Select Medical Holdings Corp (SEM) 2018 Q1 法說會逐字稿

Good morning, and thank you for joining us today for Select Medical Holdings Corporation's earnings conference call to discuss the first quarter 2018 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 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 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.

Good morning, everyone. Thank you for joining us for Select Medical's First Quarter Earnings Conference Call for 2018.

Before I outline our operational metrics, I want to provide you with some summary comments and some updates since we presented to you last quarter.

Our inpatient rehab and Concentra business segments both had a great quarter, with strong double-digit revenue and adjusted EBITDA growth on a same quarter year-over-year basis. Our inpatient rehab segment experienced significant growth in terms of both revenue and adjusted EBITDA as our joint venture development projects opened in late 2016 and throughout 2017 continue to mature.

On a same quarter year-over-year basis, revenue grew 20.7% and adjusted EBITDA increased 64%, which was driven by growth in both volume and rate in this segment. We continued to build our JV pipeline, with expected 2 to 3 new projects per year. We opened our new Ochsner rehabilitation joint venture early this week and believe our Dignity Las Vegas joint venture will open the fourth quarter of this year. We expect double-digit growth in both revenue and EBITDA for the foreseeable future in this business segment.

Our Concentra segment had same quarter year-over-year revenue growth of 42.1% and adjusted EBITDA growth of 35.7%, driven primarily by the acquisition of U.S. HealthWorks on February 1, which added 219 centers and 21 on-site clinics.

Beginning February 1, U.S. HealthWorks results are included in our Concentra segment and consolidated in Select's financials. U.S. HealthWorks added $90 million of net revenue and approximately $9 million of EBITDA.

Concentra, on a standalone basis without U.S. HealthWorks, realized a 6% growth in revenue, 14% growth in adjusted EBITDA and an adjusted EBITDA margin of 18.3%.

Our LTAC segment also had a good quarter on a year-over-year same quarter basis, with revenue growth of 4.4%, occupancy rate growing from 68% to 71%, admission growth of 5.6%, and compliant population at 99.8%. We realized substantial growth in patient volume in mid-January through the balance of the quarter, which required increasing our clinical staffing with traveling nurses, agency nursing and overtime. This increase in costly staffing had a negative impact on our EBITDA margins in January. As we fine-tuned our clinical staff throughout the balance of the quarter, we saw margins grow nicely from 12% in January to almost 19% in March. We believe this bodes well for LTAC business as we normalize occupancy rates back to historical levels.

Finally, our outpatient rehab segment experienced a modest revenue growth, driven by improved pricing in the quarter, which (inaudible) a challenging quarter weather-wise in several outpatient markets, but we were able to overcome much of that challenge with strong performance in our legacy clinics. We estimate the weather impact to us was approximately $1.8 million for the quarter. We continue to make progress in our physio-clinics and have seen nice traction in a number of their markets, but we still believe it will take another 6 to 9 months to reach our expected financial objectives.

Let me take you through some additional operational highlights for the first quarter.

Overall, our net revenue for the first quarter increased by $161 million to $1.25 billion for a 14.8% year-over-year growth rate, with top line growth in each of our 4 business segments.

Net revenue in our LTAC segment in the first quarter increased to $465 million compared to $445 million in the same quarter last year. Patient days increased 4.2% to 266,000 days compared to 255,000 days in the same quarter last year. Net revenue per patient day remained stable at $1,730 per day in the first quarter compared to $1,731 in the same quarter last year.

As I mentioned, net revenue in inpatient rehab segment in the first quarter increased 20.7% to $175 million compared to $145 million in the same quarter last year.

Patient days increased 23.5% to 77,000 patient days compared to 62,000 days in the same quarter last year. And net revenue per patient day increased 7% to $1,623 in the first quarter compared to $1,517 per day in the same quarter last year.

Net revenue in our outpatient rehab segment in the first quarter increased 2.8% to $257.4 million compared to $250.4 million in the same quarter last year. Our net revenue per visit was $103 in the first quarter compared to $99 per visit the same quarter last year.

Patient visits decreased slightly to 2.07 million visits in the first quarter compared to 2.08 million visits in the same quarter last year. Decline in visits is primarily related to severe weather conditions that impacted our clinics within certain regions of the country during the quarter.

Net revenue in our Concentra segment for the first quarter increased 42.1% to $356 million compared to $251 million in the same quarter last year. For the first quarter, revenue from our centers was $322 million, and the balance of approximately $34 million was generated from on-site clinics, community-based outpatient clinics and other services.

