US Physical Therapy Inc (USPH) 2012 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the US Physical Therapy fourth quarter and year end 2012 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)

I will now turn the call over to Mr. Chris Reading, Chief Executive Officer. Please go ahead, sir.

Thank you. Good morning, everyone. Welcome to US Physical Therapy's fourth quarter and year end 2012 earnings call. With me here in the office this morning include Larry McAfee, our Executive Vice President and Chief Financial Officer; Glenn McDowell, our Chief Operating Officer; Rick Binstein, our Vice President and General Counsel; Jon Bates, our Vice President and Controller. Before we begin today's call, where we have a lot of material to cover, we first need to review with you a brief disclosure statement. Jon, will you do those honors?

Thanks, Chris.

This presentation contains forward-looking statements which involve certain risks and uncertainties. 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. Okay, we'll start today by walking through a few highlights from what was another good year -- in fact, the sixth straight year of very solid earnings growth, in fact record growth from operations.

Some highlights from the year and the quarter. For the year, we produced same-store revenue growth of 4.4%, which was muted somewhat near year's end by the effects of Hurricane Sandy. Despite that, we finished the year as well as the quarter in solid, steady fashion. Net revenue growth for the year increased 6.4%, and our corporate cost as a percent of revenue declined to just under 10% for the full year for the first time in the Company's history. 2012 also marked an expansion in our development initiatives to include a program to help our largest partners tuck in existing local and regional practices to further accelerate their growth. This was successful, and in the second half of the year we closed on seven of these tuck-ins, following the larger acquisition of a very nice partnership announced earlier in that year.

As we begin to walk through our performance for 2012, along with our plans for 2013, I thought it important to create some additional perspective, and briefly reflect on a few relevant items that will relate contextually to the path that we will take for 2013, as we work through some of these recently announced federal payer and other challenges that face not just us, but the entire industry. We have detailed a thorough and thoughtful plan to navigate this path, as we have done repeatedly over these past nine to 10 years. Over this period we have successfully worked through previous federal payer rule and reimbursement changes and challenges. We have remodeled an earlier Company-owned store initiative which we needed to significantly revamp when we arrived. We successfully added, broadened, developed, and adapted with the changing market forces, aided in part by a very capable sales team that we developed many years ago.

Most recently with the help and support of our partners, we have further identified approximately 55 locations where we are in the process of training an existing team member, and that member will be a non-licensed person; so typically, a physical therapy technician with degreed background or front-office person to assist in a targeted sales program, further expanding the number of sites where we will have at least part-time sales coverage in an effort to drive more business and touch more lives with our facilities' excellent care.

With the help and support of our partners in our Corporate Resource group, we have added numerous programs and services over the years to help us further differentiate ourselves in the market place, all while taking care to maintain our partner-centric environment and ownership model that's helped us be successful over these past 20-plus years. Our committed group of de novo partners have grown dramatically over this time, and in more recent years we have further enhanced our growth and capabilities through our selective and focused partner acquisition program, which has helped us to grow significantly during these past six years of record earnings. I have a great deal of faith in all of our partners, as well as our many Corporate Resource groups to continue to work as they have to overcome, as we have before in the past, some of the challenges that are before us this year.

So let's discuss these challenges. Right out of the gate, we're dealing with some persistent severe winter storms, coupled with the worst flu season in quite some time, affecting virtually the entire nation this winter. Last year, you might recall an incredibly favorable winter weather season, which unfortunately this year we've not seen thus far. Additionally, as outlined in the earnings release, some very granular detail regarding the impact from the recent MPPR Medicare payment reduction, as well as last week's sequester impact. These are certainly real challenges that we have to work to overcome this year, so let's spend some time talking about how our team of dedicated clinicians, front- and back-office teams, sales, corporate resource, and leadership groups are responding to these challenges.

First a quick comment that I believe these Medicare pricing reductions are wrong-headed, and target an industry known for its cost effectiveness and its very positive impact on patients and overall cost of care. Rather than belabor that, we are channeling that frustration into productive actions designed to overcome the effects of these recent challenges over the course of the year and going forward. First, it is important to know that we have been in action mode for some time. We have proactively worked to further strengthen our team, both centrally here in the form of additional development and operational support resources, as well as by continuing to grow our organic and acquired partner network.

