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Select Medical Holdings Corp (NYSE:SEM)
Q4 2019 Earnings Call
Feb 21, 2020, 9:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning. And thank you for joining us today for Select Medical Holdings Corporation's earnings conference call to discuss the fourth quarter and full year 2019 results and the company's business outlook. Speaking today are the company's Executive Chairman and Co-Founder, Robert Ortenzio and the company's Executive Vice President and Chief Financial Officer, Martin Jackson. Management will give you an overview of the quarter and year and then open the call for questions.
Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company, including without limitation, statements regarding operating results, growth opportunities and other statements that refer to Select Medical's plans, expectations, strategies, intentions and beliefs. These forward-looking statements are based on the information available to management of Select Medical today and the company assumes no obligation to update these statements as circumstances change.
At this time, I will turn the conference over to Mr. Robert Ortenzio.
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Good morning, everyone. Thanks for joining us for Select Medical's fourth quarter and full year earnings conference call for 2019. Let me start out by saying Q4 was another very good quarter for us with all four business segments exceeding same quarter prior year revenue, adjusted EBITDA and margin. 2019 was a solid year for development growth for the company. We added a new 60-bed rehabilitation hospital in partnership with the University of Florida Health System in Gainesville, induced 60-bed rehabilitation hospital in partnership with Dignity in Las Vegas and a new 30-bed rehabilitation hospital with partners in New Orleans.
We also relocated our rehabilitation hospital in Newport News, Virginia that we operate in partnership with Riverside Health into a new 50-bed hospital. In addition, we acquired four critical illness recovery hospitals in two separate transactions and added additional critical illness recovery hospital through a joint venture partnership. We also increased our portfolio of outpatient rehab clinics by 78 clinics during the year and in 2019 with 1,740 clinics under our management. During 2019, we completed the integration of U.S. HealthWorks into our Concentra business and have fully captured the synergies we outlined when we acquired the business in early 2018.
Let me now take you through our operational metrics for the fourth quarter and the full year. Overall, our net revenue in the fourth quarter increased 8.7% to $1.37 billion. For the full year, net revenue increased 7.3% to $5.45 billion. Net revenue in our critical illness recovery hospital segment in the fourth quarter increased 6.7% to $455 million. The increase was driven by both an increase in volume and rate with patient days up 5.2% compared to the same quarter last year and revenue per patient day up 1.5% to $1,742 per patient day in the fourth quarter.
Occupancy in our critical illness recovery hospital segment was 67% in the fourth quarter compared to 66% in the same quarter last year. For the year, net revenue in our critical illness recovery hospital segment increased 4.7% to $1.84 billion. Again, we experienced an increase in both volume and rate compared to last year. Patient days were up 2.6% and net revenue per patient day was up 2.2% to $1,753 per patient day for the year.
Overall, occupancy in our critical illness recovery hospitals was 68% this year compared to 67% last year. Net revenue in our rehabilitation hospital segment for the fourth quarter increased 20.9% to $380 million [Phonetic] compared to $151 million in the same quarter last year. Patient days increased 15% and net revenue per patient day was up 8% to $1,739 per patient day in the fourth quarter.
Occupancy in our rehabilitation hospital segment was 78% in the fourth quarter compared to 75% in the same quarter last year. For the year, net revenue in our rehabilitation hospital segment increased 14.9% to $671 million compared to $584 million last year. Patient days increased 11.9% and net revenue per patient day was up 4.9% to $1,685 per patient day for the full year. The increase in patient days for both fourth quarter and the full year was primarily driven by the new hospitals we opened in 2019. Occupancy in our rehabilitation hospital was 76% this year compared to 74% last year.
Net revenue in our outpatient rehab segment for the fourth quarter increased 7.7% to $272 million compared to $252 million in the same quarter last year. Patient visits increased 7.2% to over $2.25 million -- 2.25 million visits in the fourth quarter. Our net revenue per visit increased $104 in the fourth quarter compared to $103 per visit in the same quarter last year. For the year, net revenue on our outpatient rehab segment increased 5% to almost $1.05 billion. Patient visits increased 4.3% to over 8.7 million visits for the year. The overall increase in patient visits resulted from new start-up clinics, as well as acquired clinics. Net revenue per visit was $103 per visit both this year and last year.
