Pro-Dex Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 29, 2024

There are 10 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the U. S. Physical Therapy 4th Quarter 2023 and Full Year Earnings Conference Call. At this time, all participants are in a listen only mode.

Operator

After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. Now like to turn the call over to Chris Redding, President and CEO. Please go ahead, sir.

Speaker 1

Thanks, Shelby. Good morning, and welcome, everyone, to U. S. Physical Therapy's earnings call this morning. With me on the call today include Carrie Hendrickson, our CFO Eric Williams, our Chief Operating Officer Rick Binstein, our Senior Vice President, General Counsel Jake Martinez, our Senior Vice President of Finance and Accounting.

Speaker 1

Graham Reeve happens to be on a plane this morning, won't be joining us. Before we begin with some prepared remarks, I'll ask Jake to cover a brief disclosure statement. Jake, if you would, please.

Speaker 2

Thank you, Chris. This presentation contains forward looking statements, which involve certain risks and uncertainties. These forward looking statements are based on the company's current views and assumptions. The company's actual results may vary materially from those anticipated. Please see the company's filings with the Securities and Exchange Commission for more information.

Speaker 2

Thanks,

Speaker 1

Jake. I'm going to go ahead and start this morning with particular thanks to our clinical teams led by our capable partners around the country for their efforts in delivering exceptional care, returning a record number of patients to the things that they enjoy the most. And to our prevention partners for weathering what we expected to be a more challenging year in 'twenty three with great continued success in keeping thousands of workers and companies that we serve healthy and injury free. They finished the year in really strong fashion with 9.7 percent revenue growth in our final quarter and a 3 30 basis point improvement in margin in what has been a seasonally slower quarter for this subset of our business, all of which sets the table for good growth year ahead in 2024. Past year was one of persistently high demand for our physical therapy services.

Speaker 1

Each quarter in 2023 produced a record for volume across our growing networks of clinics finishing the year for the first time in our history at 30 visits per clinic per day. Visits grew to more than 5,000,000 for the year, up 11.6 percent in 2023. Demand remains strong throughout the year. Helping to meet this demand, our clinical teams did an exemplary job caring for our patients, which in turn creates additional demand from happy customers who refer their colleagues, friends and neighbors to us. Despite a rather tight labor market, we were able to attract and hire therapists to enable us to achieve these record volumes.

Speaker 1

Our team led by our locally strong partners around the country helped to limit turnover at a time when demand has remained at record levels. And our clinical cost efficiency improved in 2023 despite significant inflationary pressures. I'm particularly proud of our ops team and their efforts to keep these many factors and forces in balance throughout the year, all while juggling numerous initiatives, including opening or tucking in 35 clinics and working to integrate an additional group via acquisitions in both PT as well as injury prevention. Additionally, we work to overcome the Medicare cuts, which made our lives more difficult these past few years, despite physical therapy saving the system significant costs when compared to more expensive, invasive and often unnecessary musculoskeletal procedures. Our team renegotiated a significant number of payer contracts in 2023, which is bearing fruit for us in and across our commercial contract base.

Speaker 1

And we have a good work plan for 2024 to carry on that work and to impact rates further. Finally, you saw in the release that we announced a small dividend increase with the start of this year with the majority of our attention and focus on deploying capital through carefully vetted acquisitions in the quarter and years to come. The partners we added in 2023 are ahead of plan and doing terrific, including the industrial injury prevention partnership that brought us our first software product, which is getting strong reviews and we produce a great overall year in injury prevention. On the PT side of things, we are busy at varying stages of diligence and completion, several opportunities that we've included in the guidance we provided in our release. While the environment isn't easy by any stretch, by a fantastic team whom I love and respect.

Speaker 1

And I can assure you everyone is working very hard to produce a good year ahead. We have a lot of detail to cover. Kerry always does a great job with that. So I'm going to turn it over to him to dive in before we open it up for questions.