We've been working hard to fight our way through this tough flu and winter period by working to drive new patients in the door in spite of the challenges around us. Our partners, directors, and sales teams have done a very commendable job during a period with multiple important initiatives going on, to stay focused on job one -- that is driving new patients in the door, and then working to get them better with great care and service. I'm pleased to say that despite a visit impact from the unkind winter season, we are on plan with respect to our new patient referrals thus far this year. These continuing efforts should bode well for us as Mother Nature settles down, and things thaw out for us around the country.

Shifting gears a little bit. Today we announced our first acquisition of the year, with a terrific group of partners we have come to know very well and are very excited to have on our team. And we are working hard to keep that momentum moving through the rest of the year. On that note, we have recently adjusted some previously allocated development resources, and we have invested in a seasoned new team member we've known for a long time, who will assist us in further developing our acquisition flow and taking over the tuck-in acquisition process, as well. This individual is well known and well regarded in our industry, and will undoubtedly assist us in our success as we move forward. We are very confident that we can provide a good home for many of these private practices who are out there working to navigate an increasingly complicated payer world. We are actively working hard to fold in the very best of those into our family over the coming months and years.

Next, our clinicians are hard-working smart people who understand the meaningful impact that these rate reductions have on our business. And as well, they understand the changing environment in general. They are actively working with us to create meaningful efficiency improvements, while maintaining the strength and effectiveness of our clinical care. These adjustments are under way.

Finally, in the area of new programs and existing program enhancements, we still have a few things up our sleeve for this year. First, Fit to Work is doing a terrific job in gaining steam weekly, signing some very nice contracts and expanding existing relationships with some well-known large companies. This will help us to offset the slow patient volume start as the year progresses, as well as to bolster our net rates through an expanding calm focus.

Next, we have a new orthopaedic home care initiative that is moving forward, which we believe will open us up to some patients that we might not otherwise get, allowing us to see them for a few visits in the home, generally following bigger orthopaedic surgical procedures within a rapid transition into the clinical setting. These and other clinical program enhancements should help us to respond to the issues discussed in this release.

This will be a challenging year for us and for many in our industry. We are very focused -- we have a very focused and capable team, however, who are all working hard to overcome these challenges, in order to deliver results to our shareholders while maintaining the fabric of our culture, and what is important to and for our patients whom are entrusted to our care. Over the long run, and accelerated by these recent challenges, we believe that these will be a further catalyst for consolidation and alignment within our industry. That should bode well for us, as I firmly believe that we continue to be a great long-term home for many of these best-in-area private practices.

In closing, let me say that we will work diligently to deal with these head winds to chart a course which will allow us to grow, leveraging a strong balance sheet and a strong team. Due to the recent timing of these challenges, and the fact that our action plans are in the early stages, we have elected to defer giving guidance at this time. Rest assured, we have not deferred our commitment nor our collective belief in our ability to make a difference for our shareholders, colleagues, and patients alike. With that overview, Larry, I'd like you to go ahead and cover the financials and operating performance in greater detail. Thank you.

Thanks, Chris. I'll begin with a review of the quarter. Net revenue increased 3.3%, from $60.7 million to $62.7 million, primarily due to an increase in patient visits of 2.9%. The average net rate per visit was $106.37, as compared to $105.09 in the year-earlier quarter. Total clinic operating costs were 77.5% of revenue in the fourth quarter of '12, versus 75.6% in the 2011 period. The increase was primarily attributable to new clinics opened or acquired. The provision for doubtful accounts was 1.9%, versus 2%. Corporate office costs were 9.8% of revenues, versus 11.7% a year earlier.

Operating income for the fourth quarter of 2012 was $7.9 million. Net income was $4.043 million. Adjusted earnings per share were $0.34 in the recent quarter, as compared to $0.29 in the fourth quarter of 2011. The $0.34 in EPS for the quarter was better than the consensus estimate, despite an estimated $0.02 hit we took from Hurricane Sandy. Same-store revenue visits and the average net rate per visit were flat for the period. Visits would have been higher were it not for Hurricane Sandy, which impacted more than 50 of the Company's clinics.

I'll now review the full year. Net revenue increased 6.4% to $252.1 million, due to an increase in patient visits of 7%. The average net rate per visit for the year was $105.57, as compared to $104.72 in 2011. The increase in net revenue was partially offset by a decrease in other revenue of $2.8 million, due to reduction in revenue from physician services. Total clinic operating costs were 75.2% of revenue in '12, compared to 74.4%. The increase was due to increased costs related to clinics acquired.

