Select Medical Holdings Corp (SEM) 2014 Q3 法說會逐字稿

Good morning and thank you for joining us today for Select Medical Holdings Corporation earnings conference call to discuss the third quarter 2014 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 highlights and then open the call for questions.

Before we get started, 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, including without limitation statements regarding operating results; growth opportunities; and other statements that refer to Select Medical plans, expectations, strategies, intentions, and beliefs. These forward-looking statements are based on 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, and good morning, everyone. Thanks for joining us for Select Medical's third-quarter earnings conference call for 2014. For our prepared remarks, I will provide some overall highlights for the Company and our operating divisions and then ask Marty Jackson to provide some additional financial details, and then we will open the call up for questions.

Net revenue for the third quarter was $758.1 million compared to $722.8 million in the same quarter last year. During the quarter we generated approximately 73% of our revenues from our specialty hospital segment, which includes both our long-term acute care and inpatient rehab hospitals; and 27% from our outpatient rehab segment, which includes both our outpatient rehab clinics and our contract services. Our results for both the third quarter of this year and last year reflect the impact of both sequestration and MPPR reductions that became effective on April 1, 2013.

Net revenue in our specialty hospitals for the third quarter increased 4.5% to $556.3 million compared to $532.6 million in the same quarter last year. In the third quarter we had a little over 332,000 patient days compared to 336,000 days in the same quarter last year. The majority of the decline in patient days was related to two hospitals that we had closed.

Notwithstanding these closures, admissions in our specialty hospitals were 13,787 in the third quarter, consistent with the 13,778 admissions we experienced in the same quarter last year. Our net revenue per patient day increased to $1,543 per day in the third quarter compared to $1,471 per day in the same quarter last year.

We experienced an increase in both our Medicare and non-Medicare net revenues per patient day. We generated approximately 82% of our specialty hospital revenue from our long-term acute care hospitals and 18% in our inpatient rehabilitation operations during the third quarter.

Net revenue in our outpatient rehab segment for the third quarter increased 6% to $201.7 million compared to $190.2 million in the same quarter last year. The increase was a result of growth in our patient visits, expansion of contracted management services in our clinic business, and revenue growth in our contract therapy business.

Net revenue in our outpatient clinic-based business increased to $154.3 million compared to $147.3 million in the same quarter last year. For our owned clinics, patient visits increased 3.6% to over 1.2 million visits compared to the same quarter last year. Our net revenue per visit was $103 in both the third quarter this year and last year.

Net revenue in our contract therapy business in the third quarter increased to $47.4 million compared to $42.9 million in the same quarter last year. The increase resulted from new contracts and expansion of services of existing contracts, which offset reductions from terminated contracts.

Overall adjusted EBITDA for the third quarter was $86.8 million compared to $80.4 million in the same quarter last year, with overall adjusted EBITDA margins and 11.5% for the third quarter compared to 11.1% margin for the same quarter last year. Specialty hospital adjusted EBITDA for the third quarter was $81 million compared to $75.3 million in the same quarter last year.

Adjusted EBITDA margins for the specialty hospital segment was 14.6% compared to 14.1% in the same quarter last year. I also wanted to note -- during the quarter we incurred $3.9 million of startup losses in our newly opened LTACs and incurred an incremental $1 million in losses related to a recently closed LTAC.

Outpatient rehab adjusted EBITDA for the third quarter was $23 million compared to $21.6 million in the same quarter last year. Adjusted EBITDA margins for the outpatient segment was 11.4% in both the third quarter this year and last year. For the outpatient clinic portion of our business, adjusted EBITDA was $20.9 million for the third quarter compared to $19.1 million in the same quarter last year.

Adjusted EBITDA margin for our outpatient clinics was 13.6% for the third quarter compared to 13% in the same quarter last year. For our contract services, adjusted EBITDA was $2.1 million for the third quarter compared to $2.5 million in the same quarter last year. The decline in contract services adjusted EBITDA was primarily related to an increase in bad debt expense, which is a result of customer bankruptcy.

Our reported earnings per fully diluted share was $0.20 in the third quarter of this year compared to $0.17 in the same quarter last year. I also want to provide a couple updates since our second-quarter earnings call in August. In conjunction with our earnings release yesterday afternoon, the Company announced that our Board of Directors declared a quarterly cash dividend of $0.10 per share at its meeting on October 29. The dividend is expected to be paid on or about December 1 to stockholders of record on November 19.