Speaker 3

Great. Thank you, Chris, and good morning, everyone. Despite challenges as we enter 2023, including the percent Medicare rate reduction that we've talked about in a tight labor environment, our team produced strong results in 2023. As Chris noted, we recorded the highest patient volumes in the company's history in 2023 at 30 patients per clinic per day. Our physical therapy revenues increased more than $50,000,000 in 2024, which was a 10% increase 10.6% increase over the prior year.

Speaker 3

Our physical therapy operating costs decreased by $0.55 per visit for the full year. Our industrial injury prevention business strengthened as the year progressed with 4th quarter revenues up 9.7% over the prior year 4th quarter and IIP 4th quarter operating income up almost 30% over the prior year. And we achieved year over year growth in both adjusted EBITDA and operating results. We added 46 clinics via acquisitions and de novos in 23, 31 on a net basis after closures and we added to our IIP business as well. Further, we strengthened our capital structure with a secondary offering in May 2023, which was done on an accretive basis, providing us with cash to deploy into growth opportunities.

Speaker 3

So despite the challenges as we began the year, our team produced some very good results and there was a lot of good work done in 2023 that positions us well as we go forward. We reported adjusted EBITDA for the 4th quarter of $19,000,000 an increase of $1,100,000 over the Q4 of the prior year. Our operating results were $0.59 per share in the Q4 of 2023, which is an increase over the $0.58 reported in the Q4 of last year. Our total company revenues increased 9.6 percent in the 4th quarter, growing from $141,200,000 in the 4th quarter to $154,800,000 in the Q4 of 'twenty 3. And our total company gross profit increased $2,700,000 or 9.6 percent from $27,800,000 in the Q4 of 'twenty 2 and the Q4 of 'twenty 3.

Speaker 3

Our average visits per clinic per day in the Q4 were 29.9, which is the highest volume in the company's history for a 4th quarter. October was at 29.9, November was at 30.3 and December was at 29.5. All 3 months were higher than the same month in the previous year. Our net rate was $103.68 in the Q4 of 2020 3, which was a meaningful sequential increase from $102.37 that we reported in the Q3 of 'twenty three due to the cumulative impact of progress in our rate negotiations and some operational efforts we've been working at all year. From the 104.28 reported in the Q4 of 2022 due to the reductions in Medicare rates, which represent about 1 third of our payer mix.

Speaker 3

All other payer categories increased 2.1% on a combined basis over the prior year. Our physical therapy revenues were $134,600,000 in the Q4 of 'twenty three, which was an increase of $11,800,000 or 9.6 percent from the Q4 of 'twenty 2. The increase was driven by having 45 more clinics on average in the Q4 of 'twenty 3 than in the Q4 of 'twenty 2, coupled with record 4th quarter average patient visits per clinic per day, which was partially offset by the decrease in net rate. Our physical therapy operating costs were $108,400,000 which was an increase of 10.3% over the Q4 of the prior year, also due to having 45 more clinics on average than in the Q4 of 'twenty 2. On a per visit basis, our total operating costs were $84.09 in the 4th quarter, which is basically flat with the $84.05 that we had in the Q4 of 'twenty operating costs were $83.34 in full year 2022 and they moved down to $82.79 per visit for the full year of 2023.

Speaker 3

Our salaries and related costs decreased to $7.59 in the 4th quarter, down from $60.04 in the Q4 of 2022. For the full year, salaries and related costs were down $0.33 per visit versus the previous year. Our physical therapy margin was 19.5% in the Q4 of 2023. That was down slightly from the 20% that we had in the Q4 of 'twenty 2, with the change due to the decrease in our net rate versus the prior year. Even with the decline on our net rate versus last year, our PT gross profit increased 7% in the Q4.