The provision for doubtful accounts was 1.9% for the year, versus 1.6% in 2011. In 2012, the gross margin from the Company's core physical therapy business increased by $4.6 million, or 7.9%, while the margin from physician services decreased by $2.7 million. Corporate costs remained about the same in 2012 as 2011 in terms of total dollars, but as a percentage of revenue, as Chris mentioned, they were 9.8% in 2012, versus 10.4% a year earlier. Operating income in 2012 rose to $37.8 million. Net income for 2012 was $17.9 million. Earnings per share for 2012 were $1.51, as compared to adjusted earnings of $1.35 in 2011. Same-store revenue increased 4.4% due to higher same-store visits and a slightly higher net rate.

Today we announced that the Company is increasing its dividend by 11%, from $0.09 to $0.10 per share per quarter. We also announced, as Chris mentioned, that in February the Company acquired a 72% interest in a nine-clinic physical therapy group.

Last, I'd like to just briefly go over, or speak about, the current operating environment. The so-called American Taxpayer Relief Act of 2012, enacted in January included provisions which will reduce reimbursement for physical therapy services provided to Medicare patients. The new law increases MPPR to 50% effective April. The estimated impact this year to the Company from the rate reduction is up to $0.18 per share. On March 1, the sequester went into place. It calls for an additional 2% cut in Medicare. The projected effect to the Company is to further reduce earnings by approximately $0.04 per share in 2013.

As we noted in the release and Chris talked about briefly, January and February were tough. Although patient referrals were good and in fact on plan, the Company's volume of patient visits was significantly impacted by both the weather and the flu. Winter storms have continued in certain parts of the country thus far in March. Normally, the Company's managed to give earnings guidance at this time, but because of the current uncertainties and all of the moving parts, Management has deferred giving guidance.

Okay. It's a lot of material. I know that you'll have questions. Operator, why don't you go ahead and open up the line, and we'll be happy to answer any and all questions.

(Operator Instructions)

Your first question comes from the line of Larry Solow of CJS Securities.

Hi guys, good morning. Any way you could ball-park impact of Sandy on visits -- quantify it any way, or -- I know it's probably difficult but?

Yes, I know we looked at it. We don't have them here in the room.

We actually tracked it. We don't have it with us. What we did is, because we have business discontinuance insurance, we knew the impact would be what is our deductible, and that's equivalent of $0.02 of earnings.

Okay. I noticed that your costs, particularly your SG&A, went up a good amount sequentially, and as a percentage of revenue year over year. Anything in there non-recurring, or is there anything -- is it just anything that should be worried about there?

No, we just had our new clinic openings were kind of tilted to the back side of the year. I think Larry, as he outlined in the release, a lot of that was due to the new and acquired facilities that were in just part of the year. So I don't think there's anything that's non-recurring in that group, though, Larry.

When you say SG&A, Larry, you're talking about salaries and related?

Yes, that's what I meant. Exactly.

I mean, we had a significant acquisition in July of '11, so that only happened what, 5 months in it versus 12, so that would have made a difference.

Then we had another deal in late in the Spring.

We had a deal in May; and our clinic openings were more -- we had more clinic openings in the second half of the year than the first.

That's correct.

Okay, so there's some temporary skews there, I guess, essentially. Last question, I know you guys are not providing guidance now. Two parts -- will you, do you plan to inevitably provide guidance; and then the second part is, you've sort of outlined the MPPR of I think $0.13 to $0.18, and then the additional $0.04 on the further cut from the sequestration. I assume maybe you can't give me a number, but that those $0.18 and $0.14 are sort of max targets, and hopefully you can offset some of that with your initiatives?

Well, we have a number of initiatives, but the full impact of those combined things is $0.22.

Right.

As to guidance, the reason we didn't give guidance now is frankly, there wasn't enough clarity. We came up with some figures, but it would have been such a wide range we didn't think it would be relevant to the investors; so if we're going to give guidance, we want to do it with accuracy and hit the numbers, so we deferred giving it at this time. We may give it later; it just depends on where we are.

Is that wide range driven by what -- the impact or some offsetting impact to this $0.22, or is it related to the weather in the Q1, both or --?

Well the weather -- I don't have February financials yet, but the weather continued to hurt us, so we don't know -- we know what the impact was in January. It was significant also in February, but we don't have the numbers yet. The other thing is too all the action items we're taking regarding just beginning or in mid-stream, and it would quite frankly be premature to try to quantify what the net benefit is going to be.

Got you, okay. Fair enough. Thanks guys.