I would also like to provide an update on our rehab joint venture development activities. Renovations on our 138-bed rehabilitation hospital joint venture in Los Angeles with UCLA and Cedars-Sinai is progressing, and we expect opening in late 2015.

Our joint venture with Cleveland Clinic, which was signed in the second quarter, is progressing well, and we expect groundbreaking on a new 60-bed rehab hospital sometime in the fourth quarter. Our joint venture with Emory University closed July 1, and we have had great success integrating our outpatient and LTAC operation with Emory's LTAC inpatient and outpatient rehabilitation.

Our joint venture with PinnacleHealth Systems in Central Pennsylvania, which we signed in the third quarter of this year, should close during the fourth quarter after regulatory approvals. And we have begun integrating their 55-bed rehab hospital and eight outpatient locations with our 15 outpatient locations. Overall, we feel good about our progress and growth in this area as well as our pipeline.

Also, we previously mentioned our expectation to add 284 additional LTAC beds through expansion projects in new hospitals. We now expect this to be 250 new beds in total, which are in part offset by closures we mentioned. We still have one additional LTAC we plan to open this year and one in the second quarter of next year.

Finally, I would offer this update on government affairs. On October 10 CMS released final instructions on how the Agency plans to enforce the LTAC moratorium, which was contained in the December criteria legislation. The CMS regional offices and their intermediaries use these instructions to process exceptions to the LTAC moratorium.

The instructions generally restated what we already knew based upon earlier guidance and rulemaking. However, CMS is also using this final instruction to introduce one new interpretation of the law, which has the effect of expanding the LTAC moratorium in one respect: the new moratorium policy announced by CMS will require that new beds at new satellite facilities come from existing complement of LTAC beds.

That is -- this is a new interpretation, with CMS now saying that it will prohibit any increase in beds, even though a site might otherwise meet the criteria for a moratorium. As a result, an LTAC hospital that established a new satellite must reduce beds elsewhere in the LTAC hospital in order to have beds at the new location.

We disagree with this policy and believe it was not contemplated by the legislation. While we are questioning the policy with CMS, the implication is that some of our new LTAC projects that were planned to open as satellites may need to open as new, independent LTAC exceptions to the legislative moratorium and incur losses during their startup period. We estimate that additional losses would be approximately $3 million in the fourth quarter, with additional losses next year.

I will now turn it over to Marty Jackson to cover some additional financial highlights for the quarter before we open it up for questions.

Thanks, Bob. For the third quarter our operating expenses, which include our cost of services, general, and administrative expense and bad debt expense, increased 4.7% to $674.5 million compared to the same quarter last year. As a percentage of our net revenue, operating expenses for the third quarter declined 20 basis points to 89%. This compares to 89.2% in the same quarter last year.

Cost of services increased 4.4% to $644.4 million for the third quarter compared to the same quarter last year. The primary increase in our cost of services was the incremental startup costs associated with the new specialty hospitals, increases in contract management services provided to our joint ventures, and growth in services provided by our outpatient rehabilitation segment.

As a percentage of net revenue, cost of services decline 40 basis points to 85% in the third quarter compared to 85.4% in the same quarter last year. G&A expense was $19.7 million in the third quarter, which as a percent of net revenue was 2.6% compared to $17.7 million or 2.5% of net revenue for the same quarter last year. The growth in G&A results primarily from increases in stock compensation expenses.

Bad debt as a percent of net revenue was 1.4% for the third quarter. This compares to 1.3% for the same quarter last year.

Total adjusted EBITDA was $86.8 million, and adjusted EBITDA margin was 11.5% for the third quarter. This compares to adjusted EBITDA of $80.4 million and adjusted EBITDA margins of 11.1% in the same quarter last year. As Bob mentioned, our adjusted EBITDA in the quarter was adversely impacted by the $3.9 million in startup losses in our new hospitals and $1 million in expense at a recently closed hospital.

Depreciation and amortization expense was $17.6 million in the third quarter compared to $16.2 million in the same quarter last year. The increase in depreciation results primarily from new hospital development and expansion in our specialty hospital segment.

