Select Medical's Q1 2025: Conflicting Insights on IRF Occupancy, High-Cost Outliers, and Regulatory Impact

Occupancy and capacity growth in IRF, high-cost outlier impact and mitigation strategies, occupancy trends and impact of regulatory changes, occupancy trends in IRF, impact of high-cost outliers and transmittal rule are the key contradictions discussed in Select Medical's latest 2025Q1 earnings call.



Inpatient Rehab Hospital Performance:
- Select Medical's Inpatient Rehab Hospital division saw a 16% increase in revenue and a 15% increase in adjusted EBITDA for the first quarter compared to the previous year.
- The growth was driven by strong demand and high occupancy rates, with an average daily census increase of 6%, though occupancy was slightly lower at 82%.

Outpatient Rehab Division Challenges:
- The Outpatient Rehab division faced challenges, with a 3% reduction in Medicare reimbursement and severe weather events impacting the South and Central regions.
- The division's revenue increased by 1%, driven by improved managed care commercial rates, but adjusted EBITDA declined by 3% due to lower patient volumes.

Critical Illness Recovery Hospitals Impacted by Regulatory Changes:
- Select Medical's Critical Illness Recovery Hospitals saw a 3% decline in revenue and a 25% decline in adjusted EBITDA for the first quarter.
- The decline was attributed to regulatory changes, including a doubling of the high-cost outlier threshold and the 20% transmittal rule, which impacted financial performance during the respiratory season.

Capital Deployment and Financial Outlook:
- The company repurchased 650,000 shares of stock for $11.4 million and declared a cash dividend of $0.0625 per share.
- Select Medical adjusted its business outlook for 2025, expecting revenue between $5.3 billion and $5.5 billion and adjusted EBITDA between $510 million and $530 million.