Guidance Update
Q: Guidance up by how much?
A: Management raised EBITDA guidance midpoint by about $27.5–$28 million with a net headwind of $5 million, driven by strong volume performance and balancing tailwinds and headwinds.

Guidance Components
Q: Key back-half headwinds outlined?
A: They cited impending headwinds from the Piedmont infusion and expected Oracle Fusion costs, while noting bad debt trends should normalize, consistent with historical patterns.

Discharge Growth
Q: What discharge growth is expected?
A: Although they avoid quarterly specifics, management anticipates a discharge growth CAGR of 6%–8% over time, reflecting continued same-store growth above 4%.

Facility Costs
Q: How have new facility costs evolved?
A: New de novo facilities continue to cost roughly $1.2 million per bed, with expansion projects at about $700,000 per bed due to improved supply chain efficiencies.

Bad Debt
Q: How is bad debt performing?
A: Bad debt increased due to TPE audits by Palmetto, but management expects a reversal as claims are processed favorably in the coming period.

Labor Outlook
Q: What is the labor inflation outlook?
A: They anticipate labor inflation to stabilize around 3.5%, supported by efforts in recruitment and retention of key clinical staff.

MA Contracting
Q: How are Medicare Advantage contracts trending?
A: Discussions with Medicare Advantage plans remain constructive despite persistent pre-authorization challenges, with no significant shifts reported.

Referral Trends
Q: Are referral patterns stable now?
A: Post-acute referral patterns have largely settled since COVID, with IRFs increasingly favored over nursing homes due to better patient outcomes.

Buybacks
Q: Will share buybacks increase?
A: Robust free cash flow has enabled more share repurchases, complementing dividend increases as part of a balanced shareholder return approach.

Audit Reserves
Q: What happens with audit reserves?
A: Reserves are established when claims are selected—mainly by Palmetto—and are quickly reversed upon favorable claim resolution and cash receipt.

Startup Costs
Q: How are startup cost trends?
A: Q2 preopening ramp-up costs were $6.9M, with a full-year forecast of $15–$18M, reflecting ongoing investments including Oracle Fusion conversion initiatives.

Medicare Mix
Q: How is the Medicare Advantage mix shifting?
A: The Medicare Advantage mix has seen a slight increase of about 0.5 percentage point, consistent with broader market dynamics and strong performance in medically complex cases.

Occupancy
Q: Why did occupancy decline sequentially?
A: Occupancy dipped as nearly 194 new beds were added later in Q2, temporarily affecting utilization during the ramp-up phase.

Provider Revenue
Q: What about provider tax revenue exposure?
A: Exposure to provider tax revenue remains volatile and unpredictable due to state fiscal cycles, making it challenging to incorporate into guidance consistently.

Labor Costs
Q: How have labor cost trends been?
A: While labor-related costs such as SWB per FTE have seen moderate increases, they have remained manageable amid sustained volume and strong same-store performance.

Geography Expansion
Q: Any plans for new state entries?
A: Management is pursuing expansion into new geographies, having recently entered Rhode Island and planning new entries in markets like Connecticut next year.

Margin Guidance
Q: Is core margin leverage improved?
A: When asked about margin leverage improvements, management requested the question be repeated—offering no definitive response on this matter.