Good morning, and thank you for joining us today for Select Medical Holdings Corporation’s Earnings Conference Call to discuss the First Quarter 2019 Results and the Company’s Business Outlook. Speaking today are the company’s Executive Chairman and Co-founder, Robert Ortenzio; and the company’s Executive Vice President and Chief Financial Officer, Martin Jackson. Management will give you an overview of the quarter and then open the call for questions. Before we start, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company holding – of the company, including, without limitation, statements regarding operation results, growth opportunities and other statements that refer to Select Medical plans, expectations, strategies, intentions and beliefs. Those forward-looking statements are based on the information available to management of Select Medical today, and the company assumes no obligation to update these statements as circumstances change. At this time, I will turn the conference call over to Mr. Robert Ortenzio.

Thank you, operator. Good morning, everyone. Thanks for joining us for Select Medical’s first quarter earnings conference call for 2019. Before I outline our operational metrics, I want to provide you with some summary comments and updates since we presented last quarter. Overall, we were pleased with the consolidated results for the quarter. Our critical illness recovery hospitals performed well this quarter as they were able to maintain adjusted EBITDA and margins with four less owned hospitals including our temporary closed Panama City Hospital. We also faced what we believed to be a tough comparative quarter with much less flu volume this year as compared to last year. And our revenue per day was up despite a reduction in Case Mix Index compared to the same quarter last year. Our inpatient rehabilitation segment had nice growth in terms of both revenue and volume. We also realized double-digit growth in same-store hospital adjusted EBITDA. During the quarter, we did experience an increase in start-up losses as well as an unexpected bad debt in one of our joint ventures, which negatively impacted our adjusted EBITDA. We were disappointed with our outpatient rehab segment as it missed our expectation for the quarter. This was primarily due to an increase in clinical staffing to meet expected volume increases that did not materialize in the quarter. The lack of volume and overall impact of increasing staffing cost reduced our clinical productivity. Having said that, we have seen a nice increase in volumes in the month of April. And finally, in our Concentra segment, we continue to see growth related to the addition of U.S. HealthWorks on February 1, 2018, as well as capturing synergies associated with integrating U.S. HealthWorks into Concentra. During the first quarter, we opened a 50-bed rehabilitation hospital in partnership with University of Florida Health System in Gainesville. We also added a new critical illness recovery hospital in partnership with UC San Diego Health in the first quarter. We have rehabilitation hospitals under construction in Las Vegas in partnership with Dignity Health scheduled to open the second quarter and in Newport News Virginia in partnership with Riverside Health scheduled to open in the third quarter. Our development pipeline remains robust. Now let me take you through our operational metrics for the first quarter. Overall, our net revenue for the first quarter increased 5.7% to $1.32 billion in the quarter. Net revenue on our critical illness recovery hospital segment in the first quarter declined slightly to $462 million compared to $465 million in the same quarter last year. The decline was primarily attributable to a reduction in patient volumes driven by three hospitals we closed since the first quarter last year as well as the temporary closure of our Panama City Florida hospital. Patient days were down 2.9% compared to the same quarter last year with just over 258,000 patient days in the first quarter. Occupancy in our critical illness recovery hospital segment was 71% in both the first quarter this year and last year. Partially offsetting our volume decrease – decline was a 1.7% improvement in rate to $1,759 per patient day in the first quarter. Net revenue in our rehabilitation hospital segment in the first quarter increased 8.1% to $189 million compared to $175 million in the same quarter last year. Patient days increased 7.7% to almost 83,000 days. Net revenue per patient day was up slightly to $1,633 per day in the first quarter compared to $1,623 per day in the same quarter last year. Net revenue in our outpatient rehab segment in the first quarter increased 7.7% to $277 million compare to $257 million in the same quarter last year. Patient visits were down slightly with 2.05 million visits in the first quarter compared to $2.07 million visits in the same quarter last year. This decline of visit was attributable to the sale of clinics to non-consolidating subsidiaries, which negatively impacted visits by 99,000 visits compared to same quarter last year. However, we had an increase in revenues related to management fees and labor pass-through services provided to our non-consolidating joint ventures in the first quarter compared to the same quarter last year. Revenue for management fees increased $1.5 million and labor pass-through increased $17 million when compared to the same quarter last year. Our net revenue per visit was $103 in both the first quarter of this year and last year. Net revenue in our Concentra segment for the first quarter increased 11.3% to $396 million compared to $356 million in the same quarter last year. The increase was primarily driven by the addition of U.S. HealthWorks, which was acquired in February 1 of last year. For the first quarter revenue from our centers was $360 million and the balance of approximately $36 million was generated from onsite clinics, community-based outpatient clinics and other services. For the centers, patient visits increased 12.2% to just over 2.9 million visits compared to just under 2.6 million visits in the same quarter last year. Our net revenue per visit was $124 in both the first quarter of this year and last year. Total company adjusted EBITDA for the first quarter increased 4.2% to $170.1 million compared to $163.2 million in the same quarter last year. Our Consolidated Adjusted EBITDA margin was 12.8% for the first quarter compared to 13% for the same quarter last year. And our critical illness recovery hospital segment adjusted EBITDA was $73 million in both the first quarter of this year and last year. Adjusted EBITDA margin for the segment was 15.8% in the first quarter compared to 15.7% in the same quarter last year. Adjusted EBITDA was adversely affected by the temporary closure of our Panama City Florida hospital. Our rehabilitation hospital segment adjusted EBITDA was $25.8 million in the first quarter compared to $26.8 million in the same quarter last year. Adjusted EBITDA margin for the Rehab Hospital segment was 13.7% in the first quarter compared to 15.3% in the same quarter last year. The decline in adjusted EBITDA margin and margin were primarily the result of losses in our startup hospitals and $1.5 million of additional bad debt I previously mentioned. Adjusted EBITDA startup losses were $2.8 million in the first quarter compared to $800,000 in the same quarter last year. Outpatient rehab Adjusted EBITDA was $29 million in the first quarter compared to $30.5 million in the same quarter last year. Adjusted EBITDA margin for the outpatient segment was 10.5% in the first quarter compared to 11.9% in the same quarter last year. The labor pass-through, which equally increases both our revenue and expense, so carries no marginal contribution impacted margins by 150 basis points in the first quarter of this year compared to 90 basis points last year. Excluding the labor pass-through margins would have been 12% in the first quarter compared to 12.8% in the same quarter last year. Concentra adjusted EBITDA was $66.3 million for the first quarter compared to $57.8 million the same quarter last year. Adjusted EBITDA margin was 16.7% in the first quarter compared to 16.2% in the same quarter last year. The increase in adjusted EBITDA is primarily the result of the acquisition of U.S. HealthWorks, which we acquired February 1, 2018. Earnings per fully diluted share was $0.30 for the first quarter compared to $0.25 for the same quarter last year. Adjusted earnings per fully diluted share was $0.27 per diluted share for the first quarter compared to $0.29 in the same quarter last year. Adjusted earnings per fully diluted share excludes non-operating gain in its related tax effects in the first quarter of this year and excludes the loss on early retirement of debt, non-operating gain in U.S. HealthWorks acquisition costs and their related tax effects in the first quarter last year. On April 19, the proposed inpatient rehab rules for 2000 – for fiscal 2020 were posted by CMS. And on April 23, the proposed long-term care hospital rules for fiscal 2020 were posted by CMS. As you know, we generally don’t comment publicly on the proposed regulations, but we’re actively evaluating and provide comments to CMS as appropriate in the process. At this time, I’ll turn it over to Marty Jackson for some additional financial details before we open the call up for questions.

