US Physical Therapy Inc (USPH) 2010 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Second-Quarter 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

I would now like to turn the conference over to Mr. Chris Reading, President and CEO. Sir, you may begin your conference.

Thank you very much. Good morning everyone.

Before we start today, I'll just let you know who's with me here in Houston. Larry McAfee, our Executive Vice President, Chief Financial Officer; Jon Bates, our Vice President and Controller. Absent today is Glenn McDowell, who is our Chief Operating Officer. Glenn's on a very deserved vacation somewhere outside the reach of cell phones and so we're happy that he had a chance to take some deserved time off and he'll be back next week. Any questions normally for Glenn, we'll prepare to cover here as well.

Before we start, I'd like to ask Jon to read a brief disclosure statement and then we'll begin.

Thanks, Chris. This presentation contains forward-looking statements, which involve certain risks and uncertainties. And these forward-looking statements are based on the Company's current views and assumptions and the Company's actual results can vary materially from those anticipated. Please see the Company's filings with the Securities and Exchange Commission for more information.

Thanks, Jon. For those of you that are normally on our call, I'm going to handle the call a little bit differently today than normal and go off script and just talk to you for a little bit today. Then I'll ask Larry to cover the pertinent financial details.

I really want to try to talk and explain where we are as a company, what we're doing, and why we're able to achieve some of the results that we've been able to achieve this quarter and this year. I also want to tell a little bit of a story along the way and highlight some of our partnerships. We were on a call earlier this week with our Audit Committee to clear the press release and the 10-Q, I think I opened the call by saying that we had a pretty solid quarter, at which point I think I probably offended a couple of people on the call -- on the team because really we had an outstanding quarter.

We always look to try to make it as perfect as we can be and that's what we should strive for. And knowing that we're probably not going to get there, one of those areas we have continued work to do on is in the same-store area. That would have probably made this about as close to a perfect quarter as we could have gotten, but it was truly, truly an excellent quarter for us. We're very happy with the progress we've made since last year.

If you remember, last year was a great year for us. Second quarter last year was a record quarter and we moved ahead from where we were second quarter of last year, I think, at $0.31 on a reported basis, up significantly over 20% to $0.38 this quarter.

I want to mention a number of our partnerships and really when we talk about the Company, what we're about and why we're able to do some of these things in what's really still a very challenging environment. I saw some jobless numbers today, which were up again. The market hadn't responded too well early this morning to some of those statistics, but when we're out in the communities and it still feels difficult; unemployment's still high, underemployment's high, yet we've been able to do some things and to navigate internally here with the help of our very talented team, team made up of excellent partners around the country.

And these are not business people, they're clinicians who are dedicated to the care of their patients, they're dedicated to the communities they live and work in. They're clinicians at heart. The number are on the call today I'm sure, but most are in the clinic today seeing patients, doing what they do best and what they love to do and that's making a difference in the lives of our patients.

I think we've done that very, very well. We endeavor here in Houston and with our support team around the country to provide resources to them so that they can focus on what they love to do and that's to drive business and make a difference with their patients and recruit new staff so that we can handle the growth and drive more growth.

I want to point out a number of our partnerships around the country that have just done an outstanding job in what I think is a continued tough market. We have partnerships in Michigan, in places like Plymouth and Saginaw and in and around Detroit, which is arguably one of the toughest hit areas in the country that are putting out some outstanding year-over-year numbers. They have found a way to continue to grow even in a difficult market and I think that's really what it's about and that's what I think underscores where we are as a company.

We're not always going to put up a perfect quarter, but we're going to try and we're going to work very hard to figure out a way of how to overcome some of the challenges that are going to continue to be out there in this healthcare market right now and we're going to figure out a way how to get a good solid win under our belt and our partners have worked very hard to do that.

In places like Florida and Maine, we have partnerships that have been around for more than 10 years. In Dallas, multimillion partnerships that year-over-year find a way to make it happen and grow. Some of our acquired partnerships in places like Phoenix, Arizona with our great partner out there, we continue to add facilities in what is a very difficult housing market and a very difficult employment market and we're still driving business.

