving facility, after giving effect to $105.0 million of outstanding borrowings and $41.7 million of outstanding letters of credit. Our material cash requirements from known contractual and other obligations include: i.
We also intend to open new outpatient rehabilitation clinics and occupational health centers in local areas that we currently serve where we can benefit from existing referral relationships and brand awareness to produce incremental growth.
We also intend to open new outpatient rehabilitation clinics in local areas that we currently serve where we can benefit from existing referral relationships and brand awareness to produce incremental growth. In addition to our development activities, we may grow through opportunistic acquisitions.
Debt payments, including finance lease payments – Our expected principal payments total $3,665.7 million, with $70.3 million payable within the next twelve months. We intend to refinance our long-term indebtedness before it matures. Refer to Note 11 – Long-Term Debt and Notes Payable of the notes to our consolidated financial statements included herein for additional information. ii.
Debt payments, including finance lease payments – Our expected principal payments total $1,731.3 million, with $20.3 million payable within the next twelve months. Refer to Note 12 – Long-Term Debt and Notes Payable of the notes to our consolidated financial statements included herein for additional information. ii.
We define Adjusted EBITDA as earnings excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries. We will refer to Adjusted EBITDA throughout the remainder of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
We define Adjusted EBITDA as earnings from continuing operations excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries.
The principal use of cash were $195.5 million for repurchases of common stock, $64.6 million of dividend payments to common stockholders, and $43.1 million for distributions to and purchases of non-controlling interests. We had net borrowings of $285.0 million under our revolving facility. Financing activities used $647.4 million of cash flows for the year ended December 31, 2021.
The principal use of cash were $195.5 million for repurchases of common stock, $64.6 million of dividend payments to common stockholders, and $43.1 million for distributions to and purchases of non-controlling interests. We had net borrowings of $285.0 million under our revolving facility. 76 Table of Contents Capital Resources Working capital.
In addition to our development activities, we may grow through opportunistic acquisitions. 75 Table of Contents Liquidity We believe our internally generated cash flows and borrowing capacity under our revolving facility will allow us to finance our operations in both the short and long term.
Liquidity We believe our internally generated cash flows and borrowing capacity under our revolving facility will allow us to finance our operations in both the short and long term.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read this discussion together with the consolidated financial statements and accompanying notes included elsewhere herein. This section of this 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read this discussion together with the consolidated financial statements and accompanying notes included elsewhere herein.
We cannot predict our ability to pass along cost increases to our customers. 76 Table of Contents Recent Accounting Pronouncements Refer to Note 1 – Organization and Significant Accounting Policies of the notes to our consolidated financial statements included herein for information regarding recent accounting pronouncements. 77 Table of Contents
Recent Accounting Pronouncements Refer to Note 1 – Organization and Significant Accounting Policies of the notes to our consolidated financial statements included herein for information regarding recent accounting pronouncements. 79 Table of Contents
At December 31, 2023, Select had outstanding borrowings under its credit facilities consisting of a $2,092.5 million term loan (excluding unamortized original issue discounts and debt issuance costs of $15.3 million).
At December 31, 2024, Select had outstanding borrowings under its credit facilities consisting of a $1,050.0 million term loan (excluding unamortized original issue discounts and debt issuance costs of $8.3 million) and borrowings of $105.0 million under its revolving facility.
Dividend On February 16, 2023, May 3, 2023, August 2, 2023, and November 2, 2023, our Board of Directors declared a cash dividend of $0.125 per share. On March 15, 2023, May 31, 2023, September 1, 2023, and November 28, 2023, cash dividends totaling $15.9 million, $15.9 million, $16.0 million, and $16.0 million were paid.
On March 13, 2024, May 30, 2024, August 30, 2024, and November 26, 2024, cash dividends totaling $16.0 million, $16.3 million, $16.2 million, and $16.1 million were paid. On February 13, 2025, our Board of Directors declared a cash dividend of $0.0625 per share.
The standard federal rate also included an area wage budget neutrality factor of 1.0004304. As a result of the CARES Act, LTCH cases were paid at the standard federal rate during the public health emergency.
The update to the standard federal rate for fiscal year 2023 included a market basket increase of 4.1%, less a productivity adjustment of 0.3%. The standard federal rate also included an area wage budget neutrality factor of 1.0004304. As a result of the CARES Act, LTCH cases were paid at the standard federal rate during the public health emergency.
Payments under the 2023 MPFS physician fee schedule decreased by 2%, and for calendar year 2024, CMS expects that its final policies for 2024 will result in a 3% decrease in Medicare payments for the therapy specialty.
Payments under the 2023 MPFS physician fee schedule decreased by 2%, and for calendar year 2024, CMS expected that its final policies for 2024 would result in a 3% decrease in Medicare payments for the therapy specialty. In the calendar year 2025 MPFS final rule, CMS calculated the payment rates without the one-time increases provided for in legislation.
At December 31, 2023, Select had $434.2 million of availability under its revolving facility after giving effect to $280.0 million of outstanding borrowings and $55.8 million of outstanding letters of credit.
At December 31, 2024, Select had $453.3 million of availability under its revolving facility after giving effect to $105.0 million of outstanding borrowings and $41.7 million of outstanding letters of credit.
On August 1, 2022, CMS published the final rule updating policies and payment rates for the IRF-PPS for fiscal year 2023 (affecting discharges and cost reporting periods beginning on or after October 1, 2022, through September 30, 2023).
On August 6, 2024, CMS published the final rule to update policies and payment rates for the IRF-PPS for fiscal year 2025 (affecting discharges and cost reporting periods beginning on or after October 1, 2024, through September 30, 2025). Certain errors in the final rule were corrected in a document published on October 2, 2024.