Net revenue in our Concentra segment for the fourth quarter increased 3.4% to $397 million. For the fourth quarter, revenue from our centers was $354 million and the balance of approximately $43 million was generated from on-site clinics, community-based outpatient clinics and other services. For the centers, we had patient visits of 2.9 million and net revenue per visit was $122 in the fourth quarter. This compares to 2.8 million visits and $124 per visit in the same quarter last year.
For the year, net revenue in our Concentra segment increased 4.6% to almost $1.63 billion. The primary driver of the increase was the full year effect of U.S. HealthWorks acquired February 1, 2018 and additional acquired centers in 2019. Visits in our centers increased 5.6% to almost 12.1 million visits compared to 11.4 million visits last year. Revenue per visit was $122 this year compared to $124 per visit last year. The decline in revenue per visit for both the fourth quarter and the full year was driven by our change in our business mix with an increase in employer service visits, which are paid at a lower rate.
Total company adjusted EBITDA for the fourth quarter increased 16.9% to $171.9 million compared to $147.1 million in the same quarter last year with consolidated adjusted EBITDA margin at 12.5% for the fourth quarter compared to 11.6% for the same quarter last year. For the year, total adjusted EBITDA increased 10.2% to $710.9 million compared to $645.2 million last year with consolidated adjusted EBITDA margin at 13% for the year compared to 12.7% last year.
For our critical illness recovery hospital segment, adjusted EBITDA was $60.5 million for the fourth quarter compared to $56 million in the same quarter last year. The increase in adjusted EBITDA was driven by both an increase in our existing hospitals and contribution from the four hospitals acquired in 2019. Adjusted EBITDA margin for the segment was 13.3% in the fourth quarter compared to 13.1% in the same quarter last year.
For the year, critical illness recovery hospital segment adjusted EBITDA was $254.9 million compared to $243 million last year. The increase in adjusted EBITDA was driven by an increase in our existing hospitals despite the extended temporary closure of our Panama City Hospital and the contribution from our four hospitals acquired in 2019. Adjusted EBITDA margin was 13.9% both this year and last year.
Our rehabilitation hospital segment adjusted EBITDA increased 51.4% to $43.3 million in the fourth quarter compared to $28.6 million in the same quarter last year. Adjusted EBITDA margin for the rehab segment was 23.7% in the fourth quarter compared to 18.9% in the same quarter last year. The increase in adjusted EBITDA and margin resulted from both increases in our existing hospitals, as well as contributions from the hospitals we opened in 2019.
For the year, our rehabilitation hospital adjusted EBITDA increased 24.7% to $135.9 million compared to $108.9 million last year. Adjusted EBITDA margin was 20.2% for the year compared to 18.7% last year. The increases in adjusted EBITDA and margin resulted from increases in volume and rate across many of our existing hospitals. Adjusted EBITDA losses in our start-up hospitals, $8.8 million this year compared to $4.7 million last year.
Outpatient rehab adjusted EBITDA increased 14.9% to $40.2 million in the fourth quarter this year compared to $35 million in the same quarter last year. Adjusted EBITDA margin for the outpatient segment was 14.8% in the fourth quarter compared to 13.9% in the same quarter last year. For the year, adjusted -- outpatient rehab adjusted EBITDA increased 6.9% to $151.8 million compared to $142 million last year. Adjusted EBITDA margin was 14.5% compared to 14.3% last year. The increase in adjusted EBITDA for the full year was driven by increases in both our existing clinics and contributions from new start-up and acquired clinics.
Concentra adjusted EBITDA increased 6.8% to $56.8 million for the fourth quarter compared to $52.9 million in the same quarter last year. Adjusted EBITDA margin was 14.2% in the fourth quarter compared to 13.8% in the same quarter last year. For the year, Concentra adjusted EBITDA was $276.5 million compared to $252 million last year. Adjusted EBITDA margin for the Concentra segment was 17% this year compared to 16.2% last year. The increase in adjusted EBITDA margin for both the fourth quarter and the full year was a result of lower relative operating costs across the combined Concentra and U.S. HealthWorks business.
Earnings per fully diluted share was $0.24 for the fourth quarter compared to $0.18 for the same quarter last year. Adjusted earnings per fully diluted share was $0.31 per diluted share for the fourth quarter compared to $0.20 in the same quarter last year. Adjusted earnings per fully diluted share excludes the pre-tax losses on early retirement of debt and its related tax effects for both -- in both the fourth quarters this year and last year. Earnings per fully diluted share was $1.10 for the year compared to $1.02 last year. Adjusted earnings per fully diluted share was $1.24 per diluted share for the year compared to $1.3 last year.