Speaker 3

As I mentioned earlier, IP business saw nice growth in the Q4. IP net revenues were up $1,800,000 or 9.7 percent, and our expenses were up only $800,000 or 5.3 percent. So that resulted in a $1,000,000 increase in the IOP income in the Q4 of 'twenty three, which was an almost 30% increase over the prior year. Our IIP margin increased from 17.9% in the Q4 of 'twenty 2 to 21.2% in the Q4 of 'twenty 3. Our balance sheet remains in an excellent position.

Speaker 3

We have $144,000,000 of debt on our term loan with a 5 year swap agreement in place that places the rate on our debt at 4.7%, and we expect to remain at that rate going forward. As you know, that's a very favorable rate today's market and well below the current Fed funds rate. In the Q4 of 2023 alone, the swap agreement saved us $900,000 in interest expense cumulative savings of $3,300,000 for the full year of 2023. Our interest expense was $2,000,000 in the Q4 of 2023. In addition to the term loan, we also have a $175,000,000 revolving credit facility that had nothing drawn on it during the Q4.

Speaker 3

And we have We also noted in the release that our Board raised our quarterly dividend rate by $0.01 per quarter in 2024. At the new rate, our full year dividend paid would be about would be $1.76 per share, which is a dividend yield of approximately 1.7% based on our recent stock price. As we noted in our release, we expect our EBITDA for full year 2024 to be in the range of $80,000,000 to $85,000,000 The 3.5% Medicare rate reduction that went into effect on January 1 results in a $6,000,000 reduction in revenue and a $5,300,000 reduction in EBITDA net of minority interest. So the $77,700,000 of EBITDA that reported in 'twenty three becomes $72,400,000 as we begin 2020 due to the Medicare rate reduction. The 2024 EBITDA range is an increase of roughly 10% to 17% from this starting point.

Speaker 3

We have tremendous confidence in our team to produce EBITDA growth in 2024. We'll benefit in 2024 from the full year impact of negotiations that we completed in 'twenty three and then the partial year impact of negotiation work that we do during 20 expect to continue to increase volumes at our existing clinics in 2024 and we'll maintain our discipline and expense control. We'll also benefit in 2024 from the full year contribution from acquisitions that we completed during 2023. In addition, we have several acquisitions that we expect to close in the near term by roughly the middle of 2024. So we've included the expected EBITDA contribution from those acquisitions in our 2024 guidance.

Speaker 3

The acquisitions we're including are similar in size to those we've completed in the normal course between $1,000,000 $3,000,000 of total enterprise EBITDA with us purchasing between 50% 90% of those companies. We expect our 2024 EBITDA by quarter to lay out a little differently than it did last year. As a reminder, we had no significant weather events in the Q1 of 2023, which resulted in the best Q1 volumes we've ever had by a sizable margin. In January of this year, we did have some significant weather events, which was more in line with our historic experience. So we'd expect our year to get off to a little slower start than it did last year and then to gain momentum as we layer in rate increases, volume growth and acquisitions as the year progresses, against the backdrop of our normal seasonal patterns.

Speaker 3

As a reminder, we expect our outstanding shares to be a little over 15,000,000 shares in each quarter of 2024 and for full year 2024, which is where it has been since we issued the 1,900,000 shares with our secondary offering in late May of 2023. That will impact our comparisons for our per share metrics in the 1st couple of quarters of 2024. In closing, we feel very good about the growth in 2024 and we look forward to producing strong results for all of our stakeholders in 2024. With that, I'll turn the call back to Chris.

Speaker 1

Yes. Thanks, Carrie. Great job. Operator, let's go ahead and open it up for questions.

Operator

And we'll take our first question from Brian Tanquilut with Jefferies. Your

Speaker 4

Congrats on the strong quarter. Maybe for both Chris and Carey, as I think about the fact that you included some M and A expected M and A contributions in the guide, just curious in terms of your visibility into the timing of the deals that you embedded in the guide? And then maybe, Chris, more broadly speaking, how are you thinking about the M and A landscape this year in terms of what you're seeing in the market in terms of competition for deals and also like the deal flow that you're seeing within your own pipeline?