We generated $2 million in equity and earnings of unconsolidated subsidiaries during the third quarter. This compares to a loss of $200,000 in the same quarter last year. These increases are mainly the result of contributions from our joint venture partnerships with Baylor and OhioHealth.

Interest expense was $21.8 million in the third quarter. This compares to $21.3 million in the same quarter last year. The increase in interest expense was primarily related to an increase in average debt levels during the quarter compared to the same quarter last year.

The Company recorded income tax expense of $18 million in the third quarter. The effective tax rate for the quarter was 38.8%. This compares to the effective tax rate of 38.5% in the third quarter of last year.

Net income attributable to Select Medical Holdings was $26.5 million in the third quarter, and fully diluted earnings per share was $0.20 compared to $23.3 million of net income and fully diluted earnings per share of $0.17 in the same quarter last year.

We reduced our outstanding debt by $78.5 million in the quarter and ended the quarter with $1.54 billion of debt outstanding and $11 million of cash on the balance sheet. Our debt balances at the end of the quarter included $775.7 million in term loans, which include the original issue discount; $711.5 million of the 6 3/8% senior notes, which include issue premium; $40 million in revolving loans; with the balance of $7.8 million consisting of other miscellaneous debt.

Operating activities provided $98.1 million of cash along the third quarter. Days sales outstanding was 50 days as at September 30, 2014, compared to 53 days at June 30, 2014, and 48 days at December 31, 2013.

Investing activities used $14.6 million of cash flow for the third quarter. The use of cash was related to property improvements and equipment purchases of $22.9 million and investments in businesses and acquisition-related payments of $3.7 million. This was partially offset by $11.9 million in distributions from unconsolidated subsidiaries during the quarter.

We continue to see accelerated capital spending this year due to the LTAC development projects and rehab JV activities, which we expect to continue through the balance of this year and next year. Financing activities used $75.6 million of cash in the third quarter. The primary use of cash related to $70 million of net repayments on our revolving credit facility, $13.1 million in dividend payments, and $3.7 million in net repayment of other debt. This was offset in part by the $13.6 million in proceeds from bank overdrafts in the quarter.

I would also like to review the business outlook provided in our earnings press release. We have provided an expected range for the fourth quarter of 2014 which tightens the range for the full-year business outlook from our previous guidance.

Our expectations for the fourth quarter of 2014 include net operating revenue in the range of $765 million to $785 million, adjusted EBITDA in the range of $85 million to $90 million, and fully diluted income per share in the range of $0.19 to $0.22. Again, this business outlook represents a tightening of the range of our previous business outlook and includes $3 million in additional startup losses expected in the fourth quarter related to the new long-term acute care hospitals that we expected to open as satellites, that we now may be required to open as newly independent LTACs and must go through the LTAC qualification period.

This concludes our prepared remarks. And at this time, we would like to turn back to the operator to open up the call for questions.

(Operator Instructions) Frank Morgan with RBC Capital Markets.

Last quarter you had called out a couple of your larger LTAC's that had underperformed; you made some changes there. I think you also called out a retooling of the marketing at some of your locations ahead of patient criteria. Just wondering if you could share any details of how the underperformers have turned and how your retooling of the margin initiative is going?

Yes. No; I think that in the business, any particular quarter you can have a couple of hospitals -- particularly some that are your really strong performers -- that will have a bad quarter for a variety of reasons. And I did a -- I broke a precedent just to call about a few of those at the last call.

But I would tell you that we are pleased with the performance of the whole group. And I think, as I recall, those that we identified as underperformers last quarter have recovered and are performing basically consistent with expectations and consistent with their prior performance.

As far as the marketing, that is an ongoing -- that is a preparatory initiative for the new criteria, which we will begin to see in future years. And that's ongoing. So we continue to tweak that, experiment with some new procedures. And we are generally pretty pleased with it.

But it's a fine line, because we continue to operate under the current reimbursement in the current criteria as we prepare for the new criteria. So we want to do those things that put us in a good position when the new criteria phases in, but also continue to run our business as it should be under current rules.

One more and I will hop. I think you called out $3 million of losses -- a drag from some of the recent development activity. How far into 2015 should we expect to see that?

That drag will probably go through the second quarter of 2015, and that will be part of the -- when we provide you with guidance for 2015, that will be incorporated into that guidance.

Okay, thanks.

Chris Rigg, Susquehanna Financial Group.