Adjusted earnings per fully diluted share excludes the pre-tax losses on early retirement of debt and non-operating gains and the related tax effects. This year. Last year adjusted earnings per share excluded the loss on early retirement debt, non-operating gains, U.S. HealthWorks acquisition cost and their related tax effects.
At this point, I'll turn it over to Marty Jackson for some additional financial details before we open the call up for questions.
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Thank you, Robert. Good morning, everyone. For the fourth quarter, our operating expenses, which include our cost of services and general and administrative expense were $1.2 billion. This compares to $1.1 billion in the same quarter last year. As a percentage of our net revenue, operating expenses for the fourth quarter were 88%. This compares to 88.9% in the same quarter last year. For the year, our operating expenses were $4.77 billion. This compares to $4.46 billion last year. As a percentage of our net revenue, operating expenses for the year were 87.5%. This compares to 87.8% last year.
Cost of services were $1.18 billion for the fourth quarter. This compares to $1.09 billion in the same quarter last year. As a percent of net revenue, cost of services were 85.5% in the fourth quarter. This compares to 86.5% in the same quarter last year. For the year, cost of services were $4.6 billion. This compares to $4.3 billion last year. As a percent of our net revenue, cost of services were 85.1% for the year. This compares to 85.4% last year.
G&A expense was $34.1 million in the fourth quarter. This compares to $30.3 million in the same quarter last year. G&A as a percent of net revenue was 2.5% in the fourth quarter. This compares to 2.4% of net revenue for the same quarter last year. For the year, G&A expense was $128.5 million. This compares to $121.3 million last year. G&A as a percent of revenue was 2.4% both this year and last year.
As Bob mentioned, total adjusted EBITDA was $171.9 million and the adjusted EBITDA margin was 12.5% for the fourth quarter. This compares to the adjusted EBITDA of $147.1 million in adjusted EBITDA margin of 11.6% in the same quarter last year. Total adjusted EBITDA for the year was $710.9 million. This compares to $645.2 million last year. Adjusted EBITDA margin was 13% this year. That compares to 12.7% last year.
Depreciation and amortization was $52.5 million in the fourth quarter. This compares to $52.6 million in the same quarter last year. For the year, depreciation and amortization expense was $212.6 million compared to $201.7 million last year. We generated $6.3 million in equity in earnings of unconsolidated subsidiaries during the fourth quarter. This compares to $7 million in the same quarter last year. For the year, we generated $25 million in equity and earnings of unconsolidated subsidiaries. This compares to $21.9 million last year.
We did recognize a loss on early retirement of debt in the fourth quarter this year of $19.4 million. We recognized a loss on early retirement of debt in the fourth quarter of last year of $3.9 million. For the year, we recognized $38.1 million of losses on early retirement of debt. We also recognized non-operating gains of $6.5 million during the year. Last year we recognized $14.2 million of losses on early retirement of debt and $9 million of non-operating gains.
The loss on early retirement of debt in 2019 resulted from the refinancing activities in the second half of the year. We were able to reduce interest rates and extend maturities on Select's senior notes, as well as reduced borrowing cost at Concentra through the repayment of their second-lien term loan. Interest expense was $44 million in the fourth quarter. This compares to $50.5 million in the same quarter last year. The decline in interest expense in the quarter resulted from both the decline in LIBOR rates, as well as the repayment on Concentra's second-lien term loan, which carried a higher interest rate. Interest expense for the year was $206.6 million. This compares to $198.5 million last year.
We recorded income tax expense of $63.7 million this year. That compares to income tax expense of $58.6 million last year. Net income attributable to Select Medical Holdings was $148.4 million for the year and fully diluted earnings per share in $1.10. Excluding the pre-tax losses on early retirement of debt and non-operating gains and the related tax effects this year, our adjusted earnings per share was $1.24.