For the centers, patient visits were 2.6 million, and net revenue per visit was $124 in the first quarter compared to almost 1.9 million visits and $116 per visit in the same quarter last year.

Increases in net revenue and visits were primarily related to the acquisition of U.S. HealthWorks. Increases in rate related to both higher reimbursement rates at U.S. HealthWorks centers and improved workers' compensation rates at the existing Concentra centers.

Total adjusted EBITDA for the first quarter grew 17.5% to $163.2 million compared to $138.9 million in the same quarter last year, with consolidated adjusted EBITDA margin at 13% for the first quarter compared to 12.7% for the same quarter last year.

Our LTAC segment adjusted EBITDA increased slightly to $73 million in the first quarter compared to $72.3 million in the same quarter last year. Adjusted EBITDA margin for the LTAC segment was 15.7% in the first quarter compared to 16.3% in the same quarter last year.

During the first quarter last year, we had adjusted EBITDA gains in some of our since closed hospitals. Excluding those gains, adjusted EBITDA margins would have been 15.4% in the first quarter last year.

Inpatient rehab adjusted EBITDA increased 64% in the first quarter to $26.8 million compared to $16.3 million in the same quarter last year. Adjusted EBITDA margin for the inpatient rehab segment was 15.3% in the first quarter compared to 11.3% in the same quarter last year.

The increase in adjusted EBITDA and margin were primarily the result of improved performance in the new hospitals we opened in 2016 and 2017.

Adjusted EBITDA results for the inpatient rehab segment includes startup losses of approximately $800,000 for the first quarter compared to approximately $2 million in startup losses in the same quarter last year.

Outpatient rehab adjusted EBITDA for the first quarter was $30.5 million compared to $31.4 million in the same quarter last year. Adjusted EBITDA margin for the outpatient segment was 11.9% in the first quarter compared to 12.5% in the same quarter last year. As I mentioned, several of our clinic markets were impacted by severe weather in the quarter, which is the primary reason for the decline in adjusted EBITDA and margin as compared to last year.

Concentra adjusted EBITDA was $57.8 million for the first quarter compared to $42.6 million in the same quarter last year. Adjusted EBITDA margin was 16.2% in the first quarter compared to 17% in the same quarter last year. The decline in adjusted EBITDA margin is primarily attributed to the acquisition of U.S. HealthWorks, as their centers operate at lower margins than our existing Concentra centers, as well as incurred costs associated with integration activities.

Earnings per fully diluted share was $0.25 in the first quarter compared to $0.12 in the same quarter last year. Adjusted earnings per fully diluted share was $0.29 per diluted share for the first quarter compared to $0.21 per diluted share for the same quarter last year.

Adjusted earnings per fully diluted share excludes the loss on early retirement of debt in both the first quarters of this year and last year and the related tax effects. Adjusted earnings per share also excludes costs associated with the acquisition of U.S. HealthWorks and its related tax effect in the first quarter of this year.

Before I conclude, I wanted to provide a couple of quick comments on the regulatory and development front.

On April 24, the proposed LTAC rules were posted, and on April 27, the proposed rehab rules were posted by CMS. While we typically don't comment publicly on proposed rules, we were pleased to see the proposed elimination of the 25 Percent Rule for the LTACs. The 25 Percent Rule has been an overhang to the industry since 2004, and its elimination should help provide stability to the industry, and we expect it with the implementation of patient criteria.

On the development front, yesterday, we announced the expansion of services in our Baylor joint venture with the planned purchase of a rehab hospital in the Austin, Texas area, which is expected to close in July.

I'll now turn it over to Marty Jackson for some additional financial details, before opening the call up for questions.

Thank you, Bob. Good morning, everyone.

For the first quarter, our operating expenses, which include our cost of services and general and administrative expense, were $1.1 billion. This compares to $957 million in the same quarter last year.

Beginning in 2018, the majority of the expense we historically categorized as bad net is now included as a component of net revenue and reflected as a reduction of revenue on the income statement.

As a percentage of our net revenue, operating expenses for the first quarter were 87.6% compared to 87.8% in the same quarter last year.

Cost of services were $1.07 billion for the first quarter compared to $929 million in the same quarter last year. As a percent of net revenue, cost of services were 85.1% for the first quarter. This compares to 85.2% in the same quarter last year.