I just wanted to follow up on the last questions on the startup cost. I just want to confirm the total amount of startup expenses in 2014. You had $3.9 million in Q2 and Q3 each, and then in the fourth quarter you get the additional $3 million. So where does the entire year shake out, approximately?

Chris, we anticipate that in Q4 we will have probably just a little bit more than $5 million of startup losses. The $3 million that we talked about was for Q4. In addition to that, we still had some of the original startup hospitals that we had in place, so that was an additional $2 million. That will take the full year to almost $13 million.

Okay. I know you're not giving guidance for 2015, but normally I would expect some of that $13 million to come off the subsequent year. But, obviously, you have got this new issue with the satellite facilities.

Can you give us at least directionally or even just an absolute number where you think the total startup costs would have been? I was currently modeling around $10 million-ish, but I think that might be a little bit light now for 2015.

It will be a little bit light. If you take a look at -- the way you should think about it, Chris, is there is about a nine-month period of time where there are startup losses -- you know, the six-month period of time that we have to go through demonstration; and then, in addition to that, there's a couple more months.

So there's really -- if you take a look at that $3 million loss associated with the satellites' turn to new hospitals, if you take a look at that $3 million and assume that $3 million is for three months, assume it's going to carry on for another six months of 2015.

Okay, great. And on the revenue per patient day, it looks like that was the strongest increase in about two-ish years. Is any of that, in your view, because of the marketing for the higher acuity patients because of the criteria, or is it for some other factor?

I think there was a host of factors, but I think you hit on one of the points. We did see an increase or a bump-up in the Case Mix Index on the Medicare side from 115 up to 117. So that's going to have an impact, a positive impact on your rate.

Okay, great, I'll leave it there. Thanks a lot.

A.J. Rice from UBS.

Just one more question, I guess, on this CMS ruling. Bob, as you said, you don't believe this was the intent. Is there any recourse? Is there any way to get it reconsidered, or is it really much a done deal at this point?

Well, it's a great question, A.J., and I don't know. We are making some increase at CMS. As you know, the moratorium was put into place with legislation in December of last year. And so for 10 months we have been kind of waiting for final guidance.

In that interim period we used the criteria that CMS used for pretty much the exact same moratorium in 2007 and 2010. And so this new wrinkle came as a bit of a surprise, and I don't think we could have anticipated it.

We don't really understand yet the thinking behind it, and we are trying to get that. So we have sent a letter. You know, it obviously can be changed, because it's just guidance to the intermediary; it's not necessarily -- it's somewhere in between kind of formal rulemaking and the legislation. It's kind of guidance from CMS to the intermediaries through licensure.

So I think recourse is too strong of a word. There's not an appeal process, but we are going to make some inquiries; and, I think, try to understand why it was changed from what they used in 2007 and 2010, particularly when you had a 10-month lag time. And providers had to rely on something, because you couldn't just do nothing for 10 months.

So as usual, it's just a little bit of frustration. So we're going to obviously see if we can get some feedback and actually ask for a change. Whether -- if you asked me to handicap that, I don't know that I really could at this point.

Okay. I guess it begs the question: as you think about the implication of the LTAC patient criteria rules or change -- are there other significant open-ended issues that -- I wasn't perceiving that there was a lot of those, but are there other open-ended issues that CMS has to give guidance on from your perspective as we move toward that implementation?

It's another good question. I think that the legislation is pretty straightforward, and the regs around it should be pretty straightforward as well. Obviously, this tweak on the moratorium gave me a little bit of pause about what could be in the future about as regs come out.

That's a thing that providers always worry about, because the bureaucracy sometimes has their own views relative to what comes through legislation. So the short answer to your question is: I don't think so. The criteria is pretty straightforward.

It talks about -- as you know, it talks about pulmonary and ICU. There's obviously some implementation things that have to be -- there has to be some guidance on.

But I certainly -- I hope that there is not. But we will be preparing and trying to have dialogue as we lead into the phase-in of the new criteria to make sure that there are not any surprises. But I will add that the legislation was very detailed. So anything that's specifically in the legislation cannot be changed through the regulatory or rulemaking process.

But is there some areas, some gray areas? Perhaps. We will be working on that and trying to stay close with CMS.

