U.S. Physical Therapy (NYSE:USPH) Q1 2020 Earnings Call

0:00 Ladies and gentlemen, thank you for standing by, and welcome to the U.S. Physical Therapy Q1 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Chris Redding. Thank you. Please go ahead, sir. Thank you. Good morning, everyone. Welcome to U.S. Physical Therapy's first quarter 2020 earnings call. I'm currently in our office with Larry McAfee, Executive Vice President, CFO.

0:46 With us on the call include Graham Reeve and Glenn McDowell, our COOs. John Bates is here with us in the office as well. John is our Vice President and Controller. Rick Binstein is on the line, our Vice President and General Counselor. Sorry for the background noise next to a firehouse. Before we begin to cover our results for this more complicated than normal first quarter, I'll ask John to cover a brief statement. 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.

1:31 Thanks, John. My comments this morning, I'm going to try to paint the picture of our early quarter pre-COVID for the purposes of this discussion pre-COVID period, which will be the January and February months and then the post-COVID period, period of March. Importantly, I'll discuss the steps we took quickly, in advance, to prepare us for the impact we began to feel acutely as communities began to ultimately adjust in early to mid-March. I'll also discuss how those steps have meaningfully and positively impacted the safety of our staff and patients, service to our partners, our aggregate financial performance, including our visits, revenue, and especially important, our cash position and overall trajectory.

2:23 to be sure this has been a supremely challenging period. However, I am so very, very proud of how our teams have led throughout this COVID-19 experience. First, January and February. Volume started off strong again to begin the year. And in fact, same store volumes picked up again from what was an excellent same store year in 2019. We began the year in January and February with 5.9% same store visit growth. Visits per clinic per day improving from 26.5 in 2019 to 27.7 in the first two months of 2020. Our revenues increased for this period approximately 8.3% after adjusting for the sale of that single partnership that we transacted on and we sold last June. And our overall volumes grew by 9.7%.

3:21 Despite the impact related to community closures and stay-at-home orders, which began to accelerate in mid-March, we grew revenues on an adjusted basis 2% for the quarter overall. This was in spite of an estimated $8 million revenue and contribution margin loss in the month of March, secondary to the COVID-19 pandemic. In our industrial injury prevention business, the revenue was up for the quarter over 43%, and the revenue impact in the quarter was much less than in our physical therapy business. One exceedingly bright spot in the first quarter relates to several of our large Biotics Health clients signing expansions of their existing contracts, which we began to step up for as things began to unravel in other parts of the economy.

4:11 Costco has been exceedingly helpful throughout this time. This graciously expanded our service location footprint with them in order to assist us in keeping our workers active, resulting in significantly less furloughs in this part of the business. There have been a number of other bright spots as we have worked our way through the early stages of this pandemic. One of those has been our team's rapid deployment of telehealth, which has been widely adopted and utilized by our partners. That was especially important during the height of the shelter-in-place orders, where telehealth quickly became a meaningful and effective bridge for those who were unable or unwilling to come to our clinics for therapy. Special thanks to Ben Keaton, one of our very important partners for his assistance with this program, that we expect to become part of the fabric of our alternative care delivery as we move forward.

5:06 Another bright spot was the across-the-board designation of physical therapy as an essential health service, which allowed us with CAB and with appropriate cautionary safety measures keep the overwhelming majority of our facilities open throughout this time. We remain actively working through our APTQI alliance and a recent investment in a lobbyist with APTQI to keep the progress and ground we have gained with telehealth and other positive adjustments as we work our way through to a more normal post-pandemic period at some point. Part of the pandemic accelerating in the U.S., we went through a to evaluate our readiness to function remotely should it come to that, and of course it did, which we've been doing now. We've been functioning remotely for the majority of these past few months. The early start we got enabled us to purchase needed equipment and computers, which has allowed our team to make a rather seamless transition to remote work to ensure the safety of our Houston team, most of whom worked in a large central office. where we provided the needed communication service and support to our partners who were fighting the fight in the front lines as they came in and cared for our patients each and every day.