Equity in Earnings of Unconsolidated Subsidiaries For the year ended December 31, 2023, we had equity in earnings of unconsolidated subsidiaries of $40.8 million, compared to $26.4 million for the year ended December 31, 2022.
Equity in Earnings of Unconsolidated Subsidiaries For the year ended December 31, 2024, we had equity in earnings of unconsolidated subsidiaries of $63.9 million, compared to $41.3 million for the year ended December 31, 2023.
The standard payment conversion factor for discharges for fiscal year 2022 was set at $17,240, an increase from the standard payment conversion factor applicable during fiscal year 2021 of $16,856. The update to the standard payment conversion factor for fiscal year 2022 included a market basket increase of 2.6%, less a productivity adjustment of 0.7%.
The standard payment conversion factor for discharges for fiscal year 2025 was set at $18,907, an increase from the standard payment conversion factor applicable during fiscal year 2024 of $18,541. The update to the standard payment conversion factor for fiscal year 2025 included a market basket increase of 3.5%, less a productivity adjustment of 0.5%.
Interest expense was $198.6 million for the year ended December 31, 2023, compared to $169.1 million for the year ended December 31, 2022.
Interest expense was $154.2 million for the year ended December 31, 2023, compared to $137.5 million for the year ended December 31, 2022.
The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate is $42,750, an increase from the fixed-loss amount in the 2023 fiscal year of $38,788. See high cost outlier risk factor within “Item 1A.
The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate is $46,217, an increase from the fixed-loss amount in the 2024 fiscal year of $42,750. See high cost outlier risk factor within “Item 1A. Risk Factors . Criteria for Reconciliation of Outlier Payments Under the LTCH PPS, CMS makes two types of outlier payments to LTCHs.
At December 31, 2023, Select had $1,225.0 million of 6.250% senior notes outstanding (excluding unamortized premium and debt issuance costs of $7.6 million).
At December 31, 2024, Select had $550.0 million of 6.250% senior notes outstanding (excluding debt issuance costs of $10.6 million).
For the Year Ended December 31, 2021 2022 2023 Cash flows provided by operating activities $ 401,228 $ 284,825 $ 582,058 Cash flows used in investing activities (256,594) (226,339) (268,477) Cash flows used in financing activities (647,385) (34,890) (327,481) Net increase (decrease) in cash and cash equivalents (502,751) 23,596 (13,900) Cash and cash equivalents at beginning of period 577,061 74,310 97,906 Cash and cash equivalents at end of period $ 74,310 $ 97,906 $ 84,006 Operating activities provided $582.1 million, $284.8 million, and $401.2 million of cash flows during the years ended December 31, 2023, 2022, and 2021, respectively.
For the Year Ended December 31, 2022 2023 2024 Cash flows provided by operating activities $ 284,825 $ 582,058 $ 517,864 Cash flows used in investing activities (226,339) (268,477) (231,011) Cash flows used in financing activities (34,890) (327,481) (311,165) Net increase (decrease) in cash and cash equivalents 23,596 (13,900) (24,312) Cash and cash equivalents at beginning of period 74,310 97,906 84,006 Cash and cash equivalents at end of period (1) $ 97,906 $ 84,006 $ 59,694 ______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ (1) The Company had and $37.7 million and $31.4 million of cash and cash equivalents from discontinued operations at December 31, 2022 and 2023, respectively.
General and administrative expenses were $170.2 million, or 2.6% of revenue, for the year ended December 31, 2023, compared to $153.0 million, or 2.4% of revenue, for the year ended December 31, 2022. 71 Table of Contents Other Operating Income For the year ended December 31, 2023, we had other operating income of $1.8 million, compared to $28.8 million for the year ended December 31, 2022.
General and administrative expenses were $170.2 million, or 3.5% of revenue, for the year ended December 31, 2023, compared to $153.0 million, or 3.3% of revenue, for the year ended December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−3 removed1 unchanged
Biggest changeAs of December 31, 2023, a 0.25% change in market interest rates would impact the interest expense on our variable rate debt by approximately $2.2 million per year, which includes the impact of the expiration of the interest rate cap on September 30, 2024. Item 8. Financial Statements and Supplementary Data.
Biggest changeAs of December 31, 2024, a 0.25% change in market interest rates would impact the interest expense on our variable rate debt by approximately $2.9 million per year. Item 8. Financial Statements and Supplementary Data. See Consolidated Financial Statements and Notes thereto commencing at Page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.
As of December 31, 2023, Select had outstanding borrowings under its credit facilities consisting of a $2,092.5 million term loan (excluding unamortized original issue discount and debt issuance costs of $15.3 million) and $280.0 million of borrowings under its revolving facility.
As of December 31, 2024, Select had outstanding borrowings under its credit facilities consisting of a $1,050.0 million term loan (excluding unamortized original issue discount and debt issuance costs of $8.3 million) and $105.0 million of borrowings under its revolving facility.
Removed
In order to mitigate our exposure to rising interest rates, we have an interest rate cap which limits the Term SOFR rate to 1.0% on $2.0 billion of principal outstanding under our term loan. The agreement applies to interest payments through September 30, 2024. The Term SOFR rate was 5.35% at December 31, 2023.
Removed
As of December 31, 2023, $92.5 million of our term loan borrowings were subject to variable interest rates. Subsequent to the expiration of our interest rate cap on September 30, 2024, all of our term loan borrowings will be subject to variable interest rates.
Removed
See Consolidated Financial Statements and Notes thereto commencing at Page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.

Other SEM 10-K year-over-year comparisons