Thanks, Bob. Good morning, everyone. For the first quarter, our operating expenses, which include our cost of services and general and administrative expense were $1.16 billion and 87.7% of net operating revenue. For the same quarter last year operating expenses were $1.1 billion and 87.6% of net operating revenue. Cost of services were $1.13 billion for the first quarter compared to $1.07 billion in the same quarter last year. As a percent of net revenue costs of services were 85.5% for the first quarter compared to 85.1% in the same quarter last year. G&A expense was $28.7 million in the first quarter. This compares to $31.8 million in the same quarter last year. G&A as a percent of net revenue was 2.2% in the first quarter, this compares to 2.5% of net revenue for the same quarter last year. G&A expense in the first quarter last year included $2.9 million in U.S. HealthWorks acquisition costs. Excluding those costs, G&A expense as a percent of net revenue would have been 2.3% in the first quarter last year. As Bob mentioned, total adjusted EBITDA was $170.1 million and adjusted EBITDA margin was 12.8% for the first quarter. This compares to the total adjusted EBITDA of $163.2 million and adjusted EBITDA margin of 13% in the same quarter last year. Excluding the effect of the labor pass-through for the entire company, adjusted EBITDA margins would have been 13.7% in the first quarter this year compared to 13.6% in the same quarter last year. Total revenue related to the labor pass-through was $80.1 million in the first quarter this year. This compares to $55.2 million in the same quarter last year. Depreciation and amortization was $52.1 million in the first quarter. This compares to $46.8 million in the same quarter last year. The increase in depreciation and amortization expense was primarily the result of the U.S. HealthWorks acquisition. We generated $4.4 million in equity and earnings of unconsolidated subsidiaries during their first quarter. This compares to $4.7 million in the same quarter last year. The reduction in equity and earnings was driven by two new JVs where we have a minority position that had losses during the first quarter of this year. We had a non-operating gain of $6.5 million in the first quarter this year. Last year, we recognized a loss on early retirement of debt of $10.3 million and non-operating gain of $400,000 in the first quarter. Interest expense was $50.8 million in the first quarter. This compares to $47.2 million in the same quarter last year. We recorded income tax expense of $18.5 million this year. This compares to $12.3 million in the same quarter last year. Net income attributable to Select Medical Holdings was $40.8 million in the first quarter, and our fully diluted earnings per share was $0.30, excluding the non-operating gain and it’s related tax effects our adjusted earnings per share was $0.27. At the end of the year, we had $3.3 billion of debt outstanding and $147.8 million of cash on the balance sheet. Our debt balance at the end of the year included $1 billion in select term loans, $160 million in select revolving loans, $710 million in the select 6 3/8 senior notes, $1.1 billion in Concentra first lien term loans, $240 million in Concentra second lien term loans, $41 million in the unamortized discounts, premiums and debt issuance cost that reduced the overall balance sheet liability. And we had $71 million of other miscellaneous debt. Our balance sheet now reflects an operating lease right-of-use asset and both the current and non-current operating lease liability that we recognized in connection with the adoption of the new lease accounting standard. Operating activities provided $41.8 million of cash flow in the first quarter. This compares to $50.7 million in the same quarter last year. Our days sales outstanding or DSO, was 53 days at March 31, 2019. This compares to 51 days at December 31, 2018, and 56 days at March 31, 2018. Investing activities used $82.8 million of cash in the first quarter. The use of cash was primarily related to $49.1 million in purchases of property and equipment and $33.7 million of acquisition and investment activity during the quarter. Financing activities provided $13.7 million of cash in the first quarter. We had net borrowings of $140 million on Select’s revolving loans, a portion of which we use to prepay term loans of $98.8 million at Select. Concentra also prepaid $33.9 million in term loans during the quarter. Additionally, in our earnings press release, we reaffirmed our business outlook for the calendar year 2019 provided earlier this year. We expect net revenue to be in the range of $5.2 billion to $5.4 billion, adjusted EBITDA is expected to be in the range of $660 million to $700 million and fully diluted earnings per share is expected to be in the range of $0.97 to $1.13 in 2019. This concludes our prepared remarks. And at this time, we’d like to turn it back over to the operator to open the call up for questions.