6:30 Today I would say that we will be back in the Houston office on a rotating shift basis for the near term until we better understand the signs around the progression and transmission of disease as society begins to reopen. To date, our clinical services team has done a terrific job keeping us all abreast with the latest updates and thinking around the science. We in turn have kept our partners and staff informed so that we've been able to remain operational with a very minimal amount of exposures and infections. Because we're able to act quickly and make adjustments to staffing through a variety of measures, including reductions to wages, hours worked, and other means, along with making some strategic decisions to close or go dark in a small percentage of our facilities.

7:22 As a result, our cash position has remained strong and certainly stronger than we initially projected. And along with the advance payments by Medicare of approximately $12.5 million and CARES Act payments of approximately $5.7 million to date, Our cash position is currently approximately 110 million. At the same time, we are seeing weekly improvements in new patient referrals and overall patient volume. We are now solidly above 60% of our pre-COVID visit levels and still trending forward. At this point in time, we are beginning to bring back select staff as volume warrants, and we are doing that for the most part in a PRN as volume dictates basis.

8:12 Additionally, Briotics has continued to do well, and while some of our client companies have been closed or operating with restricted hours or personnel, and that has curtailed our revenue somewhat, our team has been able to offset some of those reductions with new or expanded business. Currently, we estimate that we are off in our Briotics health business somewhere in the 10 to 15% range compared to our pre-COVID levels. but that is an improvement over prior months. Our partners and our Houston teams have both done well throughout these past difficult months. We are ready to ramp back up safely and we look forward to what we hope is a gradual progression back towards ultimate normalcy.

8:58 That concludes my prepared comments. I'm gonna turn things over to Larry to cover financials in more detail. Okay, thanks Chris. Normally at this time I would go line item by line item, quarter over quarter, but honestly that would be like comparing apples to oranges. So I'm just going to hit some highlights. Included in the quarter were closure costs of, I believe, $3.8 million. And we talked about it in, there's a bullet point on it on page three of the release. About half of that was non-cash charges relating to write-off of goodwill, trade names, et cetera. The remainder is... equipment that we couldn't salvage, severance, and what the remaining lease obligations are.

9:44 The other thing I'll talk about is the average net patient revenue in the first quarter was lower than a year ago. There wasn't any one factor. We investigated that at length, and it wouldn't surprise me if the rate's a little higher going forward. Sometimes it just moves around quarter to quarter. One thing, though, that was probably significant is the Medicare sequestration was in place in Q1. and that cost us over a dollar a visit. That has been lifted, I think, in May. So I expect our net rate to be higher going forward. Something else I'll talk about is cash. As Chris mentioned, we have about 110 million in cash at present. We have our credit line fully drawn down, 125 million. We just did that to be on the safe side. We were in compliance and are still in compliance with all the covenants under our credit agreement.

10:35 Additionally, we received the Medicare advance payments, obviously. Our billings and collections have gone on on a timely basis and much, much better than I expected. I thought we'd see delays in payments, but that really hadn't happened. I mentioned the credit agreement. As we run our forecast, we might actually still be in compliance at the end of the second quarter, as bad as it's going to be. But that said, we've been in discussions with Bank of America every week. They couldn't be more supportive. And they offered to put amendments in place that will keep us in compliance long term. So we will do that sometime in the next few weeks. That's all I got, Chris.

11:20 Okay. All right. Thanks, Larry. I know you have a lot of questions. Before we open for questions, we just want to talk about what we're comfortable discussing. So we certainly want to discuss the quarter and where we are right now. We want to try to avoid any future guesswork around looking forward or estimating things relative to this pandemic just because of the uncertainty. So I appreciate your interest and understanding as we open the line. Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster.

12:08 Your first question in queue is from Larry Solow with CJS Securities. Good morning, Larry. Great. Good morning, guys. Good to hear your voices. I hope your families, everybody's doing relatively okay. So just, I guess, a couple questions. Obviously, volume's down a lot. I'm not really looking too much forward, but just sort of The trend down and the trend up. Are you seeing more improvement today or a little bit better patient volumes as some of these restrictions open up? I guess my question is, is it more due to restrictions or you're also seeing just patient psyche and whatnot? I imagine there are different levels of demand in terms of I have to get to the physical therapist versus somewhat discretionary. I'm just trying to Get an overall picture of how, you know, you mentioned different areas.

