Select Medical unveiled an aggressive growth plan Monday, with seven new long-term acute care hospitals and eight new outpatient clinics joining its ranks this year.
Publicly-traded Select, whose stock was up almost 3% at Monday's market close, is structuring the deals as both acquisitions and joint venture partnerships under which it will be the majority owner. The Mechanicsburg, Penn.-based company expects the transactions, which need regulatory approval, to close in the third or fourth quarters.
"This has been the most exciting and successful time from a partnership standpoint that we've ever had," Select's CEO David Chernow said in an interview.
Chernow said Select typically lands two or three joint ventures per year, so this is much more growth than is typical for the company. Monday's announcement also adds six new partners to Select's existing group of 20 partners. Chernow said he thinks the COVID-19 pandemic has heightened providers' willingness to work together.
The transactions are as follows:
- Select has signed a definitive agreement to acquire Acuity Healthcare, which owns and operates four long-term acute care hospitals and one satellite long-term acute care hospital serving parts of New Jersey and West Virginia. The deals cover four joint ventures with AtlantiCare, Mon Health, Virtua Health and physician partners. Select said the five acquired hospitals will be rebranded as Select Specialty Hospitals. They'll keep their current locations in Atlantic City and Willingboro, NJ, and Morgantown, Wheeling and Weirton, WV.
- Select has signed a joint venture partnership with Northwest Healthcare, a subsidiary of Community Health Systems, to acquire Curahealth Tucson, a 47-bed long-term acute care hospital. Under the agreement, Select and Northwest will relocate the hospital to be inside Northwest Medical Center in September. It will be called Select Specialty Hospital-Tucson Northwest.
- Select has entered a joint venture with Ascension St. Thomas to open a new 30-bed critical illness recovery hospital inside Ascension's St. Thomas Hospital West in Nashville. Called Specialty Hospital-Nashville West, it will be a satellite hospital to Select Specialty Hospital-Nashville, a 70-bed critical illness recovery hospital that's been in operation since 1998.
- California's Scripps Health has joined the existing joint venture between Select and UC San Diego Health in Select's 110-bed critical illness recovery hospital, Select Specialty Hospital-San Diego, which became part of Select's network in 2019.
- Select has entered a joint venture to acquire an ownership stake and management services for eight HealthWorks Rehab & Fitness clinics in West Virginia. The deal also marks Select's entrance into the state for outpatient physical therapy.
The deals include Select's first joint ventures with Ascension and for-profit CHS, and Chernow said they hopefully set the stage for future partnerships across their national platforms.
Select's planned growth comes off a strong first quarter performance, in which the company's operating income spiked 57% to $202 million.
The company's revenue grew 9.3% year-over-year to $1.5 billion, with expenses rising at a slower clip: 7.2%. Select said government shutdowns during the pandemic hit its outpatient rehabilitation and urgent care businesses the hardest. By mid-March 2020, its facilities were seeing fewer workers' compensation injury visits because of temporary business closures and less demand for rehab following elective surgeries.
The pandemic continued to dampen volumes into January and February 2021, however, by March 2021, both Select's outpatient rehabilitation and urgent care clinics were seeing demand levels similar to before the pandemic hit, the company said.
Operating in 46 states plus Washington, D.C., Select is one of the country's biggest critical illness recovery hospital operators. As of March 31, the company operated 99 critical illness recovery hospitals in 28 states, 30 rehabilitation hospitals in 12 states and 1,809 outpatient rehabilitation clinics in 38 states plus D.C.