Hello, and welcome to the Ensign Group, Inc. Q2 2024 Earnings Call. At this time, I would like to turn the call over to Mr. Keetch. Please go ahead

Thank you, operator. Snd welcome, everyone. We filed our earnings press release yesterday, and it is available on the Investor Relations section of our website at ensigngroup.net. A replay of this call will also be available on our Web site until 5:00 PM Pacific on Friday, August 31, 2024. We want to remind anyone that may be listening to a replay of this call that all statements made are as of today, July 26, 2024, and these statements have not been nor will be updated subsequent to today's call. Also, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Ensign and its independent subsidiaries do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances or for any other reason. In addition, the Ensign Group, Inc. is a holding company with no direct operating assets, employees or revenues. Certain of our independent subsidiaries, collectively referred to as the service center, provide accounting, payroll, human resources, information technology, legal, risk management and other services to the other independent subsidiaries through contractual relationships with such subsidiaries. In addition, our captive insurance subsidiary, which we refer to as the insurance captive, provides certain claims made coverage to our operating companies for general and professional liability as well as for workers' compensation insurance liabilities. Ensign also owns Standard Bearer Healthcare REIT, Inc., which is a captive real estate investment trust that invests in healthcare properties and enters into lease agreements with certain independent subsidiaries of Ensign as well as third party tenants that are unaffiliated with the Ensign Group. The words Ensign, company, we, our and us, refer to the Ensign Group Inc. and its consolidated subsidiaries. All of our independent subsidiaries, the Service Center, Standard Bearer Healthcare REIT and the insurance captive, are operated by separate independent companies that have their own management, employees and assets. References herein to the consolidated company and its assets and activities as well as use of the words we, us, our and similar terms are not meant to imply nor should it be construed as meaning that the Ensign Group has direct operating assets, employees or revenue, or that any of the subsidiaries are operated by the Ensign Group. Also, we supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, so they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and is available in our Form 10-Q. And with that, I'll turn the call over to Barry Port, our CEO. Barry?

Thanks, Chad. And thank you, everyone, for joining us today. We're thrilled to report another record quarter and are excited about the continued momentum our teams have created across our entire portfolio. We're in awe of our local leaders and how they continue to consistently drive outstanding clinical and financial performance as they work together with their cluster partners to practice proven operational principles. We are very pleased to see our growth over the prior year quarter in occupancy and skill mix days and our same-store and transitioning operations, particularly in our managed care population. Our same-store occupancy, which reached 80.8% for the quarter, an increase of 2.8% over the prior year quarter. In addition, we saw an increase in the same-store and transitioning skilled service revenue during the quarter of 6.8% and 6% respectively. With that pace of growth, we are as excited as ever about the incredible amount of built-in upside that exists in our portfolio as so many of our operations continue to march towards occupancy levels that dozens of our most mature same store operations regularly achieve, which are in the 90 plus percent range. I also want to emphasize that for 25 years we have acquired lower occupancy operations at very attractive prices, which has resulted in enormous long term ramp and value creation. So with consolidated occupancies where they are we get very excited about the significant organic growth potential that is inherent in our existing portfolio. As our operators continue to build on a solid foundation of strong clinical results, cultural excellence and sustainable real estate expenses, we are confident that our partners will continue to capitalize on the occupancy and skilled mix growth inherent in our portfolio, which will allow us to consistently achieve the results that we have delivered over time. Also, as you saw in our press release yesterday, we have been busy acquiring new operations, and our transitioning and recently acquired buckets now represent 27% of our total operational beds. Again, we want to emphasize that this represents massive organic growth potential within those existing growth buckets. To give some perspective, our occupancy and skilled mix days for the skilled nursing operations in the transitioning bucket were 75.7% and 21.7% respectively, while our same-store occupancy and skilled mix days were 80.8% and 31.5% respectively. As we've shown over two decades, we expect our teams to continue to unlock the significant upside in each of these new operations as they mature. Our focus on customer second continues to ensure that our caregivers and their teams are recognized for their amazing daily achievements, which has now resulted in lower turnover for the 11th quarter in a row and also a decrease in the use of staffing agencies for the sixth quarter in a row. And all of this has occurred while our teams have simultaneously been assisting the newly acquired operations integrate into their local clusters and begin the process of improving clinically and financially. Due to our solid results, including our stable skilled mix and growing occupancy as well as continued strength from our recent acquisitions, we are increasing and narrowing our annual 2024 earnings guidance to between $5.38 to $5.50 per diluted share, up from $5.29 to $5.47 per diluted share. This new midpoint of our 2024 earnings guidance represents an increase of more than 14% over our 2023 results and is 31% higher than our 2022 results. We are also raising our annual revenue guidance to between $4.20 billion to $4.22 billion up from our previous guidance of $4.13 billion to $4.17 billion. We are also excited about the upcoming year and are confident that our partners will continue to manage and innovate while balancing the addition of newly acquired operations. This performance is not due to some large event or even a singular transformative transaction but instead is the result of consistent growth and performance quarter-after-quarter. All of these achievements are entirely due to the efforts and commitment of our local leadership teams, caregivers, field resources and service center partners. There are so many opportunities in front of us to improve in the expense management and drive occupancy and skilled mix as we continue to successfully unlock value in all of our operations. We remain poised to again showcase our ability to find, acquire and transition performing and underperforming operations by applying proven Ensign principles developed over 25 years. Next, I'll ask Chad to add some additional insights regarding our recent growth. Chad?