We completed refinancing transaction during the fourth quarter, which effectively combined the capital structure of Select and our majority-owned subsidiary, Concentra. On December 10, Select issued $675 million in incremental 6.25% senior notes due 2026 at a price of $1.06 [Phonetic] and entered into an incremental $615 million term loan. A portion of the net proceeds from the incremental senior notes and incremental term loan were used by Select to loan $1.24 billion to Concentra who then used the proceeds from the intercompany loan to repay in full its $1.24 billion in syndicated term loans outstanding. At the end of the year, we had $3.4 billion of debt outstanding and $335.9 million of cash on the balance sheet. Our debt balance at the end of the year included $2.143 billion in term loans, $1.225 million and 6.25% senior notes and $78.5 million of other miscellaneous debt.
Operating activities provided $178.5 million of cash flow in the fourth quarter. This compares to $113.2 million in the same quarter last year. For the year, operating activities provided $445.2 million of cash flow compared to $494.2 million last year. Our days sales outstanding or DSO was 51 days at December 31, 2019. This compares to 53 days at September 30, 2019 and 51 days at December 31, 2018.
Investing activities used $46 million of cash in the fourth quarter. The use of cash was primarily related to $33.2 million in purchases of property and equipment and $12.8 million for acquisition and investment activities during the quarter. Investing activities used $316.7 million for the year. The use of cash was primarily related to $157.1 million in purchases of property and equipment and $159.6 million in net acquisition and investment activities during the year.
Financing activities provided $67.4 million of cash in the fourth quarter. Provision of cash including $77.1 million in net proceeds from the refinancing in December. This was offset in part by distributions to non-controlling interest and repayment of other debt. For the year, financing activities provided $32.3 million of cash. The provision of cash included $104.6 million in net proceeds from the refinancing activities during the year. This was offset in part by common stock repurchases, repayment of bank overdrafts, repayment of other debt and distributions to non-controlling interest during the year.
Additionally, in our earnings press release, we reaffirmed our business outlook for calendar year 2020 provided earlier this year. We expect net revenue to be in the range of $5.575 billion $5.675 billion. Adjusted EBITDA is expected to be in the range of $725 million to $760 million. And fully diluted earnings per share is expected to be in the range of $1.27 to $1.46.
Before we open up the call for questions, I will turn it back over to Bob for an additional update on Concentra.
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Thanks, Marty. As many of you are probably aware, after the end of the year, we entered into agreements with our Concentra joint venture partners to purchase a total of 18.7% of the voting interest in Concentra for a total consideration of approximately $352.7 million. The purchase was the first of our partners three put rights under the restated operating agreement post-U.S. HealthWorks transaction. After the purchase, Select now owns approximately 68.8% of the voting interest of Concentra. The joint venture partners continue to have the right to put one-third of their initial membership interest to Select in 2021 and any remaining membership interest in 2022 with Select retaining the right to call any remaining membership interest outstanding in 2022.
That concludes our prepared remarks. At this time, I'll turn it back to the operator who will open it up for question. Thank you.
Operator
Thank you. [Operator Instructions] And our first question comes from Frank Morgan with RBC Capital Markets. Your line is open.
Frank Morgan -- Analyst
Good morning. Just noticing the strong rate growth on the ERP side of the business, any color about the strength in that growth and is that in any way related to this new care tool? Was any prior period cost report settlements in there? Just anything you can attribute to that unusually strong rate growth?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Yeah. Frank, there's really two variables that are driving that. One is the increased census in our California Rehab Hospital, which has a much higher rate. And number two is, there has been a favorable impact associated with the change from the FiM scoring to the GG scoring. So we've had -- we have seen a favorable impact from that.
Frank Morgan -- Analyst
Got you. Would you -- could you attribute a weighting of that, like how much was coming -- is it primarily the new care tool or would you say it's more driven off the CR [Phonetic] asset?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
It's really a combination of both, Frank.
Frank Morgan -- Analyst
Okay, all right. And then just obviously you brought on some -- I don't think there were any -- you didn't call out any start-up losses in the fourth quarter, I believe, but what do you have -- what's implied in the guidance for start-up losses for 2020?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Really start-up losses were probably moderate. I think we have -- in the third and fourth quarter we have some new hospitals coming on board.
Frank Morgan -- Analyst
Got you. And then just -- obviously you talk about these -- the LTACs you've just recently brought on, some of those in partnerships. Is there any kind of thought around where you think the target market -- target margins should be for those -- really for LTACs, but also for your IRF business. What do you think that will settle out?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
I mean we're pretty pleased with where the margins are right now, in particular in the inpatient rehab side. I think that's probably a good indicator as to where it's going to be.