Speaker 1

Yes. In terms of the timing, I think we've tried to speak to that. I mean, one of the reasons we added it into our guidance this year is just due to the relative proximity to when we were going to do this announcement, this release. So I would say because these sometimes aren't certain between now July, kind of what we're looking at for the ones that are kind of in queue right now. In terms of the broader landscape, we're as busy as we've ever been.

Speaker 1

Competition is changed or changing some because some folks are more sidelined than they have been for quite some time just because of leverage and the rates that some of these companies are having carry. And so it's good opportunity for us. That said, we continue to be selective and we continue to look for our kinds of partners and attributes. And so that part isn't changing. We'll continue to be disciplined, but it's good opportunity right now.

Speaker 1

We expect to be busy this year.

Speaker 4

That's awesome. And then maybe, Carey, as I think about the gross margin side, you highlighted your success there and obviously is very impressive. So just curious in terms of what you see as the remaining opportunity either to hold the gross margin line steady as you grow volumes this year or if there are remaining opportunities to drive some margin expansion?

Speaker 3

Yes. I think it's going to depend on how much we can do on the rate side this year. We expect to do well there. I think we'll be able to at least maintain our margins where they have been, if not grow them slightly in 2024. Yes, but it's going to really give me a function of how much we can push on the net rate side.

Speaker 3

And then to the extent we're able to keep our costs in line, so it's either flat on a per visit basis or slightly better than that. And if we do that, if we push both of those really well, I think we can see a little margin improvement.

Speaker 4

Maybe, Carey, for Chris, actually, as I think about just the last point that Carey made on the ability to drive rate growth from commercial payers, how are you thinking about that in terms of what the discussions are and kind of like what inning are we in terms of trying to get more rate growth across the portfolio of contracts that you have in the different markets that you're in?

Speaker 3

Yes. So we've had really good success in these discussions. I'd say they're based around outcomes and they're based around the value that physical therapy provides and the fact that it's a way to actually decrease cost of the overall patient's care. And we've been successful in those conversations. It's we have a team that is working on our most the ones that we concentrate on the most are the 5 largest carriers and at our top partnerships.

Speaker 3

And we're going to keep at that work during 2020.

Speaker 1

So what inning would you say? In the inning,

Speaker 3

I would say we're probably in the maybe the 5th inning or so. We've made some good progress so far in the last 18 months, I'd say. But we still have some more we can do. We still have we definitely have work we can do. The good thing is, Brian, we built in step increases.

Speaker 3

As we renegotiated these contracts, we've been trying to build in 1, 2, I mean, 3 year step increases so that we're not having to revisit all these contracts each year, because we have, as you know, like 1700 plus contracts that we're always having to come back to and renegotiate. So the 3 year step increases have really helped because we get that automatically as we as the 1 year lapses. So that's been good.

Speaker 1

And I would say this gap, when we get to the 9th inning, we're not done. We're going to just play a new game. That's right. So we're going to start over. So this is going to be a perpetual thing.

Speaker 1

And I think over time, how we get paid, maybe it changes and maybe we have a little bit more latitude to focus on results and not count minutes like we do right now, which is crazy way to do it. But I think we've got continued opportunity.

Speaker 4

That's awesome. All right. Congrats again. Thanks, guys. Thank you.

Operator

And we'll take our next question from Larry Solow with CJS Securities. Your line is open.

Speaker 5

Good morning, Larry. Good morning, guys. Thanks. Good morning. Good morning, both of you.

Speaker 5

I guess just continuing on just on that line of question, just on the commercial side, you mentioned a nice 2% increase this quarter or 2% ex the CMS impact. Do you have what it was for the full year? And do you expect a similar sort of improvement or maybe even a little bit better in 2024? Or is you I think using that baseball analogy of we're in the top of the fifty, you get some of that stuff from the bottom of the 4th that wasn't necessarily in 2030 and maybe a little more

Speaker 1

Yes, for sure.