Thanks, Barry. We continue to add to our growing portfolio and are very excited about the 10 new operations and six real estate assets we added during the quarter, bringing the number of operations acquired during the year to 15. These new acquisitions include the following new operations; three in Colorado, three in Tennessee, two in Arizona, two in Kansas, two in Utah, one in Iowa, one in Nevada and one in Texas, totaling 1,326 new skilled nursing beds, 202 senior living units and 43 new LTACH beds. Of these 15 new operations, seven of them included the real estate assets, which were acquired by Standard Bearer and leased to an Ensign-affiliated operator. Each of these additions were all carefully selected amongst the many opportunities available to us and were chosen because of the huge clinical and financial potential. We continue to prioritize growth in our established geographies as it allows our clusters to work together with their acute care partners to provide a comprehensive solution to their healthcare needs. In particular, we are very excited to grow in Arizona where we have deep and longstanding relationships with the largest hospital systems in the states. However, we are also excited to build clusters in new states or in markets where we have significant room to add more density and expect additional growth in some of our newer markets in the next several months. We continue to see a very healthy pipeline of new acquisition opportunities and are lining up some exciting new additions that we expect to close in the third and fourth quarters. Our scalable decentralized growth model is not dependent on a centralized team of experts but instead is driven by local leadership. In times like these when deal opportunities are abundant, we rely on a proven set of deal criteria, including a deep local knowledge of their respective healthcare markets to ensure that we remain disciplined and grow in a very healthy way. One of the foundational elements of our consistent performance has been to insist that the prices we pay are commensurate with the historical operational performance, which will result in a cost structure that allows us to achieve healthy returns over a long period of time. However, we do not just grow for the sake of growth or acquire revenue or by earnings. Accordingly, we will sacrifice short term margins and metrics growth for the long term built-in organic upside. As we have consistently communicated, executed and delivered, our intention is to continue to grow when we see deals that will be accretive to shareholders for years to come. We continue to provide additional disclosure on Standard Bearer, which is currently comprised of 115 owned properties. Of these assets, 86 are leased to an Ensign-affiliated operator and 30 are leased to third party operators. All of these properties are subject to triple net long term leases and generated rental revenue of $23.4 million for the quarter, of which $19.2 million was derived from an Ensign-affiliated operation. Also, for the quarter, we reported $14.5 million in FFO and as of the end of the quarter had an EBITDAR to rent coverage ratio of 2.4 times. With that, I'll [Technical Difficulty] Spencer, our COO, to add more color around operations. Spencer?

