Ensign Group Inc (ENSG) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, welcome to The Ensign Group fourth-quarter fiscal 2010 earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session with instructions following at that time. (Operator instructions). As a reminder, this conference is being recorded. And now I will turn it over to Greg Stapley, Executive Vice President. Please begin, sir.

Thanks, Tyrone; thanks everyone. Welcome and thank you for being on the call today.

Yesterday we filed our 10-K and issued a press release highlighting key financial results and other developments for the quarter and the year. Both are available on the investor relations section of our website at www.ensigngroup.net. A replay of this call will also be available there until 5 PM Pacific on Thursday, February 24.

As usual, we will take care of the housekeeping items up front. First, any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business, 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 the call. Participants should not place undue reliance on any forward-looking statement and are encouraged to review Ensign's SEC filings for a more complete discussion of factors that could impact our results.

Except as required by federal securities laws, Ensign does not undertake to publicly update or revise any forward-looking statement where changes arise as a result of new information, future events, changing circumstances or for any other reason. Second, any Ensign facility or business we may mention today is operated by a separate, wholly-owned independent operating subsidiary that has its own management, employees and assets. References to the consolidated Company and its assets and activities, as well as the use of terms we, us, our and similar verbiage is not meant to imply that the Ensign Group, Inc. has direct operating assets, employees or revenue or that any of the facilities, the service center, the home health and hospice businesses or our captive insurance subsidiary are operated by the same entity.

Third, we supplement our GAAP reporting with EBITDA, EBITDAR, adjusted net income, adjusted EPS and other non-GAAP metrics. These measures reflect additional ways of looking at our business and operations which, when viewed together with GAAP results, provide a more complete understanding of our business. They should not be relied upon to the exclusion of GAAP financial measures. A reconciliation of these non-GAAP measures to GAAP is available in yesterday's press release.

We also customarily take a moment to update you regarding ongoing DOJ investigation at this point in our calls. We have nothing new to report today, but we, through our regulatory counsel, continue to interact with representatives of the DOJ on a limited basis to produce and examine relevant documentation and to derive such information and understanding from the data as it might produce to assist us in pressing the matter toward a conclusion. Other than that, we have no changes to report since our last call.

Now, at this point, just a personal note -- the three of us are not together today -- Suzanne, Christopher and I -- because Christopher is away standing vigil at his wife's side; she is about to deliver their new baby. So if we stumble over each other a little bit, we hope you will forgive us as we try and figure out who will take questions and so forth.

With that, I'm going to turn the call over to Christopher, our President and CEO; and then Suzanne Snapper, our CFO, who will discuss the financials. And after that we'll open up for questions. Christopher?

Thanks, Greg; good morning, everyone. We are pleased to be able to again tell our shareholders that we have just finished another record quarter and another record year. Both for the quarter and for the year, the Company moved in a positive direction on nearly every financial metric we follow. More importantly and certainly as part of a clear cause and effect relationship, The Ensign Group posted one of the most outstanding clinical performances as an organization in 2010 that I can recall. The quality of care rendered across the organization this year as measured by state survey results as well as market response in both occupancy and skilled mix growth across the entire portfolio has been truly gratifying.

Although many things remain that we think we can and must improve upon, we believe that our continued focus on positive clinical outcomes for our residents has not gone unnoticed by regulatory and medical communities across our markets this year. This quality improvement has produced the single greatest influence on our results last year, and especially last quarter. We grew same-store occupancy by 137 basis points to an all-time high of over 83% on the year and by 194 basis points to a record 83.7% in the fourth quarter. There were other factors at work, but this census growth was the principal driver of last year's and especially last quarter's success.

With that I would like to share some other highlights of what our concerted efforts to become the facilities of choice in the markets we serve produced last year and last quarter. Consolidated skilled revenue grew by more than 21% for the year and more than 22% for the quarter. Same-store skilled revenue mix grew by 292 basis points on the year to over 53%, and 319 basis points quarter over quarter to 54.6%. And earnings were up 24% to $1.92 per diluted share on the year and up over 34% to $0.55 per diluted share for the quarter.