Speaker 3

Yes, right. So, for 2023, if you take all the categories except for Medicare and combine them on a combined basis, they were up about 1.5% in 2023. So obviously, it accelerated in the 4th quarter being up 2.1%. So it's been accelerating as years gone along. And I think I'm sorry,

Speaker 5

go ahead, Larry. No, no, go ahead. Yes, I'm here. Go ahead.

Speaker 3

Yes. And I think as we looked at 'twenty four, you asked about that. I mean, I think we can if we do somewhere between just from a math perspective, right, if Medicare is going to be down 3.5%, If we do 1.5% to 2% of an increase in these other categories combined, that would make our rate next year flat. And I think we can do that or maybe even a little better.

Speaker 5

Got it. Okay. And on the CMS rate cut, I guess, 3.6%, it sounds like there'll be no relief on that. Congress is probably not going to get together in the next couple of weeks to do anything there. But what Christian, can you just remind us, I know these cuts, they're sort of related to physician fee schedule and shifts sort of more to the general practitioner while maintaining sort of budget neutrality.

Speaker 5

But what's the outlook going forward? Are we pretty much at the end of that? Do you expect more cuts potentially in 2025? Or how do you guys view

Speaker 1

that? Yes, I don't know, Larry. I mean, trying to predict what CMS does or the federal government does a little bit of a hard job. But I think we're at the end and I think we'll get back into a more normal pattern as we go forward with small increases every year. I think people understand that they're picking on the wrong guys and that this isn't sustainable to have 3 sequential years of cuts.

Speaker 1

And that's what I believe. So we'll see what happens.

Speaker 5

Got it. Okay, great. I appreciate the thought. Thanks. Thank you.

Speaker 5

Thanks, Larry.

Operator

And we'll take our next question from Joanna Gajuk with Bank of America. Your line is open.

Speaker 6

Hi, good morning. Thank you so much for taking the questions here. So I guess a couple of things. When it comes to these assets that you outlined, so you listed contribution from unannounced deals, those that you expect to close later this year or this year through the first half, maybe July. I listed as one of the items, but it's one of the last items on that list.

Speaker 6

So should we wait into this as implying the kind of the assets you're talking about here versus the $5,300,000 I guess, when you have to overcome year over year, but the deal contribution from those features is kind of smaller items. So are you willing to quantify that or quantify some of these other things you listed there as assets?

Speaker 3

Yes. Joanna, you can appreciate there's a lot of puts and takes. And we didn't provide specifics about any of the items and their dollar amounts and impact, just to know that there are things are some and some will get more on than we would anticipate and then others we may not be quite as much on. So we didn't want to specifically talk about dollars related to each one of those items. I will say on the acquisitions, I talked a little bit about that in here just that they're these are ones that are in kind of our normal course, if you will, between $1,000,000 $3,000,000 of EBITDA for a total enterprise basis.

Speaker 3

And then we are going to have our ownership percentage of those, which typically is somewhere around 60%, 70%, 80%. And then and so I think you can kind of get some feel for what the amounts are there related to that. But we'll have other we believe we'll have ones beyond what we have put in the guidance beyond the first half of the year that will close later in the year and those can have impact. Their impact won't be as significant though because the later in the year you go, the later the less impact those have in 2024.

Speaker 6

All right. That's helpful. And I guess on the guidance, I guess, then how should we think about what do you assume essentially for volumes here? So I appreciate you highlighted that Q1 will have a tough comp. But I guess what was the same store, I guess, volume growth for 2023, the full year?

Speaker 6

And then how do you think about volumes, same store volumes, I guess, growing for the full year 2024?

Speaker 3

Yes. I mean, we think we could we hope to have strong volumes. Really, that's going to be that's one of those factors that you we have an amount in the plan and we it's a nice mid single digit kind of growth number, 3% to 5% probably growth for our existing clinics. And we think that's achievable in 2024.