(Operator Instructions)

Your next question comes from the line of Brooks O'Neil of Dougherty & Company.

Good morning. I was kind of hoping that you might be able to walk us through sort of the modeling impact of the Medicare cuts. I'm just trying to think it through; obviously, Medicare is only 20% of your procedures. Help me think about how you came up with this $0.18. I'm not questioning it. I'm just trying to understand.

Yes. When it initially came out, we ran a model, and then also the APTA has a model -- in fact, when we put the same assumptions and units in there our figures and theirs came out almost exactly the same. The impact to us was about an 8% to 10% reduction in our average net rate from Medicare, which is about $8. Then we took our Medicare visits times the $8, and that's how you come up with the dollar impact.

It's actually -- I think it's -- Larry's right. I think it's actually a little bit more than $8. When we looked at our Medicare reimbursement to begin with, we were about $95 a visit; so depending upon the unit selection -- somewhere in that 8% to 10% range puts us in that $8 to $9.50 range. On top of that, which just mathematically as we back into our Medicare visits, and the rate impact on that, we end up at an $0.18 figure, and then the sequester at another 2%. As Larry mentioned and as I discussed in this release, we're doing a lot of things to get through this. Those are revenue impacts. We have to do other things to offset that. The runway is just short in terms of visibility from when these things happen, what we're doing, and we just need a little bit more time to get these things in place.

Sure. I totally understand that. I think most people do. I think that I recall that historically, Larry said you guys don't have a pipeline of potential acquisitions, but I sense that you're in somewhat active pursuit of opportunities all the time. Could you just characterize in a broad general sense? I sort of sense acquisitions could be one way you could begin to offset some of the impact of the cuts. Would it be fair to assume that it's likely you're going to try to be more active this year?

Yes. In terms of our -- we give kind of a, Brooks, pat response on the whole pipeline issue; because we don't announce how many people we're talking to, and we don't give an estimate ahead of time, even after we've signed a letter of intent with somebody in terms of a deal until it's closed.

Yes.

We've been very active this past year in the market. We've had good success in having some very good discussions. We added to our team another seasoned person who will focus his entire day, week, and month -- day in, day out -- on prospecting and finding new deals. We expect to be very active, as we expect to be active this year in doing our kinds of deals -- good people that want to stick around that have the right kind of values and perspective on the business. We'll continue to deploy cash in a disciplined way with people that we like and are also interested.

Sure.

The reason we don't refer to it as a pipeline is because it's not groups that we're contracted with to do a deal yet.

Sure. I understand that, and I think it's a good way to think about it. As I think about the offsets beyond building up the clinic groups, it strikes me that probably it will be a combination of efforts to drive revenue or patient visits higher, combined possibly with some efforts to trim expenses where you think you can do that. Is that a fair way to think about what you're going to try to do this year?

Yes, there are a number of things. One of those is to improve our efficiencies, which our partners understand we have to do. The other is to continue to drive through a variety of different ways new programs, some of which we discussed, higher revenue and more volumes --Fit to Work being one of those initiatives; one of the other being the fairly significant expansion of our sales team with these additional part-time folks. We've got about 55 people in training right now across our Company in -- typically in the facilities that we haven't had coverage with before. Those things, combined with some other things that we're working on, we hope to have an impact.

That's good. Pretty clearly, I guess I'm assuming that it's possible to look at the facilities in the fourth quarter that were impacted by Sandy, and those that weren't, and kind of assess how your business was in the markets that weren't really affected, compared to the markets where it was; and that may not be the only variable, but --?

Yes. No, business was fine in the fourth quarter. I mean, we had a very strong fourth quarter going late into the year, and the only impact really for us was Sandy.

In the first quarter with the weather and the flu, that almost certainly is much more broadly disbursed around the United States -- obviously not many snowstorms in the warm-weather areas, but is that a fair way to think about it, that it's pretty much across the United States?

It's pretty broad. Flu is everywhere, and we even had storms in North Texas that were -- and Oklahoma that were significant this year; so it's not been a kind winter season. But we're going to be out of it soon, and we're doing everything that we can. The team did a great job driving new patients and new referrals into the facility. In fact, we were on plan both January and February, and things are picking up.

That's good. Let me just ask one last question. I'm curious your philosophy in thinking about raising the dividend at this point. Obviously, I'm guessing it's a message that you think the long-term prospects for the business are good; but can you just tell us what you and the Board thought about as you thought about raising the dividend right now?