These financial results and the clinical and operational excellence that produced them are the work product of many, many dedicated leaders and caregivers across the Ensign organization who consistently and selflessly give their all to their residents, their communities and each other every day. We will continue to recruit, train and support the best local leaders in the business, and we are confident that they will continue to deliver industry-leading performance and returns, both financial and clinical, for our residents, our communities and our shareholders.

Suzanne will discuss the numbers in more detail in a moment. But first I would like to have Greg briefly discuss the growth that we experienced over the last year. Greg?

Thanks, Christopher. 2010 was a solid growth year for Ensign. We acquired five facilities and a home health business last year, and we have already added two very exciting continuing care campuses and an independent living facility in 2011 with more growth to follow.

Although the skilled nursing market has held up pretty well through the recession and never, in our view, saw the kind of dislocation or widespread distressed asset sales that have afflicted the broader real estate market, we have nevertheless been able to locate a fairly steady stream of compelling acquisition opportunities. If there has been a difference this past year in our growth patterns, it has largely been in the quality of assets we have been able to acquire. More than ever, the kinds of acquisitions we have made this past year have tended more towards the strategic as opposed to the opportunistic, which is what we usually do as market forces start to favor sellers. But we continue to see and seek both kinds of opportunities and expect to continue acquiring both strategically and opportunistically and always in a disciplined fashion going forward.

Among the year's acquisitions, we branched out into new business lines that are related to our core skilled nursing business in some important ways. For example, we continued to expand our subacute services, particularly ventilator and respiratory therapy operations, in key markets. We also acquired Horizon Home Health and Hospice, a four-office home health and hospice business in the greater Boise, Idaho market, which continues to grow and perform well ahead of projections. And we acquired in our most recent campus acquisition a small but well-regarded long-term inpatient acute psychiatric clinic. At present, these are small, low-cost, lower-risk operations, and we're using them to explore whether it makes sense to expand these business lines into the larger organization. With time, experience and success, each of these platform operations could eventually provide a solid springboard for new growth and diversification of our business offerings.

We have also added a number of strategically located and well-priced independent and assisted living units in key markets since January 2010. To date, all of these units have been on larger campuses with significant skilled nursing components or near other of our skilled nursing operations that might benefit from the synergies associated with providing a broad continuum of care. Occupancy in our health operations has grown and, although still accounts for less than 3% of our total run rate revenues, we are increasingly comfortable with this business line as it relates to our larger portfolio.

2010 also saw Ensign's various markets grow and stabilize to such a degree that we feel confident looking to new markets and additional new ventures as we carry the Ensign operating philosophy to a broader swath of the healthcare world. Ensign's growing portfolio to date stands at 85 facilities, 55 of which are Ensign owned, plus the growing home health and hospice businesses. We continue to see a robust acquisition pipeline in our target markets and beyond, and we believe we can remain selective in choosing both strategic and opportunistic objectives.

In addition, we are seeing more multi-facility portfolios lately, something we like when considering new markets, as it gives us a critical mass in those markets from the start. And, we have a deeper bullpen of talented leaders in the wings than we've had in a long time, giving us the operating confidence we need to grow. We also have significant cash on hand, and we still have an untapped $50 million credit line. And we still have 30 facilities that we own free and clear with over $200 million in leverageable equity in our portfolio. All of these resources can be used to drive additional growth, again, as compelling opportunities arise.

In doing so, we pledge to continue pursuing these and other opportunities in a very disciplined fashion and working hard to ensure that they have every opportunity to succeed once we've stepped into them.

And with that, I'll hand it back to Christopher.

Thanks, Greg. We are regularly asked how we can consistently deliver superior returns in an otherwise boring and heavily regimented industry. We always respond that it comes from our talented local leaders, who do it market by market, not from some corporate hierarchy. Many have begun to hear and believe us, but we still like to provide a few concrete examples each quarter of how our local leaders and their teams are making a difference in their communities and therefore making a huge difference for Ensign.

This quarter I would like to highlight a few of the more mature facilities from our same-store portfolio. These local leaders continue to achieve new heights year in and year out, even after others might have assumed that their facilities had peaked and could climb no further.