Speaker 6

Okay. Thank you. And last one on a follow-up on the discussion around pricing and good to see the commercial traction there. Can you talk about workers' comp? I guess, 2 things.

Speaker 6

What is you getting there and also the mix, are you improving or increasing the workers' comp mix and I guess that will be helping the average rate as well, right?

Speaker 3

Yes. The mix has stayed pretty consistent. The good news is we're growing the other categories well too. So workers' comp is growing. It's been had really nice increases, but so has commercial, so has Medicare.

Speaker 3

We've had just a lot of patient volume growth across the mix of categories. The mix hasn't changed that much. And the workers' comp rate though is continuing to improve. It's higher than 2023 than it was in 3 than it was in 'twenty two and we're hoping it'll continue to be like that as we go forward. We're negotiating rate on workers' comp just like we are in others now as well.

Speaker 6

And if I may just squeeze the very last one, sorry about that. And thank you for taking the question. The comments around margins, so these were gross margin, where you thought about keeping the flower maybe even expanding. Any comment around corporate level costs? How should we think about the number going forward?

Speaker 6

I guess, it picked up a little bit in Q4. I guess, maybe there's some seasonality, dollars 13,900,000 corporate office costs. So how should we think about that number going forward? Thank you.

Speaker 3

Yes. I think that consistently, we've been between 8.5% 9% of total net revenue on that corporate cost number for several years. And I think that's how to think about it is as a percent of net revenue because we do have to add some additional cost additional clinics that we add as we go forward. So I think thinking of it in that 8.5% to 9% of net revenue total revenue number Joanna?

Operator

And we'll take our next question from Jared Haas with William Blair. Your line is open.

Speaker 3

Hi, Jared.

Speaker 7

Thanks for taking the questions. Just first one from us and maybe just sticking with sort of levers from a a margin perspective and maybe thinking over the next couple of years. I was curious to think about just how you sort of the trends from a hiring and a staffing perspective. I think in recent quarters you kind of talked about a little bit of a shift in mix to PT assistance. So I'm just kind of curious to kind of hear how you're thinking about that mix and sort of the availability from a staffing and labor perspective, any trends there to call out from an operating cost perspective?

Speaker 1

Yes. I would just say this. The market continues to be tight, but I wouldn't call it unforgiving recruiting team here combined with our partners locally, our ops folks, everybody's working together to do a good job to get new clinicians into the company. We're not we've always been a PT centric company, more licensed therapists, considerably more than PT assistants, which are also a licensed position. But look, if we have a good opportunity with a great PT assistant, we're not going to probably pass on either.

Speaker 1

So the relationships have been reasonably steady between PT and PPA the last year. If we can improve those a little bit, really where we just have to be sensitive to it is on the schedule more than anything with respect to federal patients. But markets, it's competitive market, but we're doing okay. Eric, anything you want to add to that?

Speaker 8

No, I think you summed that up pretty well. We continue to invest in additional resources as the company grows to help us from a recruiting perspective. And our clinical turnover number this year was the lowest number we've had in 5 years. And it was 1.5 percentage points better than 2022, which also helped us from a business per

Speaker 7

Helpful. And then kind of sticking with this theme of levers for margin expansion, another area I was hoping to hear an update on was in the past you kind of talked about rolling out group purchasing across the platform. Just hoping to hear a little bit more color in terms of just how penetrated that is across your footprint of clinics. And then to what extent you see any kind of incremental leverage opportunities from continuing to consolidate purchasing?

Speaker 1

Yes. Well, I mean, you have 2 unfortunately divergent factors. You have the rollout of group purchasing, which we've done and is pretty complete. And then you have overlaid on that just general inflation. And so I think it was the right thing to do.