Thanks, Chad. And hello, everyone. I'm excited to present two operational examples that can hopefully give you deeper insight into the incredible work that our affiliated teams are doing day and night to continue to achieve the consistent results that we see quarter-after-quarter. As Barry mentioned earlier, more than a fourth of all of our operations are either in the recently acquired or transitioning categories. Because of that the first facility I'll highlight is a transitioning facility, called Arrowhead Springs Healthcare located in San Bernardino, California. When it was acquired in February of 2022, this 119 bed SNF suffered from low occupancy and a poor reputation in the healthcare community. Despite the tremendous challenges, Executive Director, Jeff Beltran and COO, [Iman Bravo], together with the Arrowhead leadership team saw the facilities potential and systematically went to work. First year was difficult as the team poured themselves into establishing clinical systems, remodeling the building and forging partnerships with local hospitals and Managed Care organizations. The results have been astounding. For example, CMS overall star rating has increased from 3 stars at acquisition to 5 stars today. Overall occupancy has jumped from 76% at acquisition to over 96% in Q2 of this year with skilled Medicare and managed care days increasing by over 56% over the prior year quarter. As you would expect, growing census has increased the need for additional staffing. But because Arrowhead has become a great place to work, they've been able to hire and retain employees and reduce spending on contract nursing labor from over $140,000 per month a year ago to $0 last month. Not surprisingly, as the facility has become healthy, so have earnings, with EBITDAR improving by 95% over prior year quarter. Turnaround at Arrowhead is a great example of the meaningful progress being made at so many of our newly acquired and transitioning operations. Grateful for the work being done and excited to watch as these operations continue to improve and contribute to our organization for years to come. Now as excited as we are about these transitioning facilities, we're equally enthusiastic about the ongoing growth we see in our same-store operations, which continue to reach new heights. One example of this is Rainier Rehabilitation in Puyallup, Washington, led by CEO, Brett Watson; and COO, Staci Chapman. Despite being acquired a decade ago, the team at Rainier continues to find ways to improve quality and grow earnings. The foundation at Rainier is an obsession with clinical excellence. This shows in its CMS 5-star rating for health inspections, quality measures and overall. In fact, the Rainier team has scored deficiency free in their past two annual surveys in spite of Washington having one of the most difficult survey environments in the entire nation. Because of the strong clinical reputation, Rainier has become the number one facility in the state for ventilator dependent and other high acuity patients. Managed Care organizations and hospital systems have taken notice and Rainier has been awarded numerous preferred provider contracts in recent years. As a result, occupancy and skilled mix continued to increase and the facility recently hit its maximum operational capacity, and had to start a waiting list for admissions. In the second quarter, this mature operation grew revenues by 17% and its EBIT by 34% over prior year quarter. But perhaps Rainier's most impressive contribution comes from the culture that they've established. People want to be part of Rainier. Their turnover rate for employee scores among the best in Washington. And when people do leave, it's often to take on increased responsibility at sister facilities or new acquisitions. For example, Staci and the Rainier team have trained multiple nurses who are now transforming care at sister facilities as directors of nursing and continuing to spread Rainier's influence and impact far beyond the facility. With that, I'll turn the time over to Suzanne to provide more detail on the company's financial performance and our guidance. And then we'll open it up for questions. Suzanne?

Thank you, Spencer. And good morning, everyone. Detailed financials for the quarter are contained in our 10-Q and press release filed yesterday. Some additional highlights for the quarter include; GAAP diluted earnings per share was $1.22, an increase of 8.9%; adjusted diluted earnings per share was $1.32, an increase of 13.8%; consolidated GAAP revenues and adjusted revenues were both $1 billion, an increase of 12.5%; GAAP net income was $71 million, an increase of 11%; adjusted net income was $76.4 million, an increase of 15.3%. Other key metrics as of June 30, 2024 include cash and cash equivalents of $477.3 million and cash flow from operations of $112.2 million. The company paid a quarterly cash dividend of $0.06 per common share. We have a long history of paying dividends and have increased the annual dividend for 21 consecutive years. We also continued to delever our portfolio, achieving a lease adjusted net debt-to-EBITDA ratio of 1.99 times. Delevering in periods of growth is particularly noteworthy and demonstrates our commitment to disciplined growth as we believe that we can continue to achieve sustainable growth in the long run. In addition, we currently have approximately $573 million of available capacity under our line of credit, which when combined with cash on the balance sheet give us over $1 billion of dry powder for future investments. We also own 120 assets, of which 115 are held by Standard Bearer and 96 of which are owned completely debt free, and are gaining significant value over time, adding even more liquidity to help with future growth. We also wanted to remind you that CMS minimum staffing rule, which if [Indiscernible] [revised] will have a multiyear phase-in period and will have no material impact on us in 2024. As Barry mentioned, we are increasing and narrowing our annual 2024 earnings guidance to between $5.38 to $5.50 per diluted share, up from $5.29 to $5.47 per diluted share. We are also raising our annual revenue guidance to between $4.2 billion and $4.22 billion, up from the previous guidance of $4.13 billion to $4.17 billion. We have evaluated multiple scenarios and based on the strength in our performance and the strong momentum we’ve seen in occupancy and skilled mix as well as the continued progress on [agency] management and other operational initiatives, we are confident that we can achieve these results. Our 2024 guidance is based on diluted weighted average common shares outstanding of approximately $58.5 million, a tax rate of 25%, the inclusion of acquisitions closed and expected to close in 2024, the inclusion of management's expectations for Medicare and Medicaid reimbursement rates net of provider tax and with the primary exclusions coming from stock based compensation, litigation and system implementation. Other factors that could impact quarterly performance include variations in reimbursement systems, delays and changes in state budgets, [Indiscernible] [holding] occupancy and skilled mix, the influence of general economy, census and staffing, the short term impact of our acquisition activities, variations in insurance calls and other factors. And with that, I'll turn the call back over to Barry. Barry?