In our newly acquired partnerships in places like New Jersey, where they're doing an outstanding job, we've opened two new facilities or in the process of getting the second one open right now. And we're learning from them in terms of their unique and very focused consumer-directed marketing approach, which we've adopted and adapted and are rolling out in a very focused way across the country. These are the kind of things that enable us to overcome some of the challenges of [the day].

Our contracting team here in Houston continues to make good strives working with our folks and our clinicians to deliver great care in combination. We've been able to increase net rate this year pretty significantly. And we had a great year last year in terms of net rate expansion and that's continued this year.

Places like Nashville, where we've had challenges like the flood that affected all of Nashville and many of the surrounding areas that occurred in May and impacted us over 3,000 visits between May and June. Our partners did two things. They rallied around their team and their communities and helped to rebuild homes, and they stayed focused on the business and they had a plan this year and they've done a great job. So we've got some challenges in the market. We've got some opportunities we think.

We're going to continue to grow our marketing and sales base. We're doubling down in some of our established markets creating a more focused territory for some of our long-tenured people and bringing on some new people. We right now have 14 or 15 new marketing positions that we've identified and approved and are looking to fill to continue to grow in those areas and to continue to drive the 20%-plus income and earnings growth that we were able to do this quarter.

We've seen margin expansion this quarter over last year. When I looked at June last year, we had an excellent June a year ago. We increased our EPS just for the month of June more than $0.06 from where we were at June a year ago. Our operating margins expanded from 27% in that month to over 31% and up for the quarter.

We will continue to work on all these things. We have more opportunity. We've got to figure out a way to continue to be more efficient and at the same time, to deliver great care. I think our clinicians all understand that. We spend a lot of time on that, that's not an easy thing and that's something that happens in increments over time, as we learn how to remain focused on the outcome and not the process. And we continue to work on that, but the good news is we have opportunity and we have room.

We continue to be focused on developments. We had a very good development quarter, we opened seven new facilities and we've closed a few. We're going to continue to pare facilities that make sense, but I will tell you the facilities we've opened are doing an excellent job, both the new partners and the satellites of existing partnerships. Our recruiting team has done an excellent job identifying very good people.

And this whole partnership thing, this isn't just about giving a share of the business away to anybody. This is about finding outstanding people, people who are driven, people who are the best at what they do in the communities in which they live and work and incentivizing them the way that makes sense for them and gives them a reason to go out and make extraordinary things happen. I think we've got a great team of partners around the country. We remain very focused on attracting new partners organically and through acquisition.

We think we've got a lot to offer and we think we've got a great team that has the ability to grow this business further and we will continue to be focused on that. We've added some resources this year. We've added some resources to focus on work comp expansion and industrial expansion. Those guys are doing a great job and making a lot of good things happen.

We've re-upped our Ford deal recently and that continues. We've opened the doors on some other industries in places around the country and are making great strides there with the help of our partners and a very focused comp team, and we're going to continue to do that. We'd like to diversify our payer base a little further away from our federal payers. You all are likely aware that CMS has some proposals out there that we don't entirely agree with. We're working on a very focused grassroots effort to push back on that. At the same time, we're doing a lot of the things that I think we need to do to move forward if the environment remains challenging as it is today and to face whatever challenges that come and I think we're well prepared to do that.

So with that, I want to say thank you for your continued interest in our Company. I'd like Larry to cover the financial details and then we'll open it up for questions.

Thanks, Chris. First, I'll review the quarterly results and then we'll talk about the six months. In the second-quarter 2010, net revenues rose about 4.5% to $54.1 million, due to an increase in our average net rate per visit of about 1.9% over $105 and an increase of 10,000 in patient visits to 497,000.

Our gross margin increased by 100 basis points to 28.7%, as clinic operating costs were reduced as a percent of revenues. Corporate office costs at 10.2% of revenue in the second quarter were down from 11.3% at the same time last year. Our operating income increased by 17.7% to just under $10 million, and our operating income margin of 18.5% was a 210 basis-point improvement from the second quarter last year.