13:04 There's obviously variance among volumes and regions. Is that based on, you know, obviously in the Northeast, it's probably a lot harder than maybe in some other parts of the country. So maybe you can just give us a little more color on that. Yeah, so just a little perspective. So our volumes bottomed. The Northeast was hit harder. Our volumes bottomed there around April 12th. are volumes bottomed in the western, central and western parts of the country a week prior to that. Since they've bottomed, they're picking back up each week. Now understand, in the bulk of that period, I have a lot of friends who were acute surgeons. They sat at home. Their offices were closed. Unless you're on trauma call, which is clearly not elective, you weren't doing any elective surgery.

13:58 So unless you're doing cancer-related tumor work or trauma, you are sitting at home with everybody else. And so things have begun slowly on the elective surgery side, you know, varies across the patchwork, but have begun to open back up. And as they've opened back up, I mean, anecdotally, I got a note yesterday in San Antonio, and we got literally dozens of referrals in the first couple days of this week because, you know, the surgeons just started back in their surgery centers. And so I don't think our volume, where it is right now, and it's picked up each and every week, referrals have picked up each and every week. I don't think it's related to people being afraid.

14:51 I think it's been more related to the restrictions that are in place and the fact that while we were essential and remained open, a lot of the rest of the healthcare environment was deemed nonessential and has been closed. And so it's going to take some time. It's going to be community by community, state by state. But so far, each week is better than the week before. Overall, we bottomed out at 45%. We stay in the press release. We're running at 60%. As Chris mentioned, it ticks up each week. The good news is that referrals are growing faster than visits, so it should accelerate. In the models we did, we didn't assume we'd be at 60% at this point, so we're ahead in our financial models.

15:42 Our Monday volume, and Monday is one of our busiest days, but every Monday is... Our busiest day of the week, and that was closer to 70% in both parts of the country this week. So it wasn't quite there, but it was close. So definitely picking up. Also, I would, especially investors that aren't, because we got a lot of people on this call today, about twice what we normally do. I would urge you to look at our map on our website and see what states we're in. We're not in California. We're not in New York. And we are in states like Pennsylvania, Michigan, and New Jersey that have been hit hard. But the fact that we're in 40-plus states and so many different communities, frankly, has been very helpful. It's given us a portfolio effect so we didn't just get creamed by being in one or two locations.

16:31 You guys mentioned you've closed, I think, 35 clinics or maybe a couple more subsequent to the quarter. Or 35 won't reopen, I should say. Can you sort of characterize these clinics? Were they mostly... Well, remember, we Normally, we permanently close 20 clinics a year.

17:22 For the most part, the clinics we closed this time were one-offs. Some of them were very old. They either had some losses or were modestly profitable. When we ran the math, if they come back and they're not running at what they were before, obviously, they were going to lose even more money. Some of them had the leases up for renewal anyway. Some of them were already dark, temporarily closed, so we didn't even have severance costs associated with it. In aggregate, they were unprofitable. Okay. Okay. So is there a risk, you know, so we've gotten the question, you know, from many investors, just trying to clarify, is there any risk, you know, from a run-up, you know, from maybe not so much closed clinics, but from, I know you've terminated a lot of employees. If you terminated it, Are there any partners terminated, or is there any risk of partners requiring you to buy back the clinic?

18:15 Yeah, so first of all, other than maybe a single site partnership that was unprofitable at the time we elected to close it, and we didn't have any partners who were terminated as a result of this, none that I can think of. And thankfully, we haven't had any partners leave us in this period either for any of our partnerships. And so we have a structure, a deal structure, that after a predefined hold period, usually four or five years, these are after we do transactions, a partner If that partner terminates his or her employment with us and can put their interest to us, we have to repurchase it.

19:11 And so we've been fortunate, I think, that our partners, the vast, vast, vast majority, and I think, you know, I won't say every single one, because I don't know, I don't talk to every single one every day, but they expect to be around for the longer term and they know that they believe, as I believe, that the business is ultimately going to come back. And so is it possible that we have some of these? I think right now we're aware of one repurchase that we can handle within our current facility.