Frank Morgan -- Analyst
Okay. And then I guess in terms of just capital structure, obviously a lot of refinancing activity. But where do you really focus now that you've got these refinancings done, what's really going to be the focus going forward from a capital deployment, from a debt reduction standpoint? And I'll hop off. Thank you.
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Sure. Frank.
Robert A. Ortenzio -- Executive Chairman & Co-Founder
I think from the -- in terms of use of capital, Frank, we -- our primary focus is the continuing acquisition of the minority Concentra interest. So that's what we really have an eye toward. We'll do some modest allocation of capital to acquire small outpatient clinics. And then the bigger one would be allocation of capital to new rehab joint ventures where we may build some new hospitals. But other than that, I don't think that we're looking for any significant capital allocations in 2020 leading up to the Concentra purchase.
Frank Morgan -- Analyst
Okay. Thank you. I'll hop back in the queue.
Operator
Thank you. And our following question comes from Justin Bowers with Deutsche Bank. Your line is open.
Justin Bowers -- Analyst
Hi. Good morning, everyone, and congratulations on a really strong start to what turned out to be a strong year. So as you -- I guess as you think about this year or 2020 and kind of beyond, what are some of the opportunities you're looking most forward to? And then what areas of improvement are you guys focusing on?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Well, in terms of opportunity, we think that 2020 is probably a good year where we're going to focus on our execution. We do want to grow in each of our segments and we think we can with some development projects and continuing to operate the business leading up to the next Concentra purchase. So I know -- I think it will be a year of kind of steady performance in terms of the execution of the business and operations. We would like to add some new critical illness recovery hospitals in our hospital within a hospital model, signed some more rehab joint ventures with some leading health systems around the country, continue to have some net gains in our outpatient business either through de novo growth or outpatient acquisitions and then we think we're going to have another steady year with Concentra adding to their portfolio of clinics probably through some small tuck-in acquisitions.
In terms of improvement, Marty?
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Yeah, Justin. I mean as far as improvements are concerned, we still believe that there is, in particular on the critical illness recovery hospitals, we think there is the opportunity to expand the margin there and then also on our outpatient business. We've seen some significant improvement over the past couple of quarters and we expect that to continue.
Justin Bowers -- Analyst
Got it. And then just in terms of critical illness, can you just talk about the external environment a little bit just in the context of adding some facilities there? And it looked like you added one during the quarter as well. Was that a hospital in hospital model? And then -- or facility? And then kind of what are the discussions or kind of efforts internally you're having with your existing portfolio?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Well, I'll take the first part of your question first, what is the external environment. As many of you know who follow the company and the industry on the LTAC or what we refer to as our critical illness recovery hospitals, there continues to be although winding down considerable contraction of the industry as the industry adapts itself to the new criteria. And for some of the features that didn't really apply to us that continue to phase in or all be phased in 2020. That has resulted in a contraction of the industry. I think the number of beds are down probably 27% and Medicare spend similarly is down from the last numbers I looked at probably about 27%. So if you look at the Medicare spend from over $5 billion to a much lower in the $4 billion range. From an external standpoint, I think that's probably good for the overall industry as it rationalizes and just focuses on taking the, what we call the LTAC compliant patients, which are those patients that were in an ICU or require mechanical ventilation inside the LTAC.
So I think that that will probably continue to ring itself out through the balance of 2020. And what we're seeing for us is as that industry becomes a lot more stable, and I think generally viewed much better by the regulators as we read the rules, the proposed rules and even some of the commentary coming out of MedPAC, we think that there is an opportunity for us to selectively add LTACs around the country. Well, it won't be a big effort, but I think incrementally we could add some LTACs. So I think that's really where we think the opportunities were and opportunity is given the backdrop of the industry.
Justin Bowers -- Analyst
Okay. Got it. Thank you. Congrats again. I'll hop back in queue.
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Thank you.
Operator
Thank you. Our next question comes from A.J. Rice with Credit Suisse. Your line is now open.