[Operator Instructions] Our first question comes from the line of Frank Morgan with RBC Capital Markets. Your line is open.

Good morning. I guess I’ll start with the high level. Going back to the proposed rule for 2020, I know you don’t want to go into a lot of detail there yet since it is just proposed. But conceptually, when we look at the public use files, it looked like you would fare much better under this estimated change in the case mix group. I’m just curious just kind of a yes or no answer. Did you find that to be more of a positive? Or do you think that’s likely to be more of a positive? And if so structurally, why would that be the case? And then any particular areas that you would call out that you’re likely to make some comments back to CMS on? That will be my first question.

Well, Frank, I’ll – it’s Bob. I’ll let Marty comment on the rehab reg. I’ll just make a comment on the reg – the proposed reg on the long-term acute care. I mean, I think based on regs we’ve seen in the past, the one we got was pretty, I think, capita stability in the industry, and there’s a lot going on. It’s – what we had hoped for, which is modest increases, but more increases expected on the side of the LTAC compliant patient population than on the site neutral, which is going to leave the phase in the blended rate. So obviously, for us, that’s good. And the fact that there’s some increase and some stability, when I say stability, no more radical changes on the LTAC side while they continue to – the industry continues to adjust to criteria, and the loss of the blended rate, I think, is a positive. So we obviously won’t have as many comments – much commenting on the LTAC rule as we’ve had in the past years where we’ve had some pretty dramatic policy changes there. So I’m pleased that we’re looking to see some stability in the LTAC space. And I’ll let Marty comment and give you any comments on the rehab rule.