19:56 But other than that, I mean, we're heads down, you know, working our way through this. Our partners are doing the same. And, you know, it's working the way that it's supposed to work. Great. Thanks. I really appreciate the call, guys. Your next question in queue is from Brian Tinkwilt with Jefferies. Hey, good morning, guys. Hey, good morning. Hope everyone's okay. I guess I'll just follow up first on Larry's question on the closures. So obviously, like you said, Larry, some of these facilities are closed anyway. You close 20, 25 locations a year. But from a modeling perspective, should we assume that the drop in revenue for 2021 would be worse than your typical impact from the regular store or unit closures that you do most years?

20:51 I guess my fault, Larry, would be just from a back office perspective, is there a corresponding decline that we should be modeling? I'll be honest with you, Brian. I don't know how you would model 2021 at this point. You know, I can say that facilities that we have decided to close, you know, we'll certainly lose visits and revenue from those facilities, but we won't lose profitability in aggregate. We're going to have to right-size our corporate office accordingly, and we have to date, and we'll have to keep it that way. But, you know, I agree with Larry. I don't know what 21 looks like yet.

21:36 That is really helpful. That's totally understandable. And then I guess, you know, to your point, Larry, earlier on in looking at the map, you know, Tennessee obviously is one of your biggest states. The state has reopened. I think we've been open for two, two and a half weeks now. If you don't mind just walking us through the experience that you've seen in terms of the rewrap in those operations. And then how are you thinking about, you know, you said referrals are coming in above volume. So how are you thinking about expanding capacity to take advantage of the increase in referral flow outpacing volume growth? Yeah, so Brian, I'll handle that. So I couldn't be any prouder of our team in Tennessee, our star group. Those guys have done a remarkable job. Leadership's been incredible.

22:27 Responsiveness has been incredible. How they adjusted their staffing to their volume and how it was accepted and how we're now ramping back up and doing it the right way. They've, as a partnership, found a way thus far to remain profitable through all this, even though their volume had been impacted just very significantly like everybody else's. But they're ramping back up, and I expect, as we have the last, really since the April 12th week, we've begun to pick back up. When we talk about new patients being ahead of currently our volume growth, it's going to take a little time. Remember, we had such a low inflow of new patients during a substantial period. We have some patients that we need to discharge too, and so there's some balance between patients who've been hanging around for a while and it's time for them to go and the new patient inflow. And that's going to, for a little bit, mute on a one-to-one basis the growth of visits. But it's picking up. It's picking up nicely. It's picking up each week.

23:54 And I can't predict, you know, even three weeks out at this point. I don't know. But so far, it's been, you know, a steady forward march. Now, that's very helpful. I guess, Larry, just housekeeping, I know you showed growth statistics, but Would you be able to share the same store numbers for the quarter, just our model? Well, Chris gave it pre-COVID 5.7. What was it? 5.9. 5.9 pre-COVID. I know our overall volume for the quarter was 2%, but that's not necessarily same store. I mean, honestly, it would be, again, I would say it's apples and oranges. How can you compare March of this year to March of last year?

24:42 Yeah, that's fair. Okay. Yeah. Understandable. And then I guess, Chris, my last question for you, as I think about, you know, the same story trajectory, right? I mean, if I look back at your business, you know, you've definitely benefited from the strength of the employment picture. And then as I look back to, you know, kind of like the 09 to 2012 timeframe, you know, volumes were challenged during that time. How are you thinking about, you know, as we stare down at a recession heading into 2021, How are you thinking about your volume outlook? And then I guess the other thing I would ask you is, as I look back to the last recession, rate growth was positive, and that's opposite the volume headwind. So, you know, obviously in the last few years, we've seen rate growth flatten out.

25:27 So putting all those pieces together, you know, how are you thinking about the revenue outlook for the business? Yeah, there's a lot packed in there. Sorry. No, that's okay. It's all right. It's all right. I just try not to miss anything. So you're right. We're in a flat rate environment. I would say from 8 through 12, while there was probably a year or two where our same store was flat or even maybe in the worst of those, slightly negative, we were able to eke out some same store in the remainder of that period. It wasn't as high as it is or has been in our business lately.