A.J. Rice -- Analyst
Hi, everybody. Maybe just a couple of things if I could ask. This is sort of a conceptual question. When I look at what your EBITDA growth was for 2010, it was 10 -- I calculated and I maybe dangerous, but 10.2% roughly increase. If I look at the midpoint of your guidance for 2020, you're looking at about a 4.4% increase. And you said there really weren't that much in start-up cost in there. I guess are you -- is that a conservative starting point or is -- I'm not really sure what would necessarily moderate significantly. I know the buildup in U.S. HealthWorks synergies played out in '19, but you'll get a full year benefit of those synergies all year long. So that's probably still an incremental positive. What is -- any sort of big picture puts and takes that are leading you to sort of a mid-single-digit as opposed to something similar to what you did in 2019?
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Yeah. A.J., the guidance we provided was I think it is relatively conservative, but it's something that we're very -- we're comfortable with right now. We'll -- after the first quarter, we'll take a look at it at that point in time. And if it's conservative, we'll make an adjustment.
A.J. Rice -- Analyst
Okay. But if you look at the major segments, is there any particular segment where you would see -- obviously you had some very good results for example, in others. But do you see moderation clear-cut versus what you posted in '19?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
I think it's fair to say that at this moment, we don't see any significant headwinds in any of our segments. You know the Concentra will always be sensitive to more general economic conditions, but I think the business still seems pretty strong right now. We have -- I don't think there is any question that we've really hit our stride in the inpatient rehab side of the business and we don't have any new openings scheduled for the next couple of quarters. So that's just a question of maintaining a performance that they've had there. And the LTACs, much bigger base of hospitals, I mean as Marty suggested, we want to continue to focus on driving census there. And depending on the flu season the remainder of the year that can be a tailwind or a headwind. And so we feel actually pretty good about where we are now, but you know.
A.J. Rice -- Analyst
Okay, all right. When you think about Concentra, I see here toward the end of the year, you've done the intercompany loan, you repurchased the first tranche there. I think that -- or you purchased the first tranche. I think that was done slightly ahead of schedule. So I guess it opens a two-fold question for me. One, is there a possibility of perhaps if priority is to retire some of those stakes is something that might get accelerated in any way or should we think it's probably going to play out as is in the current agreement? And then second, is there anything about the way the deal is structured today, I know an intercompany loan is sort of a formality. But are there things that you would do if you own 100% of Concentra that you can't do because of the current structure until you buy those pieces out?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
I think I'll take the second part of your question and let Marty take the first. No, I don't think there's anything that we see today that we would be doing different that will be meaningful of Concentra if we own 100% today versus what we own. So no, I don't think there is anything there...
A.J. Rice -- Analyst
Nothing straight? An investment in any way or anything and moving the other cash flow into that business or anything?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
No. I would say that we do not feel at all constrained. We've had great partners there who are focused as we are on the long-term viability, stability and growth of the company. And so I would say, no, there is no constraints there. And as to the first part, I'll let Marty way in, but I would think that the second put would probably play out the way the first one did. And so we would think about our partners putting their next tranche to us right at the end of 2020 or right very beginning of 2021? Marty?
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Yeah. No, I think those ancillary right, Bob. The other thing is, if you take a look at the agreement itself and the methodology that was structured in the agreement with regards to using an investment banker to determine of evaluation. What we -- what all partners concluded was given the fact that you take a look at the two largest transactions in this space were done by us and our partners at 11.3 times. At the end of the day, there was really no need to hire an investment banker. And given that, we were able to accelerate it based on expected year-end EBITDA. So as Bob indicated, I think that will play out in 2021, as well as 2022.
A.J. Rice -- Analyst
Okay. And then my last question. If you're thinking about growing again in terms of adding properties in the LTAC world or critical access world, is there any -- I mean I know you referenced, so I'll continue with the hospital in a hospital model. Is there anything that's changed your thinking about freestanding critical access hospitals and whether those would be of interest? And any comment on the competitive landscape? Your major competitor in this space is now sort of been in a different ownership structure for more than a year. And I wonder have you seen any change in the competitive landscape as a result of any of that?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Yeah. First thing -- yeah, A.J. In terms of our critical illness recovery hospitals, just for other people that may not be as familiar, critical access is a whole different class of hospitals, critical illness hospitals. We probably would not be looking to do specific freestanding critical illness recovery hospitals for us. Now you may -- we are seeing a model that could emerge where you have a post-acute hospital that has both rehab and LTAC licensed bed in the same building. So we might do that. But our model is to have particularly because we are an LTAC-compliant patient-focused only is that we tend to think about these are smaller bed complement. So we like that 35-bed and that's best served in a least hospital within a hospital model. So you should not expect to see us break ground on the construction or the acquisition of freestanding LTAC hospitals. The capital for that would really be directed only to the rehab hospitals.