Frank, our initial evaluation on the inpatient rehab is we are cautiously optimistic. It looks pretty good.

Okay. Switching gears, I know this labor pass-through thing is becoming on this unconsolidated – JVs is becoming a bigger number. So would you mind just going back through that and kind of go through the mechanics of it and why it works the way it does and – because clearly, that’s becoming a bigger part of the story. We just put from an uptick standpoint we need to make sure we get it right. So any color or background there will be appreciated.

Yes. Frank, we certainly appreciate the question. The labor pass-through is really – that growth is really a result of new JVs where we have a minority ownership, but we employ all the personnel, and these employee costs are charged back to the JVs at their cost. You saw a significant increase on a same quarter year-over-year basis, and that’s really a function of the Banner Health, the OhioHealth JVs and then growth in the Baylor JV where we own minority positions in all three of those.

Got you. And then I know there was pulling the facilities out. I don’t know if you said this in the prepared remarks, but do you have any kind of same-store numbers that you could adjust for the fact of pulling the – pulling some of those ventures out or some of that business out? Any color there will be great, and I’ll hop off. Thanks.

Frank, could you – before you hop off, could you repeat that question? I want to make sure that we understand it.

Yes. Just some of the upticks to the volume numbers. Did you give a same-store or a pro forma adjusted as if you had the same amount in both periods? I just didn’t catch it. I want to just have a sense of how volumes were doing excluding the effect of some of those JVs.

Is that on the – are we talking inpatient or outpatient? If we’re talking outpatient, we can certainly talk to you through that. I mean we had…

Yes, we’re talking outpatients.

Yes. On the outpatient side, we had basically contributed three – we had three JVs where we contributed into a minority position clinic assets. That represented about 99,000 of visits. So when you take a look at the overall visits, it looked as if it was a decline when, in actuality, the underlying visits actually increased on a same-store basis excluding those joint venture or those clinics that we moved over to the joint ventures.

Okay. That’s what I need. Thank you.

Our next question comes from the line of Peter Costa with Wells Fargo. Your line is open.

Continuing on that a little bit. You’d expect to see that the equity and earnings would go up from these JVs and yet it was five. Now you highlighted a couple of new JVs that caused some costs in the equity in earnings line. Can you describe, how – what was the total amount of that cost? Did you give us that? I don’t know that you disclose that.

Yes. Pete, the overall impact – there were – the two JVs that we talked about on the critical illness recovery hospital side, it was a little bit north of $1.1 million loss. And then on the IRF side, it was about $500,000, so $1.6 million.

And so that ran through the equity in earnings line, to be clear?

That’s correct. Yes, that had a negative impact on the equity in earnings line.

Was there anything else that impacted that equity in earnings line besides the negative value?

No. Those two were really the major reasons for the impact, the negative impact.

Okay. And then last year, first quarter, we saw that 71% occupancy and we thought that was tied to flu, I guess. And now we’re seeing the 71% occupancy again this quarter in the LTAC space. Is that really more – and we really have as much of a flu season this year. So is that really a seasonal impact? So should we start to expect that to be the year level of occupancy in the first quarter all the time? Or is this a new run rate level of occupancy that we should carry going forward in all quarters? Help us understand sort of why it was so strong why it’s so strong this year.

Well, the fact of the matter is we’ve been talking about all of the work that the operators have been doing in educating our referral sources. And we really think that this 71% this year is really a function of some improvements that have been made. Some of that education is we’re finally seeing additional referrals and conversion of this referrals.

Yes. Last year – I remember last year at this time when we were talking about the first quarter, we said the 71 – suggested the 71% was a result of really a dramatic flu season that impacted the centers. There’s no question that it did. So we did not have as severe of flu seasons that impacted this year’s first quarter, but yet we still reached that increased occupancy. So from our standpoint, from an operational standpoint, we feel as though it’s an up quarter even though it’s flatter occupancy. But the environment is a little bit different. So I feel good about the progress we’ve made on developing senses and filling unused beds just based on the things that we’ve talked about in the past, the education of our referral sources and getting more of those higher acuity patients post their ICU space. So I feel good about the progress we’ve made here in the first quarter. Now as I said that, there’s still some – there’s still seasonality in this business on the critical illness side of the business. There’s still some seasonality in the business, but I do feel as though we’re further along this year than we were a year ago.