26:17 Look, we follow some strong economic groups that aren't predicting a recession in 21, and still aren't. Maybe they're not right. We'll see. One of the things that we've learned here, and it's been interesting, It's been tough as well, but we know who our A players are, and we have tried our best. It's not perfect by any stretch, but we've tried our best to stay in touch with those people we've furloughed, to stay in touch with our doctors who are at home, and to do this the right way. I have a lot of examples right now where we're getting calls from people who have referral-based followings who have previously worked for somebody else who were unceremoniously dismissed and nobody contacted them over a multi-month period and they're now looking to join our team just because they believe they'll have a better long-term opportunity and work with a group that is going to be able to care about them and the business they bring.

27:35 I'm in no way, shape, or form knowing what 21 is going to look like on a same-store basis. What I will tell you is we're very, very focused. This has been a gritty time, but we've gotten to the worst part of it, I think, and I hope, and we're going to grind it out. And the other thing I'll say is our competition, you think about it, hospitals, who have had their hands incredibly full and who are really interested in getting their surgery, their imaging, and those things back open again. Maybe not as interested in PT because that's a lot further down the line. So we compete with them. We compete with a lot of small practices.

28:21 And we've got more resources that are focused on this business than both of those groups. And so we may have to move some market share, but we're ready to do that. We're going to work at that. So we'll see what happens. I can't predict, but we're focused on it and we're focused on overcoming at this point. I appreciate that. I would add on to that that eight of the ten largest companies in the sector are private equity backed and are levered five plus times to one versus our pre-COVID 0.6 to one. So in terms of Thank you. Larry, since you mentioned that, I guess, sorry for my last question.

29:11 You talked about the leverage and the credit facility and covenants. I think you're showing in the filings you have flexibility to be above two and a half times leverage and then 1.2 times on fixed coverage. So if you don't mind just walking us through how you're thinking about that and what the discussions are with the lenders in terms of your Thank you for joining us. The business has always thrown off good cash flow.

30:04 We've downsized, including corporate costs. I think we're solid for the foreseeable future. And we expect on the end of this to be able to grow again, and grow means organic openings and acquisitions and the other things that we've done in the many prior years before this happened. So we expect to get back to that. I appreciate that. All right, guys. Thank you, and good luck. Yeah, thanks, Brian. Your next question is for Matt LaRue with William Blair. Hey, Matt. Hey, good morning. How are we doing, guys? So, great. Larry, I wanted to ask a little bit about that last comment, and you've noted in a couple of cases you expect to incur losses during this time, but you also noted in the press release today that You've identified about $87 million of annualized cost savings, and I think you said that the 60% was ahead of your plan in terms of volumes.

31:10 So could you maybe give us a sense of that $87 million, what is sort of run rate savings on the back end of this versus things that you've been able to reduce with the lower volumes? So the $87 million is if everybody we furloughed or terminated did not return to work. That's why I said would be. For the rest of the year, right. Well, no, on an annualized basis. On an annualized basis. Annualized basis. You're right. So as business gets better, we've started to bring back clinical staff. I think we've brought 30 people back from furlough in the last couple of weeks. And we'll continue to do that. We've only brought back one person in corporate, and we're down 40% in corporate. So, again, we're going to size the business to what our run rate is. If our run rate is 10% or 20% or whatever, less than it was before, then we'll have at least that much lower in staff. But I mean, I can't tell you what things are going to look like in June, much less at the end of the year.

32:12 Sure. Okay. And then I wanted to ask you, Chris, about telehealth. You know, just what has the experience been like? Are you getting paid for visits on telehealth? Do you think Longer term, this is a step change in the way that you're going to be delivering services. Yeah, if you could help us there. Yeah, I don't think it's a step change. I think it's an added, you know, augmented service. Look, there are times, you know, if we can all think back to what life was like three months ago when we were all on planes, trains, and automobiles, you know, running around doing our thing and You know, going to ball games and doing all that. Sometimes the light happens and patients can't make it, physically make it into the facility. On those occasions, a lot of those people might be able to do a telehealth visit.

