ATI Physical Therapy held its third quarter earnings call for 2024, showcasing a robust financial performance and highlighting key initiatives aimed at expanding access to high-quality care. The call, led by CEO Sharon Vitti and joined by CFO Joseph Jordan and Chief People Officer Eimile Tansey, provided valuable insights into the company's operational strategies and financial health.

Strong Q3 Performance and Ongoing Initiatives

ATI reported a 7.1% increase in net revenue for the third quarter, reaching $190 million. This growth was driven by a 7.7% increase in net patient revenue, demonstrating the growing demand for the company's services. The company also achieved a 3% growth in clinician headcount year-over-year, with annualized clinician attrition holding steady at 21%.

Vitti highlighted the continued expansion of clinical teams, supported by ongoing people strategies and a culture refresh. The company's focus on operational improvements and fine-tuning clinic workflows led to a 0.1 improvement in clinician productivity, underscoring ATI's commitment to enhancing patient care without sacrificing quality.

ATI's robust demand and stability around its workforce have enabled the company to build on its insights and optimize operations. The company closed 8 clinics and divested 1 as part of its strategic real estate plan, aligning with patient population needs. Despite the challenges in the labor market, ATI is navigating them with determination, staying attuned to market trends and nurturing its culture.

Financial Performance and Future Outlook

Jordan discussed the financial performance of the third quarter, highlighting a net loss of $33 million and adjusted EBITDA of $12 million. The company's Q4 guidance includes anticipated revenue in the range of $182 million to $192 million and adjusted EBITDA between $9 million and $14 million. This reflects the market dynamics and strategies aimed at growing clinical FTE and advancing overall clinic operations.

Looking ahead, ATI remains focused on expanding its clinical workforce and executing its people and operational strategies. The company's dedication to delivering high-quality care and fostering a strong culture has contributed to its success, and it is confident in its ability to drive long-term value for patients, employees, and shareholders.

Addressing Wage Inflation and Reimbursement Landscape

During the call, Vitti and Jordan addressed concerns regarding wage inflation and its impact on adjusted EBITDA margins. They acknowledged that wage inflation continues to be a significant headwind for the company and other physical therapy providers. Despite this, ATI is working diligently to find creative solutions and collaborate with payers to mitigate the impact on the business.

Regarding the reimbursement landscape, ATI is actively working with commercial payers to negotiate favorable rates and explore alternative strategies for valuing the impact of physical therapy on musculoskeletal care. On the Medicare side, the company is advocating for a revisit of the scheduled decrease in payment for 2025 and is optimistic about its strong performance in MIPS and MIPS performance with CMS.

Conclusion

ATI Physical Therapy's strong third-quarter performance and strategic initiatives underscore its commitment to delivering high-quality patient care and expanding access to physical therapy services. Despite challenges in the labor market and wage inflation, the company is navigating these headwinds with determination and a focus on operational improvements. With a clear vision for future growth and a dedication to fostering a vibrant culture, ATI is well-positioned to continue leading the musculoskeletal care space and making every life an active life.