Okay. Another solid showing on the outpatient area in volumes. Is that the new normal? Do you feel like the market is settling out with that mid-single digit volume number there? I guess -- my sense is that's a little bit of a pickup from what we were seeing the last few years. Any thoughts or comments on that?

The operators on the outpatient side continue to do a great job on increasing volume. You are right. I mean, 3.6% increase on a year-over-year basis is terrific. As you model that out into the future, I would not sit there at 3.6%. I would probably bring it back down into that maybe 2%, 2.5% range.

Okay. And it may be my last question, just on the stock repurchase -- I know you guys stepped back this quarter. Is that signaling other opportunities somewhere else for your cash? Or do you expect to be back in the market in subsequent quarters?

We expect to be opportunistic about it. We have a lot of dollars that we are spending on both LTAC projects as well as the rehab JVs. But given the price at these levels, you can expect us to be back in the market.

I think the other -- A.J., the other thing that I would just mention -- I think you are starting to see this come through, and I tried to highlight it in my prepared remarks. For the first time in a couple of years, because of the certainty that we got on the LTAC criteria last December, even though there's some time before the phase-in and still a little bit of uncertainty in terms of how we will perform, I think, for investors, we have certainty on what the criteria is.

So it has really allowed us to get back into a little bit of growth mode. And you see that in our discussions about startup losses. We've had an acceleration about our rehab joint venture; that's going to require some capital.

And my first bias is to put capital toward growth, but we will also continue to be opportunistic. We have the dividend out there, which it appears as though the Board continues to be committed to. So we want to be judicious about our free cash flow. So I would say we would first go to development; acquisitions, certainly there; and the dividend and stock buybacks.

Okay, great, thanks a lot.

Gary Lieberman from Wells Fargo.

This is Ryan Halsted on for Gary. Just a quick clarification, I guess -- on the moratorium exception, I just want to be clear. Does that apply to the bed adds that you were planning?

It only would apply to the bed adds if they were being added as a satellite to an existing LTAC operation. It does not affect the new starts. So I think that the number of beds that were in our prepared remarks of the addition -- I think it's 250 beds -- I think that you can count on that. We feel confident that that we will get those opened.

Okay, great. And then moving to the criteria, I guess I just wanted to be clear. Are you seeing any payors, government or nongovernment, that are already using the criteria?

No.

Okay. And then have you guys thought about quantifying what the impact would be in terms of what percentage of your patients, maybe, meet the prerequisite stay?

No, we have not. The move to the new criteria is still significantly far enough out there, and we still have a lot of runway to get prepared for it. So we haven't given out any information, and you shouldn't expect any over -- even through most of next year, to give any more detail until some of our hospital -- and hospitals phase in gradually, because it's based on cost report years.

So we will have certain -- when that criteria becomes the law, we will have certain hospitals that phase in over the course of a year. So you will begin to be able to see the effects of that.

Okay. Then moving to your acquisitions, clearly the JV pace had accelerated pretty significantly after what was, I guess, a relatively slow pace. Should we expect that deal -- those JVs -- to kind of flow in that pace were maybe it might be a little while before you might see a whole slew of announcements?

It's hard to predict. Obviously, our preference would be to have this even announcement that we could smooth across the quarters and the years. When you are negotiating with systems of the type that we are, sometimes the time frame is really unpredictable. And so what I have said in the past is that when you look at the kind of systems that we try to joint venture with, you can appreciate that there is a fair amount of negotiation and time.

If you look at the Cleveland Clinics, and UCLAs, and Cedars, and Emorys, these are some of the most premier hospitals and systems in the country. And those are the types of partners that we want to have.

So it is very difficult to predict. I can tell you that we continue to be in negotiations now with systems and providers that I think are every bit the profile of the ones that we've announced so far. As we get them signed, we will announce them. But I have long since stopped giving predictions about when they will be announced because the timing can be a little unpredictable. But having said that, we feel good about the pipeline.

Okay, great. Maybe one last one -- just to revisit the question of maybe acquiring complementary post-acute services, do you think the reimbursement outlook has changed that might make you move maybe more aggressively if you decided to do so?

Well, if your question is, are we actively looking to expand our product offering way from LTAC and rehab into some other post-acute silos, that's probably not in our near future. We feel that we've got a really good model with the inpatient and outpatient rehab. And we think there's a great opportunity for us to emerge as one of the strongest -- the strongest LTAC provider as we move into the new criteria.