33:08 Sometimes you just, you wake up and you don't feel good, or somebody who's a little bit older, you know, they worry that they might be getting a cold, and so they're gonna cancel. We can do a telehealth visit in those cases. I don't expect that we're going to convert existing patients and say, why don't you do telehealth? That's not the case. But there are going to be lots of times and circumstances, and this period has been one of those magnified where telehealth is really a nice adjunct to be able to get to somebody that you wouldn't be able to get to otherwise. And so the receptivity by the patients and our staff has been very, very high. We're going to continue with it. We are getting paid by the vast majority of our payers, including Medicare, for our P-TIP facilities. We're in discussion about 50 or 60 percent of our facilities are certified rehab agencies, and Medicare isn't currently paying for telehealth for those facilities, which I'll be honest, makes literally and absolutely zero sense.

34:25 There are a lot of providers, Select Medical, many others, who are working those angles and fighting that, you know, fight for that to make sense. But we just found out this week, Blue Cross Tennessee has decided telehealth is going to be a permanent offering for them. For some, it's been indicated, like Medicare, that telehealth is going to be for physical therapy and other places that didn't have it before during this pandemic period, whatever that means. None of us know how long that is going to be. And then we're working on the beltway in D.C.

35:11 and with CMS for that ultimately to be permanent. We think a lot of commercial carriers will allow it to be permanent, but it's uncertain on a complete basis as of yet. And if this were to become permanent, is this something that would require some additional investment for you to scale up a platform, or has it been relatively easy and plug-and-play for your clinicians? Right now, we're completely plug-and-play, and there's been no, honestly, and this is going to sound crazy, other than You know, and I don't know that we did this at the clinical level. We didn't have to buy laptops because we already have them. But today we had to make an investment. At some point, depending upon how this plays out, and it won't be in the immediate or even near future, if we go to a different platform that would require some investment, we would let you all know what that looks like ahead of that But right now, we're okay with where we are and the platform that we have, which is compliant with all the rules and regs and simple and easy to use.

36:29 And we're going to be on that platform for the foreseeable future without having to make an investment. All right. That's great. Just a final one here. You mentioned the potential for M&A on the other end of this, as many of your smaller competitors maybe are under pressure. Have you started to get additional calls already, or has the Medicare advance payment and CARES relief funds helped kind of stem the tide? And then the second piece of that would maybe just be in terms of new referral sources. A number of other non-hospital providers have indicated they've seen an increase in referral sources as smaller competitors have struggled. I understand your referrals have been down, but have you started to see that as dates have reopened?

37:16 Well, if I understand the question, referrals are picking up. I don't have optically yet the ability to tell whether we're getting a lot of new referral sources and where those referrals are coming from. I do expect one thing, and I guess this is a prediction, or maybe an expectation. I think physicians who own physical therapy business who've had to go home and sit and furlough these therapists and I think some of those are gonna look at that business and say, is it really worth it? Because it's not their primary, they don't do it as well as they run their main business. It's not their primary thing.

38:03 And so I think some of those are gonna go away. or we'll go into management agreements or other areas that's completely anecdotal. The rest of it, I expect again, expect referrals to continue to pick up from a variety of different sources. One of the deals that we have on the sidelines right now focuses on hospital management of physical therapy services. Graham has a background in that area, and so we're anxious to get to the point where we can get that completed and focus a little bit more acutely on that. And then in terms of the calls, I have had some calls, and in fact, I've been asked to speak on two national, widely distributed conferences, Zoom-based kind of conferences, and obviously a part of that is, you know, what things look like post-COVID and how that will affect them in the day. And I've gotten calls from people that we've been in touch with over the period and they know we're not ready now, but at some point we are and we will be. And, you know, people, I think, are going to look at what they've been through and a lot of them are going to want to be in a little bigger boat than the one that they've been in, you know, this storm through.

39:30 So we'll see. Yeah. A couple of things. One, the hospital deal we're looking at is an outpatient deal, not an on-site hospital management contract. And then I got a text from one of our team members. Certified rehab agencies are 40% of the business, not 60. P-TIPS are 60. So 60% qualify for reimbursement from Medicare now. Okay, got it. Thanks, Chris. Thanks, Larry. Thank you. Thanks, Matt. Your next question is from Mike Petesky with Barrington Research. Hey, Mike. Hey, good morning, guys. So, Chris, I was wondering, just in terms of the, I guess, the patient experience and the PT experience in treating, working with the patient, you know, whether it's changes to physical building, changes in the waiting room, changes in terms of PPE, can you just speak to what's different today versus, you know, two and a half months ago?