As we wrap up, I must reiterate again how incredibly honored and grateful we are to work alongside our facility leaders, field resources, clinical partners and service center team that are behind these record setting results. We are always impressed by their incredible industry leading leadership as they focus on supporting our collective mission to dignify post acute care in new and innovative ways. This commitment is blessed to live with so many, including our own. We're excited about our future because of these amazing partners and we have complete faith in them and the culture they have collectively built and continue to improve. We'll now turn it over to the Q&A portion of our call. Sara, can you give us instructions on how to proceed.

[Operator Instructions] Your first question comes from the line of Tao Qiu with Macquarie.

My first question is on occupancy momentum and upside. Last quarter, Ensign’s occupancies have surpassed pre-pandemic levels. You had another 200 basis point plus occupancy growth this quarter, which is above pre-pandemic averages. So in the prepared remarks, Barry, you alluded to the upside compared to the more mature operations and 90% occupancy. I'm wondering if you could share with us your thoughts on current momentum, the amount of time it typically takes to unlock the upside and also the key hurdles you need to clear to get there.

We've been seeing steady occupancy growth for a long time now, obviously, through the recovery period of pandemic, but even since we -- and you can see this in hospital occupancy data that's been coming out recently. The demand is strong. We're seeing that translate at the post-acute level as well. And it's getting back to pre-pandemic occupancy level, really was obviously a focus for a long time, but but it's not really a ceiling. As you remember, leading up to the pandemic, our occupancy growth was strong at that time as well. And we see those trends continuing now. And also, I'd point out that we expect typically more seasonality than I think we've been seeing the last two kind of summer seasons and we haven't seen a sharper decline in occupancy, which just is another indicator to us that demand is strong and will continue to be strong for us throughout the rest of this year.

And the second question is on investment. Could you update us on the current pipeline in terms of volume, pricing and breakdown between stable versus turnaround opportunities portfolio versus individual transactions and leased versus owned deals?

So the pipeline is very healthy, 15 so far this year. We always close our acquisitions at the beginning of the month for lots of kind of operational and billing reasons. But -- so you'll -- we anticipate there'll be some more announcements coming up here literally next week. And then lining up for the rest of the year, there's always sort of kind of a Q3, Q4 push to -- for a lot of sellers that want to get deals done in this tax year. So you'll see an increase in activity. In terms of the deals, they're really all over the board Tao. They come from the small moms and pops. There are some regional portfolios too that were well down the road and preparing to close on as well. So you'll see us participate in some -- in a larger way than just a mom-and-pop deal in a few of our states. And in terms of geography, as we said in the prepared remarks, seven out of the 14 states that we're in, saw growth. I think you'll continue to see sort of that distribution across multiple markets, which is really an important point. It's really healthy for us to grow in that way, because our local approach to transitioning is a scalable approach that when we grow in Colorado, it doesn't -- we don't feel it in Washington or other parts of the company, right? So it's -- we're really excited about the deal opportunities and kind of where they are. Obviously, the states we're in there's tons of room to continue to expand and add density in those states and we'll continue to do that. But you'll also see us making some additions in new states and growing in some of our newer states throughout the rest of the year as well.

Sounds like it's very broad based. Lastly, I want to ask about the Chevron doctrine, which Supreme Court just overturned. And I think you have lasting impact on many current and pending healthcare regulations. Could you comment on the latest thinking on the minimum staffing standards and any other regulations that the SNF industry could contest in the future, and also given the current election cycle, your expectation on future regulatory landscape?