G&A expense was $31.8 million in the first quarter compared to $28.1 million in the same quarter last year. G&A as a percent of net revenue was 2.5% in the first quarter compared to 2.6% of net revenue for the same quarter last year.

During the first quarter of this year, we incurred $2.9 million of U.S. HealthWorks acquisition costs that are included in the G&A expense. Excluding these costs, G&A as a percent of revenue was 2.3% in the first quarter of this year.

As Bob mentioned, total adjusted EBITDA was $163.2 million and the adjusted EBITDA margin was 13% for the first quarter. This compares to adjusted EBITDA of $138.9 million and adjusted EBITDA margin of 12.7% in the same quarter last year.

Depreciation and amortization was $46.8 million in the first quarter. This compares to $42.5 million in the same quarter last year.

We generated $4.7 million in equity and earnings of unconsolidated subsidiaries during the first quarter compared to $5.5 million in the same quarter last year.

In conjunction with the acquisition of U.S. HealthWorks on February 1, Concentra entered into an incremental $555 million first lien term loan and a new $240 million second lien term loan.

Concentra's revolving facility increased from $50 million to $75 million, which was undrawn at closing. In addition, the $619 million original first lien term loan at Concentra was repriced, which reduced borrowing spreads by 25 basis points.

On March 23, we completed repricing of Select senior secured credit facilities, which reduced our borrowing spreads on our $1.1 billion term loan by 75 basis points and our outstanding revolving loan by 50 basis points.

As a result of these financing activities, we recorded a $10.3 million in loss on early retirement of debt during the first quarter of this year, $2.3 million of which was related to the repricing of Select's credit facility and $8 million was related to the Concentra repricing in the first lien term loan.

During the first quarter of 2017, we recorded a loss on early retirement of debt of $19.7 million.

Interest expense was $47.2 million in the first quarter. This compares to $40.9 million in the first quarter last year. The increase in interest expense is primarily related to the financing of the U.S. HealthWorks transaction.

The company recorded income tax expense of $12.3 million for the first quarter. This compares to an income tax expense of $13.2 million in the same quarter last year. This represents an effective tax rate of 21.8% and 36%, respectively. The lower effective tax rate this year is the result of the federal tax reform legislation that was enacted in December last year and certain tax benefits from the equity transactions at Concentra.

Net income attributable to Select Medical Holdings was $33.7 million for the first quarter, and fully diluted earnings per share were $0.25. Adjusted EPS, excluding the effects of the losses on early retirement of debt and the U.S. HealthWorks acquisition costs and the related tax effects was $0.29.

At the end of the quarter, we had $3.5 billion of debt outstanding and $119.7 million of cash on the balance sheet. Our debt balance at the end of the quarter included $1.14 billion in Select term loans, $245 million in Select revolving loans, $710 million in the Select 6 3/8 senior notes, $1.17 billion in Concentra first lien term loans, $240 million in Concentra second lien term loans and $56 million in unamortized discounts, premiums and debt issuance costs that reduced the overall balance sheet debt liability. We also had $49 million consisting of other miscellaneous borrowings and notes payable.

Operating activities provided $50.7 million of cash flow in the first quarter, which compares to $55.9 million use of cash in the same quarter last year.

Our days sales outstanding, or DSO, was 56 days at March 31, 2018, compared to 58 days at December 31, 2017.

Investing activities used $556 million of cash in the first quarter. The use of cash was primarily related to the $517.1 million in acquisitions and investments and $39.6 million in purchases of property and equipment during the quarter.

Financing activities provided $502.4 million of cash in the first quarter. The provision of cash primarily relates to the financing activity for the U.S. HealthWorks acquisition. In addition, we had net borrowings of $15 million on Select's revolving loans and $5.7 million net borrowings of other debt, which was offset in part by principal payments on our term loans of $2.9 million and $7.9 million decrease in overdrafts.

Additionally, in our earnings press release, we reaffirmed our business outlook for the calendar year 2018 provided earlier this year for both net operating revenue and adjusted EBITDA.

We expect net revenue to be in the range of $5 billion to $5.2 billion. Adjusted EBITDA is expected to be in the range of $630 million to $660 million.

We now expect fully diluted earnings per share to be in the range of $0.93 to $1.08, which includes a loss on retirement of debt and U.S. HealthWorks acquisition costs.

We expect adjusted earnings per share to be in the range of $0.97 to $1.12 in 2018, which excludes the loss on early retirement of debt and U.S. HealthWorks acquisition costs and the related tax effects.