Our net income rose almost 23% to $4.45 million, and our earnings per share increased to $0.38 from $0.31. Our same-store revenues for de novo and acquired clinics open a year or more declined by less than a percent. The average net rate increased by 1.6%, while same-store visits were off 2.4%.

Now, I'll quickly go through the first half-year results. Net revenue increased 4.6% to $104.5 million. Gross margin for the six months increased by 60 basis points to 26.8%. Corporate office costs were 10.8% of revenue, as compared to 11.3% a year ago. Our operating income increased in the first six months by 11.5% to $16,650,000, and our net income in the first half rose by almost 20% to $7.6 million. Earnings per share increased to $0.64 from $0.54. We ended June with 369 clinics. During the six months, we've acquired five, opened eight start-up de novos, sold a five-clinic joint venture in the first quarter and we closed seven locations.

Our cash flow has been truly exceptional. During the second quarter, notes and bank borrowings were paid down by $7.8 million down to a balance of $4.3 million at the end of the quarter. Our cash-less debt or net cash position at June 30 was positive, it was $2.8 million or about $0.25 per share.

Based on our first-half results, in the earnings release today, the management raised its earnings guidance for the year from on the low end $1.14 up to $1.17 and on the upper end of the range from $1.20 to $1.22.

Thanks, Larry. With that operator, I'd like to ask you to go ahead and open it up for questions.

(Operator instructions) Your first question comes from Larry Solow of CJS Securities.

Hi, Larry.

Hi. Good morning, guys. Good quarter again and, Chris, thanks for some of that commentary, it was very helpful. You mentioned a little bit -- I guess the one negative is same-store visits and it looks like they were down 2.5% this quarter, a little more than last quarter. Anything -- any more color on that, just the underlying trends there or?

Larry, I'd give you some -- I'm flipping through a couple of my pages. I'd give you a couple of things. It's been kind of mixed around the country, so it isn't located to one part of the country.

Right.

Our very capable long-tenure partnerships are actually, for the most part, doing pretty well. Where we've struggled over the last few years -- when the markets gotten tougher, we've continued to struggle a little bit, we try to augment that with some sales efforts and some other things.

When I look at our visits per clinic per day for the quarter, we're actually up just very slightly from what we were at this time last year.

Right.

So I think -- and we're shifting a little bit. Now, we sold some facilities in the quarter, earlier this year and that's impacted us a little bit because of those numbers coming out and they were around before. We had the flood. But in general, I would say, the environment is a little bit tough now.

We had an excellent June, I think, from a volume standpoint and from what I've seen, we don't have certainly any financials for July, but July has been very solid as well.

Okay.

And I don't know when we're going to see an absolute turn in same store. I think it's going to -- I think probably in some combination, while we continue to fight for it very hard, it's going to take a little time until the economy improves a little bit more, but it's not bad.

Right, right. When you start those businesses, doesn't that come out of the same-store comp or is it actually still in there?

They came out. The ones we sold were actually clinics that were growing at a pretty good clip, so -- and you heard the numbers a little.

Got you. And then any reason why you would sell a better-performing clinic or was it --?

Yes, we made a lot of money off of it.

There was an opportunity in the market which -- it's a little bit of a long story, but it was a partnership that needed to go at different direction and it was a good opportunity for us to sell it and we made a decision to do that.

Yes, it was an unusual situation, it was a joint venture and we have buy/sell agreements with our partners there, so it's really gotten to a point where we need to either buy them out or buy them now.

Right. Got you. And you mentioned, Chris, some of the CMS proposals out there that [you] particularly agree with. This proposal to lower reimbursement on multiple -- when multiple services have performed in rehab therapy, would that impact you guys?

Yes, MPPR, Multiple Procedure Payment Reduction plan would impact us if it goes through. I mean it'll impact hospital providers, it'll impact outpatient providers as well, we've done the analysis on that. We have folks on the ground in Washington who are very connected with the folks at CMS. There's the comment period that extends through the end of this month.