Perfect. That’s helpful. Thank you.

Thank you. And our next question comes from the line of A.J. Rice with Credit Suisse. Your line is open. A.J. Rice: I just had suspense there for a minute. A couple of questions, if I might. Hello, everybody. The outpatient rehab margin, you did talk about the adjustments that we need to make because of the labor pass-through. But I guess it was down 80 basis points on a normalized year-to-year basis. I know it came balance around, but seems a little bit bigger than usual move. Anything to highlight there as to what’s happening?

Yes. A.J., the – as we also pointed out is we had brought on additional clinical FTEs and the anticipation of additional volume. If we had the same FTE, the clinical FTE efficiencies that we’ve had in the past, that differential represented about $2.4 million. That $2.4 million would have had about a full 100 basis point impact or a 13% margin as opposed to a 12%. A.J. Rice: Okay. That make sense.

So – and as we’ve said, we’ve started to see that volume materialize in April and we anticipate getting back to those operational efficiencies. A.J. Rice: Okay. With the Concentra, you’ve now, I guess, anniversaried the U.S. HealthWorks acquisition. I guess I would – I’m asking organic growth from here. What do you think it looks like on the top line sort of range or normalized run rate? And I think I have 16.7% margin of that business. Is that – I know there’s some seasonality there and volatility. Is the margin run rate sort of normalized? Or is there a further improvement we’ll see as you realize something like synergies or whatever?

Yes. We think the 16.7% margin is probably a margin you can expect to see moving forward in three of the four quarters. The fourth quarter is seasonally the weakest quarter. So you won’t see the margin of 16.7% in that quarter. That should be – I think, historically, has been in the 10% to 12% range. A.J. Rice: Okay. And how about just top line sort of organic growth for the combined entity now that you’ve anniversary U.S. HealthWorks. Do you think, what would you say, low single digits?

Yes. Our estimate is probably in that 2% to 3% top line growth. A.J. Rice: Okay. All right. And then the last question I had was, obviously, we’re a little bit ahead of this, but Welsh, Carson and Dignity have the ability to put back to you one-third of their position next year. Maybe we’re wrong on this, but I have calculated $250 million to $300 million if they decided to do that. I guess is there any early indication as to where – what they might do? And second, is it affecting anything you’re doing in terms of capital allocation or position of the balance sheet today? I’m thinking about that.

Yes. Good question, A.J. I’ll let Marty comment on the financing. As we sit here today, I think that you should expect that the minority partners, which is Welsh, Carson; Dignity and Cressey & Co. will exercise their put for the first one-third. I would be very surprised if they didn’t. So I think that, for modeling purposes, you should assume that they do put their first one-third to us when they’re able to do that.

A.J., on the dollar amount, we would certainly encourage you to look at the higher amount. I think it’s going to be in that $300 million plus range as far as the put is concerned. And we would anticipate, at this current time, paying that cash. A.J. Rice: Okay. All right. So you have the visibility to tap the markets or you have liquidity to do that, you’re saying?

That’s correct. A.J. Rice: Okay. All right. Thanks a lot.

Our next line comes from the line – our next question comes from the line of Kevin Fischbeck with Bank of America. Your line is open.

Great. Thanks. So the bad – you mentioned the bad debt charge, one of your JV partners in the IRFs. What was that related to?

Kevin, that was related to contract therapy where services – contract therapy service we were providing to a couple of nursing homes. Those nursing homes are being reorganized at this time. So we fully reserve that.

Yes. I’ll just add to that. That you’ll recall a number of years ago, we had a contract therapy division, which we sold and exited that business. This is just service that we were providing inside one of the joint ventures because of the kind of a local market. It’s not a business line for us. And I think as many of you know, with the struggles that the skilled nursing industry has had, some of the smaller players are struggling financially, and our judgment was that some of these amounts are uncollectible. So we decided to just take the write-off in this quarter.