I would say there's just been a slight change in our confidence since our last quarter and that would -- our confidence is increased, obviously, since last quarter because of the Chevron ruling. The same attorney that brought that case before the Supreme Court is the same attorney that's representing, ACA and our industry lawsuit related to the minimum staffing rule and it does play a significant impact. Our case was strong before that ruling. It's even stronger because of that ruling. And so our confidence has only increased as that ruling has come out. We still feel really good about legislative options that are on the table for us as well with a bill that's essentially passed through Congress and the Senate and it's kind of waiting now for next steps. And look, I think just overall there's a unified front that our association has, leading age has and the rest of the industry has making sure that overreaching legislation like this or not even legislation, overreaching regulatory mandates don't really have a place in what we're trying to do as an industry to improve quality care, because this doesn't advance quality care. So we'll continue to join with our partners in the fight against this and we feel good about the direction we're headed.

Your next question comes from the line of Scott Fidel with Stephens.

Actually I wanted first question just to follow up on the comment, Barry, that you made around not necessarily seeing the typical seasonality playing out here entering the summer, which makes you feel pretty confident about demand. And I was hoping that you can maybe flesh out what you're seeing on the demand side at this point? And in particular, just thinking about some of the other observations that we've heard around the industry recently, particularly from some of the managed Medicaid companies who have talked about seeing an uptick in and utilization amongst their populations and then also some rising acuity as well in the Medicaid population. Obviously, there's been effects from redetermination. So I was hoping maybe you could sort of double click on the demand dynamic? And then also around that acuity dynamic, obviously, that's something that Ensign focuses on too around the higher acuity patients and whether in general, you're seeing a trend towards more of those types of patients potentially representing here for services?

And we definitely are seeing an increase in the acuity profile across all payer groups, including Medicaid, which is why we've spent a great deal of time or our leaders have spent a great deal of time looking at and trying to find ways to enhance services -- acuity services for those types of patients, which include behavioral health and subacute services and others. That segment of our skilled population continues to grow. You pointed out Managed Care, in particular, Medicare Advantage, there's a recent study out that showed that their penetration is now over 50%. And I'll tell you that from our perspective, we've long kind of embraced this movement to Medicare Advantage. We know that it's going to continue to grow and be a more significant payer for us and we've seen that play out, because we've embraced the relationships that we have with them, we've done all that we can to try to adapt the way we operate and how we measure things to align with the things that are important to them and their members. And as a result of that, we've seen really solid growth in our patient population, our payer mix as we partnered closely with Medicare Advantage and Managed Care payers. So I would point that out as one area of growth for us that has been significant and continues to be increasingly significant in our leader strategy in each of their markets. But overall, as we're kind of in the middle of summer, I can tell you that demand is strong and our occupancy -- overall occupancy, both on a consolidated basis and on a same-store basis, continue to show solid improvement even at a time when we normally don't. And all of those factors for us are kind of important in the landscape as we look forward through the rest of this year.

And then a follow-up question. Just wanted to ask a bit about on the labor side, and you had mentioned the improvements in both turnover and agency and labor now on a pretty sustained basis. I was hoping you could talk about, at this point, sort of looking at the second quarter, where your agency utilization was relative to peak and then also in terms of wage trends, maybe if you could give us an update on sort of what you're seeing and what you're expecting now for wage trends for the full year, and whether that's changed at all from the initial outlook that was embedded in your guidance?

And I'll let others comment if I don't cover all of that. But wage trends are very positive, we've seen a massive moderation from the wage inflation that we saw over the last couple of years. And that moderation has been happening over the last, I would say, year or so. We're now back down to what I would call more normal trends of wage inflation that are in the kind of low to mid single digit range as opposed to even double digit trends that we were seeing historically through the worst of the wage inflation period. And then obviously, we’ve talked about this in our prepared remarks, turnover has been solidly improving over many, many quarters as has our use of nursing agency. We're not back down to pre-COVID nurse agency utilization levels. And most of that has to do with with the acquisitions that we've been taking on over time, they tend to be more troubled in this area than we've seen historically. Our leaders have taken the challenge on and have dealt with it in a pretty magnificent way. But as we take on growth we're still seeing a lot of facilities that we're taking with pretty significant agency challenges that we're having to help manage as we integrate those into our portfolio. So that will keep us from probably getting back to where we were historically for a while, maybe another year or two because I don't see those trends in the industry as a whole dramatically improving from where they are today. But that said, if you were to take a look at where we are on a same-store basis with agency, we've made massive strides, and we're not too far above where we were on a pre-pandemic basis. So that's all super positive for us.