For example, at Cambridge Health and Rehabilitation Center in Richmond, Texas, not far from Houston, CEO Jorge Rojas and his director of nursing, Morris Woods, increased their occupancy from an already outstanding 92% to 95.6%, at the same time increasing skilled revenue mix by 19.2% to 55.1% of revenues. The facility continues to grow both its occupancy and acuity as their reputation for quality care and unexpected levels of customer service have captured their market.

At Village Health and Rehabilitation Center in McAllen, Texas, the second facility ever to fly the Ensign banner, CEO Mason Hunter and his director of nursing, COO Karen [Colma] have taken a highly competitive and arguably over-bedded market by storm, increasing occupancy by 793 basis points to over 85% last year and growing their EBITDAR by over 56% in one year. They have achieved these results by simply becoming the best skilled nursing facility in the market, focusing relentlessly on clinical quality, customer service and business fundamentals.

At Summerfield Healthcare Center in Santa Rosa, California, Matt Rutter and director of nursing, COO Claudia Alexander, have taken one of our oldest and most functionally challenged buildings and performed miracles. For a building like Summerfield in a competitive market like Santa Rosa, to run at a consistent 90%-plus occupancy is remarkable in and of itself.

But they didn't stop there. Matt and Claudia and their team built on these results last year by growing net income by 80.3%, increasing skilled mix by more than 600 basis points to over 55%, all while engaging the entire team to exercise greater fiscal responsibility and deliver higher-quality care at the same time.

Finally, a perennial top performer, Palm Terrace Health and Rehabilitation Center in Laguna Hills, California, CEO Dave Jorgensen and his director of nursing, Donna [Aviguetero], have significantly increased their admission rate of Medicare and HMO skilled patients this year. They have done it in part by using a unique pulmonary rehabilitation program developed locally by their nurse resource, [Myra Jensen], to enhance their reputation as a high-capability post-acute care provider in their community.

The objective was to reduce hospital readmissions for patients with pulmonary issues. The specialized treatment programs showed quick results, improving the patients' pulmonary condition, allowing them to spend additional time working on other physical therapy treatments and actually reducing their recurrence of symptoms that would lead to re-hospitalization while also reducing skilled nursing length of stay.

With these and other measures in place, Palm Terrace saw a marked increase in skilled referrals this year with overall skilled mix climbing by 391 basis points while EBITDAR grew by over 45% and net income increased by over 59%, all while occupancy continued in the 90% range.

While these are clearly uncommon leaders doing extraordinary things, these are neither isolated incidents nor uncommon stories for Ensign. They prove that, even more than our strong balance sheet and solid operating history, it is our talented local leaders who are the key to our continued success. By pushing to constantly provide outstanding clinical outcomes and mining the bottom line and all the other moving parts of these complex operations at the same time, these leaders and their teams strive daily to make their facility the facility of choice in the market they serve.

We continue to invest about $30 million a year in upgrading our physical plants. Renovations take beds out of service and tend to take a temporary toll on operations, but our local leaders work very hard to minimize the operational impact of renovation activities and to return value on every renovation dollar we invest. We'll also continue to remain vigilant and responsive as changes occur around us.

In the meantime, we remain financially sound with the lowest debt ratio and strongest balance sheet in the industry, a solid cash position and very manageable real estate costs. Even after a solid year of acquisitions whose EBITDARs will take some time to ramp up, Ensign's adjusted net debt to EBITDAR ratio was still only 1.76 times. Moreover, as of December 31, we had $72.1 million of cash on hand, positioning us to continue growing in 2011 as opportunities arise, and we have already made two strategic acquisitions in the first two months of this year. We remain committed to keeping our cash flow strong and our debt relatively low.

In conclusion, as we are seeing in many of our same-store facilities which are now well into the 80%-plus range in occupancy, in our facilities our incremental margin growth starts to climb sharply as we drive occupancy past the 80% mark. By way of example, our Flagstone subsidiary, which includes many of our longest held and best performing operations, finished the fourth quarter with 91% occupancy and a 21.8% EBITDAR margin, and they are still improving. We believe these results can be replicated and perhaps even exceeded across the organization as our occupancy continues to climb.