All right. Great. And then I think you said double-digit same-store adjusted EBITDA in the IRF segment? I mean is that just a function of how many of these sites are still kind of in the start-up phase? I mean how long do you think you can keep that type of growth going?

Well, we think that double-digit growth will continue over the next couple of years on the inpatient rehab. It’s really a function of the pipeline and really conversion of all those opportunities into new projects, new hospitals.

So you have not only the combination of the new hospitals that are opening, which obviously generate significant losses in the opening. And then you have the hospitals that we’ve opened that see pretty dramatic growth between the first year and the second year, and the second year and the third year before they get to be fully mature. So if you look at the rehab hospitals, we have a young portfolio of hospitals and we have new openings all the time. So we think that the growth profile for that division is very strong.

And on the Panama City closure in the LTAC side, do you have – how much of that – how much of a drag that was in the quarter, either EBITDA or from a margin perspective?

Sure. The EBITDA for Q1 of 2018 was $1.6 million. I believe we had costs this quarter, since there was no revenue the cost is a loss, was in that. It’s under $100,000.

Okay. Great. And then you mentioned that outpatient rehab came in below your expectations in the quarter. Was there anything that came in better to kind of have you keep your guidance the way that it is? Or it’s just the guidance has a range, so it wasn’t off by another quantity charge and change your guidance range?

Well, we think that LTAC actually came in a little bit better than we anticipated as well as Concentra.

All right. Great. Thank you.

Our next question is from Patrick Feeley with Barclays. Your line is open.

Hey, good morning. Thanks. First question, just what was the dollar amount of that bad debt write-off from the contract therapy?

It was a little bit less than $1.6 million.

Got it. And then my other question is just on the Case Mix Index. It sounds like that was down a little bit again this quarter, maybe a little bit of a headwind year-over-year for the critical access hospitals. Is there any color around what’s driving that decline? And when should we expect that to sort of anniversary and stabilize?

Well, the Case Mix was down from 1.27 to 1.25 on a same quarter year-over-year basis. And it was really a – it was a mixed change in some of the DRGs, and we think it’ll probably fluctuate in that range.

Okay. So nothing significant to call out there?

No, there isn’t.

The only other question I had was just on de novo startup losses. What are you assuming in guidance for startup losses for 2019?

It’s probably in that $6 million to $8 million range. The issue there is it’s really the timing and when the hospitals actually opened up their doors and then finally, when do we get certification by all the governmental bodies.

Got it. And maybe just one more, if I can. Last year, in the second quarter, you had the issue crop up with the threshold days. I believe that was about a $10 million drag to EBITDA for the LTACs. Is that the right way to think about that comp for the second quarter this year?

I can tell you – I can’t talk to you about second quarter of this year. I can talk to you about Q1 of 2019 versus Q1 of 2018, and threshold days have improved nicely over those comparative quarters.

But if we’re thinking about the second quarter of last year is the right comp for this year that – it would be about $70 million excluding that threshold issue. Is that the right way to think about it? Or is it part of that $10 million not necessarily come back this year?

Yes. I think we’re – quite candidly, I’m not sure. I certainly don’t understand the question.

Okay. I was just trying to understand what the last year – was that drag last year about $10 million in the – for the critical access hospitals for the threshold day issue? Or am I just not thinking about that the right way? I thought that was – what was cited last year, but maybe I’ll have to go back to the transcript.

Yes. We’ll have to – quite candidly, I haven’t really focused on Q2 of 2018.

I do recall last year when we talked about the threshold days and what happened. I think we commented then that we thought that, that was a bit of an aberration. I don’t think that we signaled at that time that we thought that was going to be a reoccurring quarterly event. So…

Right. Yes. I mean that’s kind of my point. I’m just trying to understand what the drag was to the second quarter of last year and getting to the point that, that it shouldn’t recur this year. So I think that…

Yes. Yes, I think the only question we have is the $10 million. I’m not – I don’t recall that number. But we certainly recall the impact of the threshold days and the increase in the threshold days, and that had a negative impact. But what the total amount was, I’m not sure.

I might have a dollar amount. I’m willing to go back and check my notes, but I think you’ve answered the question. Thank you.

Our next question comes from the line of Frank Morgan with RBC Capital Markets. Your line is open.