Yes. Well, since we initiated the dividend, we've said all along that our plan was to, business permitting, to continue to increase it. Our free cash flow has been exceptional, even after paying a special dividend in the fourth quarter of $0.40 a share. We reduced our debt very quickly after that thus far in the first quarter, so we're in a great place balance-sheet-wise. We have the ability to not only pay a dividend, but to grow internally and externally, and when it's opportunistic to even continue to buy in shares.

That's great. Thanks a lot. I appreciate all of the color.

Thanks, Brooks.

Your next question comes from the line of Mike Petusky of Nobel Financial.

I guess a few questions somewhat related to a couple of the questions Brooks was asking. On the M&A front, I would assume with the double hit -- the MPPR and then the sequestration hit -- obviously, as much as it impacts you guys, it's got to impact smaller operators even more. Have you guys noticed more calls coming in, unsolicited, kind of looking for an exit strategy? Have you guys noticed anything in terms of that at this point?

Yes, and I don't know that I can relate it directly to MPPR. I think quite honestly some groups are still trying to digest what the impact is, and what it means to them. We've seen an increase in activity I'd say over the last six to nine months, with usually calls from smaller groups who are looking for some shelter.

The bigger groups, the guys that we're talking to, are usually very well positioned. They look at some of these head winds and challenges oftentimes the same way we do as potential opportunity. The question often is whether they want to go it alone, or they want to combine forces. We're talking to some good people, and we're going to continue to do these tuck-ins into our stronger partnerships, and we'll continue to grow organically. You're right. These challenges are affecting everybody, and some groups have less resources to be able to deal with it than others. We're fortunate to have strong resources and a very good balance sheet.

Okay. I would assume I know the answer to this, but I'm going to ask it anyway. Does this in any way, these challenges this year in terms of some of what you're facing out of Washington, does that change in any way your thinking about de novos? You guys have always been pretty consistent over the years in how you think about that, but does any of this change that?

It changes it very subtly in this way. We're going to continue to do -- I think that we're going to try to do as many de novos as we can that we can do predictably. We've shifted some resources out of going into brand new markets where we're going to put a single dot with a brand new unknown partner, to a great extent toward further developing our existing partner network through the addition of satellites. I think what you'll see in this year, and we continue to take the temperature of what we need to do to make adjustments, but you'll see more satellites which are very predictable for us in terms of their performance; maybe less brand new partners, and more resources shifted between the satellite expansion and the acquisitions. So we're moving some things around.

The organic expansion we've had over the last few years, much of that -- not all, but a lot of it, a big chunk -- has come as a result of our acquired partnerships, who have robust teams that are very strong and we're working with, along with our seasoned organic partners to continue to grow organically within all of those partnerships. I think as we acquire more and do more deals, you'll see that organic flow continue to be very steady.

Okay, great. That was great color. I'm glad I asked the question. In terms of your commentary around sales reps, how many -- and I didn't catch it if you said this -- how many sales reps do you guys have now?

We currently have 75 sales reps covering 306 locations.

Did I hear you right saying that there's 55 in training?

That is separate from -- the 75 sales reps that we have are traditional full-time and part-time sales reps that are trained sales reps. The 55 number that Chris was talking about are employees that we have working in the clinic either in our business office, or as athletic trainers and others that we are training to assist in sales and marketing that will have a finite group of doc's that they have relationships with that they can go out and continue to benefit.

Yes, but those -- I actually should think of those folks as augmenting or assisting the 75 that you traditionally have had in that ball park, right, or no?

Correct. It would be -- I would not add them to the 75. They're assisting in a sales and marketing effort.

But Mike, just to be clear, they don't always exist in a facility where we have a full-time rep; so when we say they're assisting, they are assisting the Company in broadening our sales efforts. They're not necessarily by degree a trained sales person. We are giving them the training that they need to be able to go out and call on a focused group, but it is broadening our sales effort across a greater number of facilities.

Yes. So if my take-away was you guys are making a material effort to kind of muscle up in that area, that would be a reasonable take-away, right?

I like that description.

Okay. All right, just last question. Around your initiative on the orthopaedic home care, where I guess you're doing a first few visits in the home, and then that leads to some clinic visits. Do you guys expect that over time -- and I'm not talking about '13, I'm talking about over the next few years -- that, that initiative could have a material impact, or is that more just a little bit of incremental business that you guys could pick up?