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

(Operator Instructions) And our first question comes from Frank Morgan from RBC Capital Markets.

I was very interested in that occupancy progression across the first quarter in the LTAC business and the margin improvement. So I'm just curious. What caused -- was it a change in the -- switching staff over from the contract or temporary staffing to get less costly permanent labor in there to help those margins improve so much? Or was it just purely volume overcame the cost of the contract labor? And just curious, is that a good sustainable number? If you can hold that level of occupancy, is a 19% margin the number we should be looking for?

Yes. Frank, there really was quite a jump up, I mean, in our average daily census from December to January, and then it continued in February and March. And I guess the point that we were trying to make is that, we went from about -- a little bit north of 2,700 ADC to -- a little bit north of 2,700 all the way up to about 3,000. So we needed to add additional clinicians at that point in time. And in order to do that rapidly, as we said, we had to include a bunch of agency nurses as well as overtime for our people and then also some traveling nurses. The premium associated with hiring those people is pretty significant. And as we went through February and March, we were able to make some adjustments for that. And as we made those adjustments, we saw the margins improve. And so to the extent that we were able to maintain a 71% occupancy rate over a longer period of time, we think that the higher margins are achievable.

Got you. And in the adjustments you made, were those just either being more optimizing the use of contract, or was it -- did you hire people in place of the temps?

We did hire some additional people. The other thing is you had a number of signing bonuses that took place early on in the quarter, and then those nurses were with you. So that's one of the other additional expenses. It's really front-end loaded.

Okay. That makes sense. Now I guess the other big question is, why did the occupancy? I mean, we're certainly glad to see that, but can you point to any one thing? Was it -- is there any change you've seen in the competitive landscape? Are you seeing competitors drop out of the market? Or is it just kind of the -- you're just gaining traction with this education of on-patient criteria and getting the appropriate patients? And then with flu in any way -- I mean, what's the correlation between compliant cases and the effect of flu?

Well, Frank, this is Bob. And there is no question in the quarter in those couple of months when we really saw that spike in occupancy that I think -- we think that there's a pretty strong correlation with the flu, with a lot of older people. It's a big pulmonary event, so you're going to see more of (inaudible) patients, and I think we can point directly to that. So that is, without question, a part of that surge in occupancy that we saw, and I think we saw it across the whole health care spectrum.

And I guess the -- maybe that 71% occupancy doesn't hold in the near term. Maybe it does. Maybe it doesn't. But is it fair to say that, that 19% margin, that's whenever you -- if you stay at this occupancy at 71% or if you get back to this occupancy, is it fair to say that 19% is a good representation of what you should be able to do financially at that margin level or at that occupancy level?

Frank, I think 17% to 18% is probably a good number for us and at a 71% occupancy rate, without fluctuation. I think we've also talked in the past about the fact that our expectation is we will be able to get back on an annual basis to historical levels, which is that 71%. And it really is just an educational process that we're going through as we continue to explain to our referral sources about the new criteria for reimbursement.

Yes. And I think Marty is right. We certainly think that there is some upside, and we want to continue to drive to that, but we really don't want to get ahead of ourselves on that. So we do think that there is good opportunity for us in the future to get our occupancies back on an annual basis, but in those low 70s. And with that and depending on the labor market, we expect to have -- to see the rewards of that.

Got you. And then just hopping over to the IRF side of the business. Clearly, that part of your business seems to be really picking up speed as these projects mature. But how far away do you think we are on some of your earlier projects? Like how close are we to optimal margin on those particular projects? And what would that number be? Would that also be a sort of a high teens kind of number?

Yes, it would be a high teens number. And remember, Frank, as we continue to grow, as we bring on incremental joint venture deals, it becomes a smaller component of our overall base. So you'll see the margins continue to grow on the rehab side. And again, as development becomes a smaller and smaller component over time, that has less of an impact on the overall margin.

Yes, even as you've seen big gains with these numbers, that is not to suggest that the hospitals that are driving those gains are fully mature. They are just hospitals that have come out of the startup period and are now contributing pretty dramatically, but they're still not fully mature operations. So we think (inaudible)

Got you. One more, maybe a Bob question, and then I'll hop back in the queue. But I'm just curious, you've been very successful with your JV development strategy. You continue to add new wins right and left. I'm just curious if you could give us kind of why do you think -- what's the biggest driver for Select in terms of being able to distinguish itself to really going out, winning that business and being as successful as you've been?