A number of aligned industry groups working in collaboration on this directly and on a very focused grassroots effort, it seems a little disconnected when you get a two point whatever percent increase that comes one week for Congress because they recognize that we're on the value end of this proposition, we're getting patients better and avoiding much more expensive procedures. And then the next week CMS comes out with something that's totally out of left field.

Right.

In some discussion with them, I think there's some methodology question in terms of how they've come up with their assessment and I think at this point in time anything could happen, but I think there's, at least, the possibility that some of this has the potential to change before it's in stone.

Right.

That said, we're working on the business like we always do and if it doesn't change, we'll do our very best to deal with that and to grow the Company as we have in the past. We're just going to have to continue to be creative as we have been, so.

And that would be (inaudible) in 2011, I guess?

As it's proposed right now, that's correct.

Right. And with that --

In our 10-Q, we got -- there are identical notes, but we have two things in the Q filed today, talk about the proposal, what our Medicare business is, the potential impact, et cetera. I think in all probability what we have in there, which is what CMS has laid out initially will probably not be where it ends up. So the management seems like every time they come out with a proposal, it gets modified one way or another. But we have some information about it in the Q today.

Okay, sounds good. Thanks a lot.

Thanks, sir.

Your next question comes from Brian Tanquilut of Jeffries & Company.

Hey, good morning guys. Congratulations, good quarter.

Hey, Brian. Thanks.

Hey, Chris, thank you for all that color that you gave us on your partnerships and all the development things that you're doing. Just wanted to hear from you what your view is on the current pipeline for the year, both for acquisitions and de novos? What should we expect in terms of deal flow this year?

I'm not going to give you any hard numbers. I will tell you that for this current quarter, our organic development looks very good and we've had this year a lot of good discussions with some very good partnerships around the country in terms of acquisition. We've got some things we're working on that may or may not happen, but it's been a very active year for us and I think over some period of time, we'll see a number of those things come to fruition.

Okay. And then on the Medicare comment that you just made earlier, I mean granted Medicare is a pretty small percentage of your business, but what are you guys thinking in terms of what you can do to your business to adapt, let's just say this proposal goes through in its current form?

Yes. Well, I mean, number one, I mean Medicare is what 20 point -- what's the percentage now?

In terms of actual receipts we get from them, it's 20.4%.

Okay. So Medicare is 20.4%. I don't know if it's small or not, but we're working on -- we're working -- it'll take some time, but we're working on some comp-related initiatives, which give us [an end] with industry, which helps to drive both volume and is also pretty solid in terms of our rate.

We've been able this year to get some expansion of rate, whether that can continue or not, not sure, but we remain focused on those things. And then it really comes down to, we've got to figure out how do we continue to be more efficient as the environment changes and still deliver an excellent clinical product. And that's happening slowly, but I think our people understand that the environment is not static and we can't be static either. And so, I think there's more opportunity there where we are and where the rest of the industry is. There's enough of a delta between that, we've got continued progress to make.

I think the team's done an excellent job in these last two years taking out cost from our leases. In fact, we had one of the very detailed members of our Audit Committee point out the fact that we've had some pretty nice reduction in some of the categories in our cost structure. We have some very good negotiators here who work to take out contract cost in a variety of different areas.

We brought on some new partners in our equipment and our supply areas and have negotiated some great deals there. And so it's not just on the labor side, we're looking at every available facet of our business. And to be honest, two years ago, I thought [we'd wrung] a good bit of it out and we found some more. So it's not just one thing, it's a combination, but we're working on all those things to try to overcome whether it's employment or CMS with [electing a] proposal that may or may not happen. I think we're going to be okay.

Brian, I gave you the wrong number. I gave you the Q1 number. Our Medicare as a percentage of our actual revenues in the second quarter was 19.7%.

Okay.

It's actually come -- well, it's come down.

Coming down, yes. And, Chris, you talked about your view two years ago about expenses. I mean where you stand today? Do you feel like -- with all the stuff that you guys have done in the last couple of years and as I look at your P&L on a dollar basis, a lot of your costs are holding firm, do you think there is more that you can squeeze in terms of cost?