40:36 It's a lot different. You know, some of it's different. Some of it is obviously we're laying out our facilities in a way to continue to have distancing so that's measured spread in terms of chairs and seating and plinths in the, you know, in the gym area and, you know, bikes where we have multiple pieces of equipment in close proximity. So it's that. It's scheduling. and making sure that while particularly it's needed and while we can, we've got appropriate people spread through the day. In terms of PPE, it's plenty of sanitization solutions and equipment to make sure after every contact things are wiped down, that we have plenty of hand sanitizer that we have masks. We were able, through Graham's previous hospital connections and his death work, we were able to, when people were struggling, come up with meaningful quantities of masks that will do us for the near term and may do us for the complete term of this.

41:59 We'll see how long it lasts. You know, thermometers and other things. Yes, there are differences. We continue to be able to be hands-on with patients. Patients are wearing masks now in our facilities. Our clinicians and our staff are masked. And then otherwise, we're going about our business and we're getting people better and we're able to do hands-on work and exercise-based work and movement re-education. and pain intervention techniques just like we were before. It's just a little bit more involved in the thoughtful preparation to pull it off the right way.

42:47 I guess, Larry, just to follow up on that, the cost of any of that, whether it's cleaning materials, PPE, that sort of thing, does that reach materiality in terms of the incremental spend there or not really? Obviously, you add some spend, but I mean, it depends on what you consider material. I don't think we spend a million dollars on it. I mean, masks are, Graham, what are masks cost us now? About 46 cents, Chris. Yeah, a mask. So there's some cost that's there. But when you talk about materiality, there will be a point, I think, I hope, when we get through this that we don't have masks I think at that point we'll know what our volumes are. Right now we're in this volume-adjusted period where we have to do some other things, and it's tough to predict exactly what that's going to look like over the next week or month or few months.

43:53 But we're well-positioned to get through it. We just need to get through it, keep people protected, and we'll get out the other side. Just real quick, are you guys allowing multiple people to sort of be in the waiting room, or are you having people sit in their cars as they wait to be called? Or is that sort of a clinic-by-clinic decision? It depends on the size of the clinic. We've got some big clinics. We've got some smaller clinics. Practically speaking, we're asking patients to come, if they can, by themselves. Not with any entourage, obviously, right now. Most of our patients don't have to wait, even on a normal basis, in the waiting room. They don't normally sit.

44:41 Sometimes the person that's in the waiting room is a driver or somebody else. So they come right back. They check in, they go right back. And we're able to do intake over the phone and things like that. So there's not a big waiting room issue. Some are larger than others, and if we needed to, could accommodate a few people with adequate spread. But most of the time, our patients are able to check in and come back. I'm sure if there was, or as there might be, a more dense arrangement, we would make an adjustment at that time and ask people to You know, wait for five or come back early or whatever keeps them safe.

45:30 I tell you, our clinical team has done a really good job at looking out for our patients first and foremost and then each other. And so, you know, we've seen our exposures go down, you know, significantly. We've seen, you know, our volume go up significantly. and, you know, I think just as of a week ago, we only had one person that was working out, you know, a short-term quarantine and that was down from, you know, a much higher number the weeks before. So we're definitely headed in the right direction, doing the right thing. Yeah, we've had a lot fewer confirmed cases than I would have ever imagined.

46:16 Gotcha, gotcha. Well, great. Can I ask a question just on the telehealth? In terms of sort of the volumes in April and May, can you give any sense, even a ballpark range, of what percentage of the revenue in April and May was associated with telehealth? Yeah, I don't know that I can give you, Mike, a percentage of revenue. Graham may be able to give us kind of a You know, an overview or a snapshot on the visits, and if we took a minute to do the math or we do after the call, we can probably figure out it's going to be a small percentage of revenue. But, Graham, what we were doing, a few thousand a week? Yeah, that's correct, Chris. So about 3,000 a week. I expect, Mike, that number actually to begin to go down a little bit as... volume picks up in the facility and people are more readily able and capable of coming out or feeling comfortable coming out.