Well, it's really been the history of doing that, going all the way back to 2011 and before. We plotted a strategy, where we wanted to partner with the very large systems, the multibillion-dollar systems, the Baylor, which is one of our older ones, and then on to Cleveland Clinic. As we've gotten marquee system partners and we've been very successful with them and gained their trust, I think that, that perpetuates the ability to do that with more systems. And we see that in our pipeline. And I think that oftentimes everybody thought that we've kind of captured that business with great systems, along comes another one, whether our recently announced Banner Health System, which is just a fabulous system, or our deal with UCLA at Cedars or with Ochsner. These are all in the health care world, these are undisputed leaders in what they do, and we feel that partnering with them positions us very nicely. So I think it's difficult then for others to follow along exactly. So we're really excited about that. We're excited about our pipeline and some of the things that we're doing. And our ability with some of these big systems to then spread to do research and training, we think is really exciting for our company, so we're really pleased with where we are.

And our next question comes from Peter Costa from Wells Fargo Securities.

I think Frank covered the LTAC business pretty well. But I'd like to talk about the Concentra business for a moment. If U.S. HealthWorks came on, it looks like about 14% adjusted EBITDA margin. How long do you think it will take you to get that up towards the sort of the 17% that you were at last year for the rest of Concentra? And can it go higher overall? Or is it the same type of business and stay -- does it stay lower? Where does it end up?

It's a great question, Peter. Let me point it out, though, the margin for U.S. HealthWorks, the approximate margin for U.S. HealthWorks is about -- in the first quarter is about 10%, okay? And so that margin -- and that has some severance costs. I think it's about $2.3 million worth of severance expense in that. So if you add that back, you were in that 11-plus-percent range. The ability to get that up to 16%, 17%, we think, over the next year or so is very achievable.

And do you think it takes a year or do you think -- how long do you think that takes?

Yes, we do. We think it will probably take a year to 18 months because a lot of that has to do with some of the synergies that we're attempting to get. So again, we're going to do that over -- we're going to use our very systematic approach that we go through and do it on a timely basis, but we think it will take probably 18 months to fully achieve those margins.

And then did you pick up any receivables with U.S. HealthWorks? Or how did that come on board in terms of the receivables line?

Sure, sure. It was a stock deal, so yes, we certainly picked up the receivables.

How much?

Probably somewhere in the -- I don't have the specifics right in front of me, but I believe it's right around $80 million.

Our next question comes from Bill Sutherland from Benchmark.

Bob, I wonder if you could go through the pipeline of development schedule here for your future IRF JVs.

Yes. We only disclose any of our partnerships after they're signed, so we don't give any information. I think the most that we give is some kind of guidance on how many new deals we expect to do per year. I think we've said 2 to 3. We've had good success in achieving that over a multiyear basis. So we don't give any more detail other than that.

I was sort of thinking about the ones that you have signed and that you're -- you've broken -- in some cases, broken ground.

Oh, yes. We do -- any of those that are now -- so the recently announced ones were the Banner -- well, Ochsner, which just opened, Dignity in Las Vegas, which is under construction, and Banner Health System in Arizona, where we expect to do 2 rehab hospitals pretty much simultaneously with them and some other post-acute care services. And then also, in the narrative today, there was the announcement of the expansion of the Baylor joint venture with the signed acquisition of a rehab hospital in the Austin area, specifically in Lake Travis.

So you've got -- this time next quarter, you'll have the Ochsner added to the total, plus the Baylor? And then Vegas comes on Q4, and then Banner is next year?

Yes. I think that's right. You got it.

Okay. I noticed you had one less LTAC quarter-over-quarter. Is there much more portfolio optimization there to go?

Well, I think that any of that optimization, as you put it, will be ordinary course. I mean, we may see an opening here or there. We may see a consolidation here or there. So I don't think that you would -- we had a lot of questions about whether there were closures as a result of the implementation of the new criteria. I think that is passed, so you won't see any closures as a result of that. But sometimes, there's other reasons why we may either open an LTAC, relocate it or close, consolidate one. So only ordinary course at this time.

Yes. I recalled some mention of plans to open an LTAC. Was it in Virginia?

Yes, we did, Bill. Riverside was the LTAC we have opened up down in the eastern part of Virginia.

Okay. So that was the one that was added to the portfolio last year. Okay.

Yes.