Speaker 1

I think it was smart to do. We didn't get it done day 1 last year, so it rolled out across the year. So we'll see that carry forward. You saw some of that probably a small part of that show up in our total cost per visit last year. But look, we were inflation has been a little challenging too.

Speaker 1

And so I'm sure that what we got, we gave some of that back in inflation. So that's not a big lever. Our big focus is driving additional volume through our facilities, which give us a little overhead coverage and help us be a little bit more efficient. And that's really what it comes down to more than anything else.

Speaker 3

Yes. And Jared, just to add on that, I will say that you do gain operating leverage as you increase your volumes at your existing clinics because the fixed costs remain relatively the same, right? So the incremental margin on those extra visits is higher than your overall margin. So that should help us as we go forward if we can keep those costs in line or maybe even a little better on a per visit basis as we go forward, which I think we can do.

Speaker 7

And then again, very helpful color. And then maybe we've kind of talked around some of the puts and takes to the outlook in 2024. I guess maybe just to put a fine point on when we think about kind of the low to high end of the range for adjusted EBITDA guidance in 2024. Is the biggest swing factor in your opinion just sort of timing related to when you complete the M and A deals that are assumed in that outlook? Is it potentially some variance in your assumptions around the rate trends for the year?

Speaker 7

Just would love to unpack a little bit about that in terms of just what kind of drives that variance from the low to the high end?

Speaker 1

Yes. Let me give Carey a break and I'm going to take that. I mean, guys, when you run a company, there are things every day that happen and you try to control as many things as you can and you try to have a great crystal ball. And when you're running close to 700 facilities and you're delivering care, I mean, it's not all 1 +1 equals 2 every day. And so we have a series of things that we're very familiar with that we have to do well.

Speaker 1

We have to drive additional volume, volume that we're projecting for July August September of the year ahead. We have to get contracts updated and renewed and carry those contracts forward and bring in relatively the same mix or slightly better mix of patients than we've had. None of that is certain. All that requires an inordinate amount of work on everybody's part clinically, locally and operationally. And then we have the timing of acquisitions, which as you point out has some effect.

Speaker 1

You roll that all together and we've given you the guidance that we've given you. We think we can do better than the bottom and we think we'll be somewhere in that range and we'll update as the year goes on according to how things are going, if we feel like we need to guide the market in a particular direction. So that's really all I can tell you right now. We're early in the year. We're off to a reasonably good start, albeit a little weather in January, but I think we can overcome that.

Speaker 1

We plan to overcome it as the year goes on. I wish I could tell you more by bucket, but it doesn't really work that way when you're in real life.

Speaker 7

And appreciate all the details.

Operator

We'll take our next question from Mike Petusky with Barrington Research. Your line is open.

Speaker 1

Hey, Mike.

Speaker 9

Good morning. Could I actually get the I don't think you guys mentioned it, the actual payer mix for the quarter?

Speaker 3

Sure. Yes, for the quarter. For the quarter, it was pretty similar. We had 48% commercial, 32%, 0.5% workers' comp and then the other 3 Medicare, personal injury, self pay, may get the rest.

Speaker 9

And then, Carey, I'm sorry, you at least on my end, you broke up on workers' comp. How much was workers' comp?

Speaker 3

Workers' comp was 9.5%. And then so 48% commercial, 32% Medicare, 9.5% for workers' comp and then the other categories make up the rest.

Speaker 9

Okay. And then I guess maybe for Chris or somebody else in the room. On workers' comp, I know you guys have expressed maybe over the last 2 to 4 quarters some optimism around possibly changing the trajectory there and getting that back up into sort of the low double digit range. Is that optimism still there or is that just a tough needle to move? Because at one time you did have that probably 12%, 14% of overall revenue.

Speaker 1

Yes. It's not dead yet, Mike, but it's a tough list. And when you're growing and we've been able to grow the whole business, it's tough to outgrow just one category. But we've done a lot of training. We've signed a lot of new contracts that should drive additional volume.

