Select Medical pushes past Concentra costs to improved quarter

Select Medical Holdings reported improved earnings in the fourth quarter and year despite being dinged for integration costs related to its joint venture operation of physical therapy giant Concentra.

In an earnings call with analysts Friday, Select Chief Financial Officer Martin Jackson said the company took charges of $4 million in the fourth quarter for Concentra lease arrangements, healthcare costs and other benefits. Select bought a 50% stake in Concentra in May for $1 billion in a joint venture with New York private equity firm Welsh, Carson, Anderson & Stowe.

The acquisition of Concentra added nearly 300 locations across the country for occupational and physical therapy as well as other healthcare services. As of January, Concentra's financial system also was moved to Select's headquarters in Mechanicsburg, Pa., Jackson said.

In the fourth quarter, Select posted net income of $29.3 million compared with net income of $25.7 million in the year-earlier quarter. Revenue for the quarter jumped 35% to $1 billion.

For the year, Select reported net income of $130.7 million compared with $120.6 million in 2014. Revenue in 2015 grew 19% to $3.7 billion.

Select is the nation's largest operator of long-term acute-care hospitals, with 109 of the facilities. It also operates more than 1,000 outpatient rehabilitation clinics and 18 acute medical rehabilitation hospitals.

Executive Chairman Robert Ortenzio said its long-term acute-care hospitals generated 81% of the company's hospital revenue and the rehabilitation hospitals the other 19%.

Ortenzio, who is also the founder of Select, said the company expects to complete the $400 million cash purchase of Physiotherapy Associates Holdings in the first half of 2016. The deal, which was tentatively agreed to last month, would add 500 locations to Select's clinic footprint, he said. The price is subject to certain adjustments detailed in the merger agreement.

Dave Barkholz

Dave Barkholz is Modern Healthcare’s Southern Bureau Chief stationed in Nashville. He covers hospitals, doctors, suppliers and governance across the Southeast. A winner of numerous national journalism awards, Barkholz started his career at Modern Healthcare in 1984 covering the investor-owned hospital companies. He spent the past 10 years in Detroit at Automotive News, a sister Crain publication.

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