47:19 I expect that number to wane a little bit. Again, I don't have good predictive ability to tell you what it should look like. In the peak period, we were seeing about 3,000 visits a week, I think. Okay. And payers were paying sort of, you know, if the visit was a $100 visit, payers were paying... It varied among payers. Some unit exclusions, for instance, obviously there's some things you can't do on telehealth. You can't do dry needling. You have to physically be there. You can't do manual therapy. You have to physically be there. So I wouldn't say that I would look at a telehealth visit as being absolutely equivalent to an in-clinic visit because there are a few things that we do with our hands that you obviously can't do through the phone or the TV or the computer.

48:19 but generally speaking, I think codes, with probably some small exceptions, codes were reimbursed at the same relative level, same from Medicare, but not across the board, not completely homogenous among or across payers. Okay, and then just last one, and you may have touched on this earlier, I possibly could have missed it, but I just wanted to ask, in terms of The industry and CMS and communications in terms of 21 pricing has all this weight on that issue. Is there any incremental, even anecdotal information you can share there? Thanks.

49:04 Yeah, I know there's a bill right now. I talked with John Dugan from Select Medical. They've done a great job. Select has us, APTQI, our alliance, APTA, the American Hospital Association, the long-term care associations, all have rather acutely banded together to press on CMS not to enact some of the reductions that were scheduled to come into play in 2021. We have a bill right now We have a number of sponsors. I don't yet know and I won't predict what happens with that, but given the amount of relief and assistance, given how important the healthcare system is and how important we are to the system and the fact that we've been deemed You know, ahead of a lot of other types of healthcare and allied health professionals to be absolutely necessary.

50:20 I think we have a shot, but it's not done yet. Thank you. Okay, going back to that telehealth volume question, if it were to, let's say we run it 2,500 a week forever, which You know, as Chris said, I think a number of those patients will come in and seen us, so that's probably aggressive. And we should have done at least 750,000 visits in the quarter. It would be like 3%, max 4% of your business, so it's not gonna be a material percentage of your PT visits. The nice part is it should help to reduce our cancellation rate a little bit, and we should lose less visits by having that flexibility.

51:06 Gotcha. Sounds good. Thanks. Thanks, Roy. Our next question is from Kevin Gade with BAHL Gainer Investments. Hi. Good morning, everybody. And really, kudos to, you know, the swift action for management and really the deliberate delivery of information for the AKs. I really appreciate it. Cut off the comments about you being a stronger investor I'd like to open it up to a question maybe more on capital allocation, where you all stand in terms of your priority. I know you mentioned pushing off M&A a little bit and also saying that dividends may be suspended for the upcoming quarter.

51:54 If you can just expand on these two points, if you Intend to suspend the dividend if you intend to pay it, and how long you intend to hold off on M&A. Thank you, everyone. So we've always said this, been very consistent. If you look at rates of return, the highest return is on a de novo clinic, one we've opened ourselves. Second would be on acquired clinics, which in turn spin off de novos. And then third, we said we were It was hard to judge whether it was better to do share buybacks or pay dividends. We initiated the dividend a number of years ago. We've increased it every year since. In this situation where there's so much uncertainty, we, like hundreds and hundreds of other companies, have suspended the dividend.

52:39 Will we resume it at some point? I would expect so. Will we pay one this year? We've already stated that we doubt that we would pay any dividends this year. We paid our first quarter dinner. We doubt we'll pay any subsequent dividends this year. But I think there is a good appetite by the board and certainly the management team to get us in a position where we can reinstitute that at a point where we feel comfortable that, you know, our capital structure is, you know, good and stable and we can do everything we need to do. Great. Thank you. Thank you. And there are no further questions in queue at this time.

53:26 All right. Listen, thank you, everybody. I know it was a long call. I know you had a lot of questions. So Larry and I are around. If you want to have some follow-up, we're available. We thank you for your time and your interest and your support. Take care. Have a great day. Bye. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.