With that I will turn the time over to Suzanne to provide more detail on the Company's financial performance. Suzanne?

Thank you, Christopher, and good morning, everyone. 2010 and the fourth quarter both produced excellent operating results and record earnings. For the year ended December 2010 consolidated revenue was $649.5 million, up 19.8% compared to $542 million for the prior year. Same-store revenue was up 6.2% for the year. Same-store occupancy grew by 137 basis points to a record high of 83.1%. Our same-store skilled mix increased 292 basis points to 53.5%. This is a reflection of our continued pattern of constantly strengthening our clinical offerings and attracting higher-acuity patient population over time.

Consolidated EBITDA for the year grew 27.8% to $92.3 million. Overall, EBITDAR margins increased 40 basis points to 16.4%. Consolidated net income margins climbed 25 basis points to almost 6.25% for the year despite the downward pull of the recently acquired facilities, and net income grew to $40.5 million, which is $1.92 per diluted share compared to $1.55 in 2009.

Q4 was another record quarter as well, providing significant momentum coming into 2011. For the quarter ended December 2010, the Company reported net income of $11.7 million. Diluted earnings per share were $0.55 compared to $0.41 per share a year ago, and total revenue was $172.8 million, up almost 18%.

Part of the revenue increase was due to acquisitions made early in the year and other factors, but the real story was in our same-store improvement. The increase in overall Medicare rates aside, our same-store revenue grew 9.4% in the quarter and was mainly attributable to an increase in same-store skilled days at 82 basis points to 28.2%, growth in our same-store skilled mix by 319 basis points to 54.6% and an increase in same-store occupancy of 194 basis points to a record high of 83.7%.

Other key metrics for the quarter included EBITDA increased 28.6% to $25.7 million, consolidated EBITDAR margins improved by 92 basis points to nearly 17%, despite the addition of five new facilities and a home health and hospice business, some of which are underperforming of acquisition. And consolidated income margins climbed by 83 basis points to over 6.75%.

In reviewing the strength of our financial position for the year, cash and cash equivalents were $72.1 million. During 2010 the Company generated net cash from operations of $60.5 million, of which $40.5 million was attributable to earnings, $24.2 million was related to non-cash items including depreciation and amortization, provision for doubtful accounts and stock-based compensation. Net operating assets and liabilities used cash of $4.2 million, which was primarily attributable to the reduction in accounts payable and the growth in accounts receivable. As revenues grow, particularly in recently acquired facilities, we typically experience collection delays of up to six months or more as we await completion of the change-in-ownership process by state and federal reimbursement programs.

Net cash used in investment activities was $57.2 million, which was primarily related to business acquisitions and the purchase of PP&E. Net cash provided by financing activities was $29.9 million, which is primarily related to a $35 million loan with RBS, which was closed on December 31.

In addition, we own 30 of our facilities free and clear. Over time, we expect to leverage the unencumbered equity in our real estate portfolio to fund further expansion and as we continue to maintain our five-year, $50 million revolving credit with GE, which was untapped at the end of the year. We believe, with our current cash balance, strong cash flow, the equity in our existing real estate portfolio and the availability on our credit facility, we are well positioned to continue to execute on our disciplined growth strategy in 2011.

As we published in yesterday's press release, we are announcing guidance for 2011. Revenues are projected to range from $740 million to $756 million and adjusted diluted earnings per share of $2.15 to $2.25. The guidance is based on diluted weighted average common shares outstanding of 21.7 million, no additional acquisitions or dispositions beyond those already made, no material increase in the income tax rate and an aggregate 1% projected decline in overall Medicaid reimbursement rates including expected provider tax increases and taking into account the impact of a wide variation in facility-specific rates in states like California and patient-specific rates in states like Texas.

The latter point reflects the fact that, although states frequently discuss their budget plans in aggregate terms, the fact that states may adjust their overall payments to health care providers by a certain aggregate percentage does not mean that all providers will be equally affected in states where facility-specific or patient-specific rate structures prevail.