Thank you. Yes. Just one quick follow-up. On Panama City, how long does that take? Or would you envision that, that would take to kind of get back to its normal run rate? Because that was a fairly stabilized, mature hospital, if I remember correctly. So how long do you think that process of getting it back to kind of pre-hurricane level performance? How long would that take? And is there any – yes, I guess that’s it. Thanks.

Well, Frank, I’ll tell you that the – it’s not a question of getting it back to the performance. It’s a question about getting it open. And when it gets open, I think we believe that it will return to its performing level quite quickly. But the issue that we have is that it requires a rebuild of the acute care hospital that we’re in. So we don’t actually control the time frame for the reopening because the acute hospital has to be rebuilt. This was a hospital that was really the – at the center of that hurricane that suffered extensive damage. So when it gets open, I’m confident that it will return to its pre-hurricane levels pretty quickly. The issue is, is when will it be open? And I don’t have a good estimate for you on that at this time, but we do plan to reopen it. And I think our host hospital is looking forward to having us back in that hospital when it does reopen.

Got you. And just ongoing cost while it’s – while we’re in sort of this state of looks. Does that wind down? Or I mean…

Yes. Very minimal. We’re not actually calling those out. Those costs during this period of time are minimal, Frank. So I don’t think we’re looking to adopt that. It’s just we miss – that was a very successful hospital. And on an comparative basis, we missed the loss of the EBITDA contribution of that hospital while it’s under reconstruction.

I understand. I guess maybe kind of on the same subject of HIHs. Has there been some changes in the 25% rule being lifted? Are you seeing that having any kind of positive impact in any of your HIH location? Excuse me.

Really, not enough to really be noticeable, Frank. I think that when we – the 25% rule, as you know, was never fully in effect for us. It was a 50% rule and never really went to 25%, and we were always fairly easily in compliance with the 50% rule. So I can’t say that, that is responsible for any part of the lift of our census. And now that we have a model that is really ICU and pulmonary patients, we’re generating those patients from those tertiary hospitals that have a bigger ICUs in the markets that we’re in. So it’s really back to just pretty stable business.

Okay. Thanks.

Our next question comes from the line of Bill Sutherland with Benchmark Company. Your line is open.

Thanks. Hey, everybody. I just have a couple at this point. On the LTAC kind of backdrop, are you – how would you describe the landscape at this point? And are there opportunities emerging as we move finally to the full compliant rate picture?

Well, the landscape for the industry is, I think, pretty tough. I mean we’ve had some – we’ve had one bankruptcy, and I’ll jump to the opportunity. We did buy three hospitals out of the bankruptcy process of one of the other companies. I think a couple of the other LTAC companies are in reorganization. MedPAC has reported that there have been significant closures. I mean – and I think that we – I think as we suggested when we look at the day in the information that this industry would really be turned on its head. And I think by and large, that has happened. So the industry is going through a pretty dramatic shakeout. We will be – in terms of opportunities, we’ll be pretty selective about those opportunities. We thought the floored opportunity at the purchase out of bankruptcy was a good one, but I can’t tell you that we’re looking to buy a lot of other LTACs that may be struggling with making the transition to the new criteria. I wouldn’t characterize as our opportunities being really robust in that area. Where we do see opportunities as the industry kind of reshapes itself is perhaps opening some new critical illness recovery hospitals, by and large, in markets where we already have a presence, perhaps in markets where we have very strong joint venture relationships. So that’s where I really see the opportunity, but that’s really separate and apart from what’s going on in a broader industry landscape. But I think it’s probably going to take at least another year for the industry to really realign itself and some of these reorganizations to work themselves through.

Got it. Thanks for the color. Outpatient, which despite the hiccup these quarters and posting nice volume trend, how should we think about the go-forward sustainable growth for outpatient?

Sure. Bill, you’re absolutely right. I mean when you take a look at same-store, we’re seeing in the neighborhood of 4% growth just on a volume basis, and that’s been – the operators have done a good job continuing to grow that. So you should anticipate something in that range.

Okay. And then just a number, I think, I missed. Did you give occupancy for IRF in the quarter?

We did. I think it was in the Q. If you can hold on just for a second.

Oh, then I’ll go grab it. That’s okay. Don’t worry about it.

Okay.

Thanks, everybody.

I’m not showing any further questions. So I’ll now turn the call back over to Mr. Ortenzio for closing remarks.

Thank you, everyone, for joining us for the call, and we look forward to updating you next quarter. Thank you.

Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.