I think the answer is -- I think there's some more. The real answer is we're not going to get people cheaper and we're not going to look for a lesser quality person, but I think over time as we provide more resources and more tools as we've tried to do in a very focused way these last few years, we'll get more efficient. And then, so I think that the relative cost for the delivery of the visits and the units that we're able to drive, I think, will go down.

If you look at the earnings growth in the most recent quarter, there we had some gross margin improvement, but we also had operating margin improvement, 210 basis points and a big chunk of that was -- which we said from the beginning when our corporate costs used to run over 14%, our goal was to get it to 10% or less of revenues. Now, we got real close in the most recent quarter, but there is some room for improvement. As we continue to add businesses, we don't have to add costs and corporate at the same pace.

Okay. And then, Chris, sorry, one more question here. As it's related to price, I mean in other areas of healthcare outside of Medicare, we're obviously hearing about commercial pricing pressure and all that kind of stuff. So I'm just wondering if you're seeing any of that in your industry right now?

I would characterize it this way. In the last two or three years, we haven't felt a big change. So we've remained very focused on where we had density. I can give you an example. In Nashville, when we did the STAR deal, it's coming up on three years now, we did that deal, their net rate was $87 a visit.

Through local efforts and efforts here, their net rate now is right at $100 a visit. Now, we can't get that everywhere, but we're able to get it in Nashville. So we're able to go and look at where we have density and opportunistically where we have relationships and other things and little by little we've made some decent progress.

Okay. And then, Larry, last question. As we look at our model for the year, is there any seasonality factor that we should be baking into the back half of the year?

Yes, I think by far the second quarter is our best quarter. Things normally slow down pretty dramatically in the summer. As Chris mentioned, June was surprisingly good, but certainly July and August are normally slower and then when kids get back in school, September or October, picks back up, so the third quarter is a good quarter. And then in the fourth quarter really primarily around the times of the holidays, to weaken. Thanksgiving and the week before and after Christmas through the New Year are really slow, so the fourth quarter is absolutely normally our slowest quarter of the year.

All right. Thank you so much and congratulations again.

Fine.

Your next question comes from Mike Petusky of Nobel Research.

Hey, Mike.

Hey, guys. This is actually [Terry Baker] in for Mike this morning. Nice quarter. I just have a few housekeeping questions for you.

No problem.

I know you said the Medicare mix was 19.7%, could you break out the rest of the payer mix for this quarter?

Yes, and I want to explain something. Historically, this is long before Chris and I got here, the Company has always reported and if you look at our investor presentation, the pie chart there in terms of the payers, what the charges were. As people familiar with medical billing know, what you bill and what you get paid are two different things. So we're going to start reporting what we actually get paid as a percentage of revenues by the different payers and it's slightly different than what the charges are.

So I'll give you, for example, when I get to Medicare what the charges were versus what we got paid. But these are charged numbers and we're going to update our investor presentation and other information to show these going forward. Private pay, which are really primarily PPOs and those type of indemnity plans is all insurance related, was 25.6%; managed care, which includes HMOs, Blue Cross, Blue Shield, et cetera, was 31.9%. So those two combined, which is really your insurance reimbursed business and the copays from those was 57.5%.

Workers' comp, which historically we report at a lower percentage because charges as a percent were lower, but the payments are actually higher. Workers' comp was 16.5% of revenue or actual receipts in the second quarter. Medicare was 19.7% of revenue and by comparison, it was 22.8% of billings. So it represents about 23% of billings, but less than 20% of revenues. Medicaid, which we don't normally break out, but I'm going to do it in this case just so you have a feel for it was 1.9%, and then our other payers constituted 4.4% of revenues.

Okay, thanks. Do you have the number for the visits per full-time employee for this quarter?

Yes, I've got it. It was 11.22 for the quarter.

Which is up about -- up from 11.1 in Q1.

Okay, thanks. And then I just have a few quick questions about sales and sales coverage. Could you tell me how many sales reps you had at the end of this quarter, what the ratio was for commission versus traditional sales reps?

Yes, I'll do my best. This is Glenn's area and he left me some quick notes. So we have 78 total sales reps and that includes the commission-only reps covering about 275 locations.