In giving these numbers, I would like to remind you again that our business can be lumpy from quarter to quarter and year to year. This is largely attributable to variations in government reimbursement systems, delays in state budgets, seasonality in skilled mix, the impact of the general economy on our census and other factors.

Performance is also impacted by fluctuating stock-based compensation expense, the cost of being a public company and other matters that have little to do with operations. In addition, during periods when opportunistic acquisition activities are accelerating, it is both common and expected to see some short-term pressures on earnings and margins until we can begin developing the long-term potential we believe is inherent in those operations. But as you can see from our results in our 2011 guidance, we continue to see ample opportunity for additional improvement across the entire portfolio.

I will now turn it back over to Christopher to wrap up. Christopher?

Thanks, Suzanne. Thanks to everyone who is on the call. We hope this discussion is helpful. As always, I want to conclude by thanking our outstanding clinical and operational leaders and their teams for another record quarter and another record year, but more importantly, for the love and care they give daily to our residents. I would also like to thank our dedicated service center team who work tirelessly in their stewardship, as we all do, to support the field and make Ensign go. We would also like to thank our shareholders again for your support and your confidence.

Tyrone, if you want to instruct us on the Q&A procedure?

(Operator instructions) Brian Williams, Avondale Partners.

Congratulations on the quarter. Your Medicare pricing was strong as a result of the new Medicare reimbursement system. Can you talk about the dynamics behind the pricing power of MDS 3.0 and the RUGS IV implementation?

Yes, Brian, this is Christopher; I can try to answer that. I think -- there were, obviously, a lot of costs associated with the implementation of MDS 3.0 and some things that we have to do now that we didn't have to do before that require more MDS labor and labor by some other folks that influence the MDS and report different things regarding the acuity of care for each of our residents on that MDS. And obviously, there were some changes that we've gone over before in therapy and such.

But, as you know, as I'm sure you've heard from others, there is some proper reimbursement on higher-acuity residents now related to clinical complexities. And we do -- we obviously saw -- I don't need to tell you this. We obviously saw an increase in our reimbursement. We did see an increase in our accompanying costs as well.

We really feel like most of the improvement -- and I'm sort of changing your question; I apologize -- but we did see most of our improvement from the growth in our overall census because, obviously, as you add another filled bed, the additional cost on that additional resident is very small. But we didn't feel like, in a lot of markets, we had to change our strategy with the implementation of RUGS IV, as we've said on previous calls.

But there are certain markets where we felt like the demand was there for a more clinically complex resident, and so some of those markets worked hard to develop the expertise and then build the trust with the surrounding hospitals and physicians. And they did change their strategy a little bit and became more of a -- their focus became more on clinically complex residents, now that the reimbursement is there.

And I'm going to follow up on the occupancy. Obviously, on the occupancy front your transitioning and recently acquired facilities are in the mid-70s, and your same-store facilities are in the 83% range. So how long do you expect the transitioning and recently acquired facilities to reach the low 80s? How long does that typically takes for a facility?

It obviously varies widely because we take some facilities that are in the 30% occupancy range and we take others that are already in the 80% range. And the majority we take are probably in the 60% and 70% range. But if you made me say what an average facility does, it probably takes the average Ensign acquisition about three or four years to get into the low 80% occupancy and probably five to seven years to get into upper 80%/low 90% occupancy.

Again, though, there are many exceptions to that average.

And then my last question -- Greg mentioned multi-facility acquisition opportunities. What's the typical size of these facilities that you are talking about here?

Is it the size of the portfolios or the size of the facilities?

No, the size of the portfolios, like how many facilities are in each portfolio?

Gosh, they are all over the map. We would regard a multi-facility portfolio as anything from like the four-building deal we did in Colorado in 2009, which was a great platform for us to enter that state, on up to full companies that have recently been for sale that go anywhere from the small regional operators with eight or 15 facilities, on up to larger portfolios.

And would you consider acquisitions of larger portfolios than, say, 15 facilities?