There's a great opportunity there in our LTAC and inpatient-outpatient rehab. So we feel pretty good about where we are. So I don't think that you should expect that we will be real active in trying to expand into other post-acute product offerings.

Okay, great. Thank you very much.

Kevin Fischbeck, Bank of America Merrill Lynch.

I just wanted to understand the startup losses from the CMS criteria. Is this more just a function of not having a provider number, so you can't bill for a while? Or is there additional costs that have to go with being a separate facility versus being a satellite?

Yes, Kevin. As a satellite, you immediately are able to bill LTAC rates. And as a startup, you basically have to go through the demonstration period. During that demonstration period, you are an acute care hospital.

And it's not until you go through that demonstration period, showing that your patients have a length of stay in excess of 25 days, that you then are designated as an LTAC and can receive LTAC reimbursement. So it's really a function of that.

Okay. So is there any benefit? I guess, obviously, upfront it sounds like it's going to be a cost issue, more startup losses by having a facility. But is there any long-term benefit from it being a facility versus being a satellite? Would you operate it differently? Is there any silver lining down the road?

The only benefit you have is that under CMS's current interpretation of the satellite, you can't increase the number of beds. So in essence, we've moved from satellite to a new hospital. Therefore, we can increase the number of beds.

I think the other -- the short answer to your question is no. There's no easily apparent benefit to having to go through the losses.

Okay. So you do expect the same ultimate profitability of this, of these facilities?

Oh, yes.

Yes.

Ultimately, as the hospital gets through, and is licensed, and is operating, the profile of the hospital will look the same.

Okay. And then you also mentioned -- I forget what the exact number was -- $1.6 million to $1.9 million related to a closed facility. Where was that in the P&L?

Yes, that was a $1 million startup loss -- or, I'm sorry, not startup loss; it was $1 million closure costs that we had.

Okay. Is that in, like, G&A or anything? Or is that in like a separate line?

No, no, that would be in the operations.

The operations? Okay.

Yes.

And you guys closed a couple of hospitals this year. Is there any more thoughts of any other hospitals that may be closed?

Well, as we get closer to the criteria -- I think if you look into, probably, 2016, as we position all the hospitals under the new criteria, I think that it's very possible that we may have some other hospitals that we just don't think, for a variety of reasons, will meet the profile of the new criteria and may close.

So, yes, we're constantly looking at that. It's not going to be a large number, because fortunately we have high-acuity patients that -- many of which already qualify under the new criteria. But yes, we could see a couple hospitals, depending on the market, which may not be sustainable.

Okay. And I guess trying to think about how you feel the conversation has gone with you and CMS with -- it sounds like in the past, CMS has had some questions about the roll-it-out factor and things like that. I wasn't sure if this change in the satellite criteria really is emblematic of that still framework or mindset in the eyes of CMS, that they still want to control LTAC utilization; or whether you feel like the dialogue has gotten better in recent years?

Well, I think the dialogue has gotten better recently. I think the criteria in December of 2013 was -- you know, and I said at the time -- it was a watershed moment for the LTACs. The LTACs have been the subject of a lot of debate back-and-forth between CMS, MedPAC, the industry.

I think that there was always some consensus that there was a role for LTACs, albeit more narrow than the position that they had, at least according to some. So I don't think that anybody would argue that the criteria that was put in place is a narrow, stringent criteria. And the feedback that we have gotten from senior people at CMS is they are pleased with it. They think it's going to be a good thing for the industry. And I think the dialogue back-and-forth since then has been constructive and healthy. So I actually feel pretty good about it.

Okay, and maybe just a last question -- you took down the number of new beds to 250 versus 284. Have you removed one hospital there? Or is it just fewer beds per hospital?

Yes, we have removed one hospital. And that was the closure that we were talking about, Kevin.

Oh, okay. So the closure was a facility that you were going to start up and then decided not to do? Okay. So that was eight hospitals with 250 beds, is the way to think about it?

Yes.

Okay. All right. Great, thanks.

At this time we have no further questions. I would like to turn the call back over to management for your final remarks.

Thanks, everybody, for joining us. I appreciate the questions. And we will look forward to updating you next quarter.

Ladies and gentlemen, this concludes your presentation. You may now disconnect and enjoy your day.