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Select Medical's Q2 2025: Navigating Contradictions in Regulatory Impact and Segment Performance
Generated by AI AgentEarnings Decrypt
Saturday, Aug 2, 2025 12:24 am ET1min read
Aime SummaryLTAC regulatory impact and engagement with CMS, outpatient rehab margin expectations, LTAC margins and seasonality, inpatient rehab segment performance, impact of outlier threshold are the key contradictions discussed in Holdings Corporation's latest 2025Q2 earnings call.
Inpatient Rehab Hospital Performance:
- Select Medical's inpatient rehab hospital division reported a 17% year-over-year increase in revenue to $313.8 million.
- The growth was driven by strong demand for services and the opening of new hospitals, although occupancy rates were lower due to the early-stage operations of new facilities.
Outpatient Rehabilitation Division Growth:
- The outpatient rehabilitation division saw a 3.8% increase in revenue, primarily due to a corresponding increase in patient volume.
- Despite challenges with Medicare physician fee schedule rate reductions, the division's profitability improved with a 6.1% year-over-year increase in adjusted EBITDA.
Critical Illness Recovery Hospitals Challenges:
- Revenue for the critical illness recovery hospitals declined by 1% to $601.1 million, primarily due to regulatory changes affecting reimbursement rates.
- The division's adjusted EBITDA declined by 22%, reflecting the impact of regulatory changes and an increase in the high-cost outlier threshold.
Capital Allocation and Shareholder Value:
- Select Medical repurchased over 5.7 million shares of stock and declared a $0.0625 per share dividend.
- The company is focused on strategic investments for growth, debt reduction, additional share repurchases, and cash dividends to support strong operational performance and shareholder value.
Geographic Expansion and Development Pipeline:
- The company continued its focus on expanding its presence in key markets, with plans to add 382 rehab beds by the end of the first half of 2027.
- Strategic growth initiatives include new openings, bed additions, and joint venture partnerships with major healthcare systems.
Inpatient Rehab Hospital Performance:
- Select Medical's inpatient rehab hospital division reported a 17% year-over-year increase in revenue to $313.8 million.
- The growth was driven by strong demand for services and the opening of new hospitals, although occupancy rates were lower due to the early-stage operations of new facilities.
Outpatient Rehabilitation Division Growth:
- The outpatient rehabilitation division saw a 3.8% increase in revenue, primarily due to a corresponding increase in patient volume.
- Despite challenges with Medicare physician fee schedule rate reductions, the division's profitability improved with a 6.1% year-over-year increase in adjusted EBITDA.
Critical Illness Recovery Hospitals Challenges:
- Revenue for the critical illness recovery hospitals declined by 1% to $601.1 million, primarily due to regulatory changes affecting reimbursement rates.
- The division's adjusted EBITDA declined by 22%, reflecting the impact of regulatory changes and an increase in the high-cost outlier threshold.
Capital Allocation and Shareholder Value:
- Select Medical repurchased over 5.7 million shares of stock and declared a $0.0625 per share dividend.
- The company is focused on strategic investments for growth, debt reduction, additional share repurchases, and cash dividends to support strong operational performance and shareholder value.
Geographic Expansion and Development Pipeline:
- The company continued its focus on expanding its presence in key markets, with plans to add 382 rehab beds by the end of the first half of 2027.
- Strategic growth initiatives include new openings, bed additions, and joint venture partnerships with major healthcare systems.
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