And we have 50 what we call traditional reps, so you'd have 20, 38 commission.

Right. And so right now we have 14 or 15 full and part-time sales reps that we're looking to fill. We're looking to again double up some of our bigger markets where we have 8 to 10 locations. We're also looking to fill in with some part-time people, and we will keep the commission sales rep program going as long as we can. It's still producing very good results although we continue to have some inflow and outflow there. I think there's no reason to discontinue that at this point certainly, but you'll see us add some reps over the course of the next six months.

Okay, thanks. I think that's all I have for you. Great quarter, guys.

Thanks.

Your next question comes from Mitra Ramgopal with Sidoti & Company.

Hey, Mitra.

Hey, good morning. First question, just wanted to follow up, I know you mentioned couple of the difficulties you're seeing is pressure on same store from higher unemployment and potential CMS reimbursement risk. Now, would that make you more inclined to be more aggressive in terms of clinic expansion?

I think we're inclined to be aggressive in terms of clinic expansion in any way. I don't know if it creates a further spur. I think the spur is pretty much there. It doesn't make me any more disinclined to do acquisition to open new facilities. We always look for portfolio positions, so I wouldn't for instance -- we wouldn't have before and we won't now do an acquisition that's predominantly federally funded, nor we do a startup in an area that was predominantly probably federally funded.

That said, I think we're going to continue to be very focused on development, we've got the cash to do it. We've got the people to do it and we've got a nice model that works and so I think that the challenges today, I think on one hand, I think do create some opportunity because I don't think other companies are looking to expand as much as we are right now. I think we are a good home and I think we'll continue to be for great people and so we're going to continue to try to grow aggressively.

Right. And I believe, if you look at the number of clinics you've had at the end of this quarter, I think it was 369 versus say 366 a year ago. Should we expect sort of a more acceleration in that sort of -- not necessarily just the openings, but maybe reduced closures, et cetera?

No. I mean I think closures are going to be higher for the year than we initially thought, they were much higher for the quarter than I anticipated. Let's say as you can see from the financials, when we close clinics, it don't cost us any money. So we don't worry so much about the clinic count, we also sold five which hurt the comparative numbers.

I look at this as kind of a pruning of things that no longer contribute to the health of the organization and done in a thoughtful, deliberate way that allows the overall function to be stronger. I think that the clinics that we've closed, we haven't missed because they were either a drag or a non-contributor. And I think conversely, the clinics we've opened and acquired have been great contributors.

And I think that we'll always have some that over some period of time change and we'll necessitate that we close. But we're going to continue to be focused on development. I'm not caught up on clinic count per se, I'm caught up on growing earnings, we all are, add value for the shareholders and there is certainly development that goes into that, and that will continue. But I'm not going to hesitate to close a clinic if it needs to be closed.

Okay, thanks. And again if we look at the net revenue per visit, it's the highest I think we've ever seen, and the last few years, you've consistently been able to increase that number. As we look out again to next couple of years, is there a reason why we shouldn't see sort of similar increases?

I don't know. My crystal ball, things are changing rapidly, sometimes unexpectedly. We made some big progress last year and everybody said, well, can you do it again next year and we didn't make any big predictions, we've just tried to stay focused on what we do.

My honest answer is, Mitra, I don't know if we can continue to get rate expansion of this magnitude year-over-year. What I do know is if you look historically, we've kind of figured out a way to get some growth in there even during tough times. There may be a point where we can't do that anymore, but right now we're still making progress.

Yes. I mean in the Company's 20-year history, I don't think we've ever had a down-year for net rate. Now, that's not because we haven't gotten pressure from time to time whether it's from the government or the states, the insurance companies, you name it. I normally try to find a way to offset that or mitigate the impact from it.

Part of it is not just pricing. Our pricing has been -- increases historically have been modest at best, some it's a small increase in units per visit, it's a combination of things and then ultimately even if the rates are same, if you can increase your visits or therapist visits per FTE and you can spread your corporate costs on a larger base, you can still continue to derive increased profits.

I know it's just been a tremendous number given the environment. And finally, Larry, on the guidance, does it include a $0.03 gain in the first quarter?