At this point in time we would say it would be incremental. We think that there is an opportunity for this to open up some doors with some orthopaedic groups in areas that we've not been in yet, so at this point it would be incremental that we're looking for, but we are getting some very positive response back from our partners and from physicians that we're talking to about it.

Mike, I would agree with Glenn. I would characterize it, though, as being a little early to say whether or not we can get this enough steam under this for it to be of material change. When you look at the size of our clinics, averaging somewhere in the low 20 visits per clinic per day range, if we can pick up a few visits a day, whether or not you consider that incremental or material, it's kind of a decent needle-mover. Where this won't necessarily go in every facility, we're beginning the roll-out process, and we think it will have a positive impact.

One thing -- I want to make sure that nobody thinks this is home health care. It's not, and it's an outpatient physical therapy visit, which in this case instead of being done in the clinic, is done one or two times or maybe three in somebody's home after they've had major surgery, because they can't get to the clinic yet.

To Larry's point, the reimbursement is the same as we would typically be paid for -- it's no different than an in-clinic Medicare visit. It's not classified truly as a home health visit.

Okay, great. Actually, let me ask one more question unrelated, If you've commented on this forgive me, but did you guys make any comments around your physician sales business, just any, I didn't catch anything if you mentioned it, I was temporarily distracted there.

The one thing I should have mentioned is I guess I made a generic comment about strengthening our resource group here. We brought back somebody who had been with us for a number of years, moved outside the Company to increase a major hospital system's physician practice expansion initiative. He did that for a few years, came back to us. He is now the lead person of our physician services group, and we're working through that transition as we speak real time.

Currently, your outlook for that business in '13 -- is it going to be a transitional year with hopefully more growth in '14, or how do you just think about the next year or two in that business?

Yes, I think this will continue to be a transition year. We hope to make progress this year. We have a number of things that we're adding, and we're working through some steps from the past, but we've got a good leadership group, and they're working hard on it right now.

Right. Thanks guys.

(Operator Instructions)

Your next question comes from the line of Kevin Leary of Spitfire Capital.

Just a couple of questions around the Medicare rate going from sort of this mid-90s level to the mid-80s level. I know historically you've heard that Medicare is good business, because Medicare patients can come in the middle of the day when the rest of us are out funding Medicare.

(laughter) Good way to put it.

Two questions. First (inaudible -- technical difficulty) and then second, at what, if it is still true, at what rate do your practitioners start grumbling about covering their fixed costs and, God forbid, turning away Medicare patients?

Yes, we're not in danger, I don't think anywhere, of turning away Medicare patients. The nice thing about our Company still is we've got a pretty good portfolio, so most facilities Medicare doesn't make up the bulk of what we do. You're right. They are able, often, to come in and have more flexibility in terms of time. I wouldn't speculate at what rate. We're making some changes in our Company in our efficiencies and our other things which would help to improve our cost structure.

I'm certainly hoping that we're not in the near future going to see additional cuts, because this is a pretty onerous year in terms of a Medicare focus on a group generally seen as saving the health care system cost. I'm not anticipating at least further reductions any time in the near future, so we haven't done that math. But your first question we either had a blip in our phone or on yours, and we didn't hear it, so if you could repeat that?

Actually, you answered it. I was just making sure that it's still good business. Second question on the other payer groups. Do your private payers and your workers' comp payers look at this reduction as an opportunity to maybe get some slippage in your other payer sources?

I think it's uncertain right now. When MPPR came out initially -- what was it, a couple years ago, two or three years ago -- we had a couple of payers, I think Aetna being one, that adopted the MPPR and Medicare-like payment mechanism. I hate to guess. I would imagine that there may be some, but I think it's still a little early. We didn't see a ground swell when the initial MPPR came out. I don't expect to see it now. Most commercial payers now are dealing with whatever they're dealing with. They have a system in place. They have a utilization management system. Now they have -- there are guidelines in terms of what percentage of their premiums they have to pay out to providers. So I'm personally not expecting to see a ground-swell move in that direction.

Great. That's helpful. Good luck in 2013, guys.

Thanks.

(Operator Instructions)

At this time there are no further questions. I'll now return the call to Management for any closing remarks.

Okay, listen. I thank you for your time and attention. I know it's been a little bit of a long call. Management team will be here to answer questions today or through the rest of the week should you have any. Again, we appreciate your attention and your support. Thank you.

Thank you. That does conclude the US Physical Therapy Fourth Quarter and Year-End 2012 Earnings Conference Call. You may now disconnect.