And with regards to the consensus, I think what we've seen is really baked -- has been baked in that everything is kind of coming within the range other than, obviously, we did raise. And so that has -- because we did have a little bit of experience of having a little bit better on the occupancy front and then really realizing those results of the additional occupancy through the earnings.

And then just last question, just on the upgraded outlook that you provided, it does seem like that would imply expectations for a bit of incremental margin improvement in the back half of the year. Obviously, you've got the strong accelerating top line growth as well. Just wanted to just get your update on whether there's any sort of seasonality that we should be thinking about around the EBITDA margin trends in the back half of the year, or whether you expect those to be relatively consistent in the third and fourth quarter?

I think when we kind of look out for the year, and we're looking at the overall guidance, it's going to be relatively consistent, obviously, with Q4 being stronger like it always has been. And so it's very consistent with what we've always put out there on the margin and on the overall.

Your next question comes from the line of Ben Hendrix with RBC Capital Markets.

Just a quick follow-up question on the acquisitions in the quarter. Clearly, more M&A towards some newer markets. I was wondering if you could kind of give us an idea of the critical mass necessary in a new market to get the kind of, I guess, the cluster flywheel, if you will, rolling such that -- I guess, I'm trying to figure out at what point does like the Tennessee markets start to realize the same synergies, the same efficiencies from the cluster model that you might see in Arizona? Kind of when do we reach that critical mass?

I'll let these guys chime in, too. So certainly, three to four buildings is kind of an ideal cluster size, five is a large cluster. You get that then you start getting almost too big and you need to have another cluster. And just in terms of how we look at it, that's kind of sort of the perfect size. And the reason for that is you want to have -- as these groups get together, they have full access into each other's performance. And if it's too big, it just -- it's a little easier to kind of fly under the radar, so to speak. So having it be the right size is certainly important. As we look at kind of new states and new markets, certainly, the cluster is very important part of that. But also there's sort of a market strategy, too, which is having resources that are unique to the state and that geography. And the bigger we get in the state the more we can justify additional resources, clinical, financial, other folks that aren't necessarily in a building but that are there to assist and help these clusters function and have all the best practices and information that they need to be the top operator in the state. So that's the other part of it. So speaking of Tennessee, we have a cluster now. We certainly want to continue to grow clusters. And as we do that then we can start just buying additional sort of market resources. So we see Tennessee as a state that could be Bandera like, which is Arizona. It's a very attractive market for us. We've got a top-notch leader, Tyler Albertson, who's been an Ensign leader for a very long time and just very talented in building that team that we're talking about. So we're looking closely at deals in Tennessee and expect to have some announcements there, hopefully, throughout the year. And obviously, these things kind of come in stages. We sort of have to digest things in a way before you can kind of take the next step. So we've got three there. The next step would be to add more -- kind of get a market than sort of get our feet under us again and then sort of do it like that is how I would anticipate that playing out. Anything I missed there, Spencer or Barry. No. Okay.

And then just also following up on your commentary on the Chevron ruling. I mean, clearly, a lot of focus on implications for the minimum staffing. But I'm thinking more broadly in longer term for implications for rate setting. It seems like, especially during the transition to PDPM a few years back, there's a lot of rebasing around, I guess, budget neutrality assumptions and what have you -- just wanted to see what your thoughts are there and how the rate setting environment might change into this rule?

We don't anticipate any changes on how rate setting will move forward. I think those groups kind of work independently. And our anticipation is that we'll continue to see very typical methodology and attitude towards rates going forward. I mean we're still in an inflationary environment and I think CMS is aware of that and I think trying to do the right thing for -- as far as rates go at a CMS level. And as far as at a state level, when you look at kind of where we were even with FMAP funding to supplement a lot of our Medicaid rates and where we are today where FMAP has now gone, we're actually right where we were even with the supplemental funding, meaning we've been made whole kind of on an average state-by-state basis. And we have really good visibility into where our rates are headed on a state-by-state basis, which gives us pretty good confidence about stability in rates overall.

Thank you. This concludes the question-and-answer session as well as today's call. We thank you for joining. You may now disconnect your lines.