Yes, that's actually on forecast, so it includes the gain from the sale in the first quarter.

Okay. Thanks again, guys.

Thanks, Mitra.

Your next question comes from [Alex Gait] of Castle Peak Asset Management.

Good morning.

Good morning. Just one question for you. Plenty of guys may have gone over this already. But could you maybe say something about the main growth drivers going forward, say, like do you expect a number of new qualified therapists entering the market to increase anytime soon?

I will tell you that the job market in general, in other words our ability to attract good people and fill open positions from a staffing standpoint, I think, definitely has improved over the last -- over this difficult period, I think. We've been -- we're seen, I think, as a pretty good home and as a good stable place and I know our time to fill positions and the number of open positions has gone down. I'm not sure if that entirely answers your question.

On the partner side, I think we continue to look for exceptional people, those people don't grow on trees, so we have to look hard and we're very selective about who we work with, but that continues to go well and we've continued to find very good people. And our traffic to own your own clinic website is up and we continue to do things to drive people there and so the interest seems to be very good right now.

I don't know on a macro basis that there's any big [influx in there].

No. I think that the schools continue to be pretty steady, the educational requirements have been steady the last few years, it's pretty much a doctor degree now and it's not going to get any worse and it's not going to get any better. And so I think that's been static and maybe that's helpful because there for a while, there was a migration from master's to doctor programs and so that probably created a little bit of a drag. So, right now in the environment, it's not easy from a hiring perspective, but it's better and we're doing okay.

Thank you very much.

Thank you.

(Operator Instructions) Your next question comes from Larry Solow of CJS Securities.

Hi, Larry.

Hey. You guys gave the visits per FTE, but did you give the units billed per visit, the change in that, do you have that?

4.22, again it's in Q1.

Yes, I think that's a typo, that's Q2, it's 4.22.

We're looking at Glenn's notes. So it was about the same as Q1. Q1 was 4.20, Q2 is 4.22, so not much of a change.

And do you know what last year's was, if I could go find that too.

Yes, it was 4.21.

Okay, so somewhere. Okay. And just -- I mean you'd sounded like you're still obviously aggressively trying to increase clinics any compared to the acquisition environment and potentially getting something done over the next six months.

We're talking to a lot more people right now than we were at this time last year.

Yes, and we have some interest that we've expressed on few places and things that we're working on. So, yes, if you'd give me -- over the next six months, I feel pretty confident we'll get some things done and we'll have some leverage.

Okay. And then just lastly, maybe more on your Q because I know you mentioned some in the Q, but in terms of this (inaudible) therapies, any way to quantify it? I mean 20% of your services are Medicaid or Medicare or about that, I mean how much -- I'm not really that familiar, is it generally a patient goes in there and he receives more than one service or --?

Typical Medicare patient [is] about 3.5 units at least from us as best we can determine and you'll see the footnote, I'm looking on page 22, it's in there somewhere else too. But we did a sample of actually over 1,000 actual bills for Medicare patients and we estimate, which is interestingly enough, it's about the same that other people have published that the reduction to us in terms of rate could be about 10% to 12% per visit.

That's net of the 2% increase that we had this year.

So if you look to what the current reimbursement is and what it would be if what they propose remains unchanged, it'd be about 10% to 12% rate reduction on Medicare patients.

Got it.

Again, that's a preliminary number, it's in the comment period, there are a lot of people that are worked up about this. There are some other public companies that have issued a lot of stuff on this.

Right. Okay. But in theory if that came out, it will be 10% on your 20% portion of your business obviously.

Right.

Which would impact obviously revenue per visit. That would be one way to keep your revenue per patient from rising, I guess?

Right.

Right.

Okay. Okay, great. Thanks a lot, guys.

At this time, there are no further questions. I'll now turn the floor back over to management for any closing remarks.

Okay. Well, I just want to say thank you one more time. We appreciate your interest. Larry and I are here for the rest of the day and the week to answer any remaining questions that you might have offline. And again we thank you and hope you have a great day.

Thank you. This concludes your conference, you may now disconnect.