In terms of the competitive nature out there, I mean this is probably a pretty good time for us because most everybody in the space is adjusting to the new criteria. Now it does seem like it's been a couple of years that criteria was passed in 2015, but remember, the way it was phased in through the cost reports, a lot of companies and individual operators are still making some adjustments. So because we got a bit more of a jump on that in terms of our plan, it does allow us now as we have a very stable platform of 100 of these hospitals to look at opportunities. So I -- it's a long way of saying that competition is not from other providers in that space, it's really not nearly the factor that just making sure that we get the market right and that there is great availability of those compliant patient population. So you need a market where there are a lot of ICU beds and where there is a need to have the clinical programs to move those patients faster out if they may be having disproportionately long stays in the short-term acute care hospitals. So the competitive factor is not nearly as big as that. I hope that answers your question?
A.J. Rice -- Analyst
Yeah, that's great. Thanks a lot.
Operator
Thank you. And our next question comes from the line of Kevin Fischbeck with Bank of America. Your line is open.
Kevin Fischbeck -- Analyst
Great, thanks. I was wondering if you could provide a little more color on the same store revenue growth by division. I think you gave like a consolidated growth, but wondering what the organic growth profile looks like in Q4?
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Yeah, Kevin. We have not -- I mean early on, we have not provided same store versus new. We may start doing something like that in particular on the outpatient side because of the rapid growth that's occurring there. But other than that, you shouldn't expect to see same store growth.
Kevin Fischbeck -- Analyst
I guess then you mentioned your 2020 outlook and how you are looking to add basically to each division the number of hospitals. Does your guidance assume a certain amount of capital deployed on these kind of tuck-ins and additions or if you deploy capital outside of Concentra, it would be upside to that?
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Today -- yeah, I think we've put out there somewhere in the $175 million worth of capital expenditures. And that includes -- it includes on the inpatient rehab side the joint ventures of the business signed that we know we're putting some shovels in the ground. So it would include that and it includes some capex associated with our clinic increase on the outpatient side. It does not include anything on the critical illness recovery hospital.
Kevin Fischbeck -- Analyst
Okay. And then maybe it makes sense to talk about the clinics, the outpatient rehab clinics because I guess it's a sector that maybe we haven't spent a lot of time on. So just wanted to kind of hear, you guys have been adding to that clinic site pretty nicely. What is the opportunity there? How big can that get and why is it a place that you -- can you put capital forward?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Well, it's very fragmented, first of all. So while we are the largest provider by I think a pretty wide margin in terms of both revenue and number of outpatient clinics and our geographic footprint, it's still very fragmented. And we do see that as an opportunity for growth. If you look kind of the recent history of the company going back to when our primary focus had to be the LTAC criteria then we pivoted to the acquisition of Concentra and then very quickly after that the follow-on acquisition of U.S. HealthWorks, all at the same time while the inpatient rehab development was really taking shape and we accelerated that inpatient rehab business. The outpatient really was the one that we did not allocate as much capital or focus. And we think that now the latter half of 2019 and in 2020 and beyond that is a much more greater focus of the company.
So you can assume with the capital that -- with the additional capital that we've deployed there, we've also deployed much more management focus on growing that business. And when you see the growth in the number of clinics, it's actually even more significant because we reported as net growth. So on a base of 1,800, nearly 1,800 clinics, every year there is a significant number of clinics that we either close or consolidate just because of the natural process. So this year, if -- when we add, if we add 70 clinics, you can assume that we're really maybe adding as much as 100 or more clinics just because that's a net number.
So I think that it's become a management -- much more of a management focus as we're reacting to what we see as the opportunity. So as Concentra and U.S. HealthWorks has realized the synergies, we've been successful in the transition and the criteria on the LTACs, you can see that we have good momentum on our inpatient rehab joint venture strategy that really leaves the outpatient as an area where we can focus and drive some value.
Kevin Fischbeck -- Analyst
Okay. And then maybe last question. Can you give us a sense of kind of what the multiple range that you're paying across the three different division when you buy something in other divisions. What kind of multiples you're paying?