Well, I never say never, but we have looked at those in the past and not seen -- it really would depend on a whole variety of factors, including how they fit in with our existing operations, whether we've got the leadership to run them in those facilities or are ready to come to those facilities and a variety of other things. So we are anxiously looking at those kind of things. I think for four is the biggest we've ever done, but maybe that won't be the biggest we ever do.

Okay, thanks, I'll jump back in the queue.

James Bellessa, DA Davidson & Co.

Good morning. You had a very impressive quarter. At the end of October, when you last talked to the street about your guidance, you indicated that you would probably be at the upper end of the guidance range, which was -- the top end was $1.83. Yet you have come through with $1.92, so significant higher results than you had presented as a possibility with your guidance.

What surprised -- I'm believing it was a surprise, that you aren't sandbaggers. So what was it that surprised you in the two months of November-December that caused the results to be materially higher than anticipated?

Well, Jim, thanks for believing in us. We try not to sandbag. We saw such great movement in census in the third quarter, and we could see, because obviously we were starting into the fourth quarter, that that census trend had continued. But it kept moving so strongly towards the end of the fourth quarter, I think that it had to be the biggest surprise.

Now, don't get me wrong with that answer, that -- we are not surprised that our folks are doing that. It's just surprising how quickly it happened and how dramatically it happened, over a period -- from about the beginning of September really until the end of January, until the present day. So I'd say that was the singular event that altered our performance more than we had projected.

Besides your good management skills across your system, is there something in the economic backdrop that's causing this change in the census?

You know, I can't point to anything, just because I look at the data that's given to us by different experts in the industry and it doesn't show similar trends in the markets that we're in. So all I really can attribute it to is that one thing that you wanted to say besides, which is the tremendous improvement that our leaders have made with the reputations with the hospitals, physicians and the community that they are in. It probably sounds like too easy of an answer, but it must be the reason.

Greg was talking about the 30 facilities that were unencumbered, I believe it was, and then mentioned a $200 million figure. What was that $200 million figure that was cited?

Jim, that's a very rough estimate of our unleveraged equity in the existing portfolio. Obviously, that stuff goes on the books at what we acquired it for. But as we acquire so many turnaround opportunities and as we get those assets cleaned up, stabilized and reestablish value inside them, we have historically been able to take that value and leverage it at very conservative levels, by the way, to fund continuing operations -- not continuing operations, but future acquisitions.

If I'm understanding it right, you have these opportunities for acquisitions on your plate. Is it conceivable, then, that you're saying that you could take down $200 million [or so] of total acquisitions and do it without any external financing, other than just put mortgages on those 30 unencumbered facilities?

Theoretically, that is possible.

Although we have always stated that we are going to be very conservative with how much debt we actually take out.

Yes.

Thank you very much.

(Operator instructions) Kirk Streckfus, Stifel Nicolaus.

Good afternoon and congrats on the great quarter. Just looking at your guidance, can you give us a range of the EBITDA margin assumptions you have embedded in that?

We typically don't provide the EBITDAR range.

Okay. Would it be fair to say -- would you expect it to, I guess, continue at the levels you saw in Q4?

We would be disappointed if it didn't continue to improve, Kirk.

Okay, and I guess second question -- to what extent are you currently utilizing patients in the new 13 RUGS? And how do you see that trending through the remainder of the year? You made some comments about some facilities or seeing a lot of success there. And just some more color there would be helpful.

Kirk, I'm sorry to ask you to do this. Can you repeat the very first part of that question?

Yes. Just wondering to what extent are you currently utilizing those new 13 RUGs?

Yes, again, I'm sure everybody gets tired of this answer. We don't really focus on the RUGs, per se; we just don't. We don't have anything in -- any files in our Company that says, well, let's do something about these particular RUGs. We really take whatever the community that we are in needs and whatever needs are not being fulfilled, whatever disappointing things are happening in the eyes of the community, hospital, doctors, what have you -- we really focus on those things.

Now, granted, we check and make sure that there is sufficient reimbursement before we march down a path and develop a skill set and an expertise in a particular area. But we really don't have a program that focuses on 9, 13, 22 RUGS at all.