And we also, I think, have announced that we'll open a new LTAC in '19 with Shands, one of our joint ventures in Florida.

Okay. And Marty, on integration costs for U.S. HealthWorks, should there be any additional ones this quarter?

We think there will be additional integration costs over the next 3 quarters, Bill. I mean, our expectation is those integration costs shouldn't exceed probably $5 million to $6 million, including the $2.3 million that I mentioned before that was already spent in the first quarter.

Okay. And then last for me. I wonder if you could go back to the commentary in the IRF -- I'm sorry, in the adjusted EBITDA margin for LTAC for '17 without getting names on closed hospitals. I'm not sure I understand what the commentary means there.

Yes. If you take a look at the amount of -- the difference in the hospital number between Q1 of '17 versus Q1 of '18, we have closed 6 hospitals, and those hospitals actually contributed a -- positive EBITDA in the first quarter of '17. So when you remove those -- when you remove that, you actually had significant -- you actually had some very nice growth on a same-store basis.

And our next question comes from Kevin Fischbeck from Bank of America.

I wanted to ask a question on the physiotherapy turnaround. It wasn't quite clear. I think when you guys first talked about turning that business around, you gave that 6 to 9-month turnaround towards the end of last year. When you say 6 to 9 months, you're talking about from the original 6 to 9 months or you're saying that it's still 6 to 9 months from today?

Yes, Kevin. We think it's probably 6 to 9 months from today. I think we modified that at the last earnings call, where we said we thought it was going to take 9 to 12 months. And so we've seen that come down from the last quarter, and we're saying we think it's 6 to 9 months. But we are seeing some nice improvements in many of the areas that we were focused on for physio, and again, we think that 6 to 9 months from now, we will be back on track.

Okay. So can you just remind us on kind of what the remaining issues are right now to reaching the target margins?

It has to do with what we had talked about before, which was we lost a number of physical therapists in certain markets, and it's really just replenishing those PTs that have good relationships with referral sources. And we continue to, as I said, we continue to make progress there and see some nice traction.

Okay. And I guess, can you talk a little bit about the labor backdrop right now? I wasn't sure if -- it sounds like the LTAC costs were not really labor -- broader labor issues, more kind of volume-driven. I'm not sure if physiotherapy bringing labor on is a shortage issue or whether it's just kind of a one-time specific to that business issue. But could you talk a little bit about your ability to hire/retain staff across your different business lines?

Yes, I think as it relates to the first quarter, when we talk about the increase in the labor cost, it really has to do with the substantial acceleration of our average daily census and having to immediately bring on nurses so we could basically take care of those patients. And we've got an ongoing HR program to recruit and bring on and onboard clinicians. But when you see that substantial jump, as I mentioned, a couple of hundred ADC, you really just can't go through your standard HR recruiting program. You've got to make adjustments, and that's what we did.

And I guess, so what's the kind of the overall wage expectation for 2018?

I mean, the expectation is -- I think we've built in to our budget, somewhere in that 3% to 3.5% increase on clinicians.

Okay. And then Concentra, the core growth there kind of ex U.S. HealthWorks is pretty strong. Does that business get helped by flu at all? Or is that kind of a good number to be thinking about the next few quarters?

No, for the most part, Concentra is really focused on worker injuries, on the worker comp side.

Okay. So is there anything about the comp or anything -- or I guess, you talked about kind of 14% kind of core Concentra growth. Is that something that's the way to think about that the next few quarters?

We think that they did very, very well this quarter. I would not -- I certainly don't and I know Bob doesn't assume that we're going to see 14% year over -- or same quarter year-over-year growth no on the EBITDA line. And I think what you've got to do is you've got to take a look at the second and third quarter were pretty strong last year, so...

They've done a great job and they've exceeded our expectations, and they're performing very well. And so great momentum, but we don't want to get ahead of ourselves in terms of where you can normalize all that.

Yes, okay. And then just last question. Equity earnings, I think, was down year-over-year. What was that related to?

Yes. We had a -- this is -- is really the unconsolidated entities that we have, including Baylor and Emory. They were down a little bit on a year-over-year same quarter basis, and that's really reflected in that number.

Is that because of like kind of [staff] losses or anything that you would point to or just a little bit weaker?

Just a little bit weaker.

Thank you. And that concludes today's Q&A session. I would now like to turn the call back over to Mr. Ortenzio for any closing remarks.

No closing remarks. Thanks, everybody, for joining us.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.