Speaker 1

Our partners are focused on it. Eric, do you want to weigh in?

Speaker 8

Yes. There were a lot of new agreements that were signed and a lot of those took place at the tail end, late Q3 and Q4. So we actually did see a pickup in Q4. Last year, in Q4, work comp was 9.2% of our mix, so up slightly from where we were. And I think the work and the things that we executed on late in 2023 are going to pay dividends to us in 2024.

Speaker 8

And there's a handful of additional agreements that are in process that will also get executed as we go through Q1 into Q2 that will pay dividends for us we believe in the back part of the year. So this is an area that we continue to really focus hard on, not just from a volume perspective, but from a rate perspective as well. And we did get a nice pickup in rate year over year for our work comp business. So opportunity there, but as Chris pointed out, when the whole business is growing, it's really hard to out kick those other categories on a significant basis, but we are making progress here and we expect better things in 2024.

Speaker 4

Okay. All right, great.

Speaker 9

And then just a quick question, I guess, on the lack of action in Washington and just the CMS cut this year. In terms of and I know Chris that you're very connected and a leader in the taken it for the last few years here and essentially make the argument that there was no relief in 'twenty four and that this streak should end at this point. I mean, has there been any talk, I guess, within the industry that there got to be an end to this?

Speaker 1

Yes. There's a lot of talk in the industry. I would tell you CMS is a frustrating place. We seem to have a lot more empathy in Congress. We're actually going to be in DC, Nick and I, Nick who serves as our Executive Director for APTQI, who also works with us and a lot of our member company CEOs will be in Washington in another month or so.

Speaker 1

And we'll meet with MedPAC to talk about some of their scoring and their lack of ability to score true savers in the system like for instance fall prevention is a saver. We know that if you can prevent a fall, we know measurably what the downstream savings look like and they're spectacular level of savings. Based on the rules, again, we're talking about the federal government now and everything's got a 1,000,000 rules associated with it. Based on the rules, MedPAC isn't able to score a saver as a saver. They have to score it as a cost.

Speaker 1

It's like it's a new add on to the prevention of a massive downstream expense. Doesn't make sense. And so there's a lot of coordination that needs to occur between the lawmaking side and the rulemaking side of government and CMS. And so, yes, we're going to continue to beat the drum. We're going to continue to work with the APTA and APQI and all the constituents and all the good people that I get to work with in those two organizations to push hard.

Speaker 1

And I think we will come out the other side and be okay. To say it's not frustrating would be an under statement. I mean, it's been a frustrating period. But I think in everyone's heart, they know that physical therapy and statistically and according to a lot of good studies that are out right now, physical therapy is should be the entree point for muscular skeletal care. If it is, it saves massive amount of cost.

Speaker 1

And so we're going to continue to beat that drum. My ability to absolutely predict what happens, I would say, is not great. But we're

Speaker 9

No, I think I lost you. Thank you. That's great. And just one quick one. On the M and A that's included in the guidance, that's all I'm assuming that's all PT, no injury prevention.

Speaker 9

Is that correct?

Speaker 1

Don't make that assumption.

Speaker 9

Okay, fair enough. All right. Thank you so much and nice finish to the year. Thanks.

Speaker 1

Now I will say that for everybody's benefit, I mean, statistically speaking, while we've been active in injury prevention and expect to continue to be active, the majority of the deals that we get done are in the PT space. But you can expect us to be active in both.

Speaker 3

Thanks.

Speaker 1

Thanks, Mike. Sure.

Operator

And it appears that we have no further questions at this time. I will now turn the program back over to our presenters for any additional or closing remarks.

Speaker 1

Look, we really truly appreciate your time and attention this morning. Carrie and I are available later to answer questions, either today or later this week or next week. We appreciate your interest and we hope you have a great day. Bye now. Thanks everyone.

Operator

That concludes today's teleconference. Thank you for your participation. You may now disconnect.

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