Right, okay. And obviously you see many acquisition opportunities since the beginning of fourth quarter. You made some comments about what you are seeing in terms of assisted living and independent living. Are you looking to shift the business mix longer-term maybe towards that higher-margin segment, or is it just a matter of what you're seeing in the market right now?

I'll answer it and then, Greg, you can follow up if I missed anything. It really is partially a function of what we're seeing in the market. We do focus on some of these other businesses as they enhance our core business in the markets that we're in. So we won't -- you won't see us very often; you may see us do it as a precursor in certain markets. But it would be very infrequent that you see us add some of these new businesses -- you mentioned assisted-living, independent -- by themselves. Generally, we do it to enhance the skilled nursing business we already have or will have in a particular market.

And how about your appetite for home health and hospice acquisitions? Are you seeing more opportunities there since the beginning of the year? I know the health industry saw a pretty significant cut, so I'm just wondering if you are seeing more potential targets.

We've seen lots and lots of targets in the home health and hospice arena. We are probably -- we are pretty excited about what we are seeing in our know home health and hospice business. But remember, we've just been in that one hospice business since October of 2009 and in this new home health business in Idaho since May of last year. And so we are still making sure we've got our feet under us, and we will watch those opportunities and use them to understand the market.

And if and when the time is right, we'll grow in that area.

And have you seen the valuations change for those potential targets since the beginning of the year? Are they coming down at all, or pretty stable?

I -- and Greg, again, you can correct me if I'm wrong. But from what I see, because we see a lot across our desk, Kirk, it seems to me that the home health prices are not -- excuse me -- that hospice prices are not changing much. If anything, they might even be increasing a little bit. And the home health seems to be declining.

Okay, and any comments on the recent Medicaid proposals, particularly out of California and Texas? Would you want to throw a probability out there of where maybe that (laughter) -- I had to try.

It's a great question. But since I'm wrong every single time on this, it's a hard thing to -- I'll just say the same thing that I've heard others say, people that have been around longer than I have. And it just seems like what comes out originally seems to always be worse than what comes out eventually.

Right, okay. And then one last question, and I'll jump off. Do you know what your current group therapy utilization is in terms of minutes, Company-wide?

It's under the 5% mark, at this point.

Okay, okay, great, all right, thank you very much and congrats again.

Mike Jolin, Heartland Advisors.

Congrats, guys, on a great quarter. I was wondering if I could get some clarity on guidance on occupancy trends, acquisitions implied in there. And then a second follow-up question to the last question was, the price on beds you're seeing relative to what you have paid on the first to acquisitions this year.

I'll take the first part and then, Greg, maybe you can take the second part. In terms of the occupancy relative to the guidance, we take that over the entire year versus breaking it down by quarter. But we would be disappointed if, between December 31 of 2010 and December 31 of 2011, if we didn't improve by at least 100 basis points in our same-store.

The consolidated we don't often make any -- we don't have projections on because we add facilities constantly, and those facilities can either add to or subtract from goals that we set. And we don't want to not do a deal because we are not going to hit certain targets we set for ourselves. So it's really around same-store that we set our goals.

Was there another question about occupancy you wanted me to answer? Or was it --

No, just the amount of acquisitions implied in the revenue.

The guidance assumes only the acquisitions made as of today, so the last two acquisitions are in there but no future acquisitions.

Great, okay, thanks.

Greg, do you want to answer the other question?

Sure. We haven't been publishing prices we pay for assets, but I would tell you that -- two things about those recent acquisitions, which I think are what you asked about, Mike. Both of them were campus facilities which include different -- both skilled nursing beds and assisted independent living units, which are very different kinds of things which price very differently. And obviously, we don't break that down. But I will tell you that the pricing on those was both well under the $50,000 per unit/bed, which is really a sweet spot for us.

For strategic acquisitions.

For strategic acquisitions. Thank you, Christopher.

Okay, thanks, guys.

I am showing no further questions or comments at this time. I'd like to turn the conference over to Christopher for any closing remarks.

Okay, well, thank you Tyrone. I just want to thank everybody for joining us today and, again, appreciate your time today.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.