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Sure. On the outpatient rehab, we're paying anywhere in the neighborhood of 4 times to 5 times LTM EBITDA. And we'll do some adjustments on that for owner compensation and things like that. But 4 times to 5 times is really the number there. On critical illness recovery hospital, as you know, we acquired four hospitals. The multiple there that we paid was in the neighborhood of 4 times to 5 times. When we take a look at Concentra, Concentra is also in that 4 times to 5 times range. And then inpatient rehab, inpatient rehab, the strategy there really is not to acquire one-offs, but really do the joint ventures.
Kevin Fischbeck -- Analyst
Okay. So that would be 11 times that you talked about as far as the Concentra multiples. That's the big platform type deals. When you do your smaller things, it's going to be relatively modest multiples?
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Yeah. I mean -- well, it's a good question, Kevin. The fact of the matter is, when you take a look at the occupational medicine business in the United States, we have 521 centers throughout the entire country. The next largest player has 40. And most of the augment centers are really, owners have two, three, four centers at a pop. So it will be a much smaller multiple.
Kevin Fischbeck -- Analyst
All right, great. Thanks.
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Sure.
Operator
Thank you. And our next question comes from the line of Frank Morgan with RBC Capital Markets. Your line is open.
Frank Morgan -- Analyst
Hey, just one quick follow-up. What are you seeing on the labor side for therapy? Obviously with the home healthcare industry going, undergoing PDGM [Phonetic] and the SNF [Phonetic] industry going to PDPM, there seems to be this believe that there will be a sharing of the therapy capacity in those two industries. So are you seeing anything yet on the labor front that might be improving that for your business? Thanks.
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Yeah, frank. Great question. We think it's a little too early to see the benefits of the changes that have taken place in particular on the SNF side. But we do -- we have been seeing substantial layouts of PTs from contract therapy companies. So we do expect to see some benefit from that. You still there, Frank?
Frank Morgan -- Analyst
Yes, yes. Thank you.
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Great, thanks.
Operator
Thank you. And our next question comes from Bill Sutherland with Benchmark. Your line is open.
William Sutherland -- Analyst
Hi, thanks. Good morning. Just wanted to -- a couple of follow-ups on the rehab hospital side. The two planned hospitals this year, will they be consolidated?
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Yeah. They are non-consolidated, Bill.
William Sutherland -- Analyst
Okay. And when we look -- when we think about the cadence on the rehab hospital operating margin this year, the quarterly cadence, but the -- since these aren't going to be consolidated with the -- so the margins kind of be likely to stay in the range that it was there in the back half of '19?
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Yes. I think you can expect that to be the same, Bill.
William Sutherland -- Analyst
Okay. And then I just want to understand on this care tool and the impact on rates. I think you all have said that you're probably experiencing better than 2.5% average improvement. And can you help us understand why that applies to you guys specifically?
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
We cannot, Bill. I mean it is a change from the FiM scoring which has happened historically. Our reimbursement people took a look at the changes that were being implemented. We felt pretty comfortable at the time that we thought that it would not be a headwind to us and it would probably be a slight benefit and that's what we're finding. And I think it's difficult for us to tell you what competitors are seeing versus what we're seeing. All we can do is tell you what we see.
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Yeah. It's just mechanics. I mean they do the posting and the coating at the facility.
William Sutherland -- Analyst
Okay. Thanks everybody.
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Thanks, Bill.
Operator
Thank you. And I'm showing no further questions at this time. I would now like to turn the call back to Mr. Ortenzio for any closing comments.
Robert A. Ortenzio -- Executive Chairman & Co-Founder
No closing comments. Thanks for your attendance and your questions. And we'll look forward to updating you again in the next quarter.
Operator
[Operator Closing Remarks]
Questions and Answers:
Duration: 51 minutes
Call participants:
Robert A. Ortenzio -- Executive Chairman & Co-Founder
Martin F. Jackson -- Executive Vice President & Chief Financial Officer
Frank Morgan -- RBC Capital Markets -- Analyst
Justin Bowers -- Deutsche Bank -- Analyst
A.J. Rice -- Credit Suisse -- Analyst
Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst
William Sutherland -- The Benchmark Company -- Analyst
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Select Medical Holdings Corp (SEM) Q4 2019 Earnings Call Transcript - The Motley Fool
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