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US Physical Therapy Inc. (NYSE:USPH)

Q2 2010 Earnings Call

August 05, 2010 10:00 am ET

Executives

Jon Bates - VP, Controller

Chris Reading - CEO

Larry McAfee - CFO

Analysts

Larry Solow - CJS Securities

Alex Gait - Castle Peak Asset Management

Mitra Ramgopal - Sidoti & Company

Brian Tanquilut - Jefferies & Company

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Second Quarter 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I would now like to turn the conference over to Mr. Chris Reading, President and CEO. Sir, you may begin your conference.

Chris Reading

Thank you very much. Good morning everyone before we start today I would just let you know who is with me in Houston Larry McAfee, our Executive Vice President, Chief Financial Officer; Jon Bates, our Vice President and Controller. Absent today is going Glenn McDowell, our Chief Operating Officer. Glenn is on a very deserved vacation. Somewhere outside to reach of cell phones and so what happened he had chance to take some deserved time off and he will be back next week. Any questions normally for Glenn we will prepare to cover here as well.

Before we start I would like to ask Jon to read a brief disclosure statement and then we will begin.

Jon Bates

Thanks, Chris. This presentation contains forward-looking statements, which involve certain risks and uncertainties. And these forward-looking statements are based on the company’s current views and assumptions and the company’s actual results can vary materially from those anticipated. Please see the company’s filings with the Securities and Exchange Commission for more information.

Chris Reading

Thanks, Jon. For those of you who that are normally on our call, I’m going to handle the call a little bit differently today than normal and go out straight and just talk to you for a little bit today. Then I will ask Glenn to cover the permanent financial details, really want to try to talk and explain what we are as a company, what we are doing and why we are able to achieve some of the results that we have able to achieve this quarter in this year.

I also want to tell little bit of a story along the way and highlight some of our partnerships. Right in the call earlier this week with our audit committee to clear the press release in the 10-Q and I think I opened the call by saying that we had a pretty solid quarter at which point I think it probably expanded a couple of people over the call on the team because really we had an outstanding quarter.

We always look to try to make it as perfect as we can be and that’s what we should stride for and knowing that we are probably not going to get there one of those areas we have continued work to do always in the same-store area that would have probably made this about as close to a perfect quarter as we could have gotten but it was truly an excellent quarter force we are very happy with the progress we have made since last year and remember last year was a great year for us.

Second quarter last year was a record quarter and we moved ahead from where we were second quarter of last year, I think at $0.31 on reported basis up significantly over 20% to $0.38 this quarter.

I want to mention a number of our partnerships and really when we talk about the company what we are about and why are we able to do some of these things and what's really still a very challenging environment. I saw some jobless numbers today which were up again, our market hasn’t responded too well early this morning, some of those statistics, but when we are out in the communities and it still feels difficult, unemployment is still higher, the employments high. We have been able to do some things and to navigate internally here with the help of our very talented made up of excellent partners around the country, needs in our business people, they are clinicians who dedicated to the care of their patients, they are dedicated to the communities they live and work in, they are clinicians at heart.

A number on the call today I am sure but most are in the clinic today seeing patients, doing what they do best and what they love to do and that's making a difference in lives of our patients. I think we've done that very, very well. We endeavor here in Houston and with our support team around the country to provide resources to them. So that they can focus on what they love to do and that's drive business and make a difference with their patients and recruit new staffs so that we can handle the growth and drive more growth.

I want to point out a number of our partnerships around the country. They have just done an outstanding job and one of thing is that continued tough market. We have partnership in Michigan and places like Plymouth and Saginaw and in around Detroit which is our view one of the toughest hit areas in the country that are putting out some outstanding year-over-year numbers.

They have found a way to continue to grow even in a difficult market, and I think that's really what it's about and that’s what I think underscores where we are as a company. We are not always going to put up a perfect quarter. But we are going to try and we are going to work very hard to figure out away how to overcome some of the challenges that are going to continue to be out there in this healthcare market right now and we are going to figure out away how to get a good, solid win under our belt. And our partners work very hard to do that, places like Florida and Maine. We have partnerships that have been around for more than 10 years in Dallas, multimillion partnerships that year-over-year find a way to make it happen and grow.

Some of our acquired partnerships in places like Phoenix, Arizona with our great partner out there. We continue to add facilities and what is a very difficult housing market in a very difficult employment market and we are still driving business.

In our newly acquired partnerships in places like New Jersey where they doing an outstanding job, we've opened two new facilities during the process of getting the second one opened right now. And we are learning from them in terms of their unique and very focused consumer directed marketing approach which we adopted and adapted and are rolling out in a very focused way across the country.

These are the kind of things that enable us to overcome some of the challenges of the day. Our contracting team here in Houston continues to make good strides, working with our folks and our clinicians to deliver great care in combination. We’ve been able to increase net rate this year pretty significantly. We had a great year last year in terms of net rate expansion and that’s continuing in this year.

Places like Nashville, where we’ve had challenges like the flood that affected all of Nashville and many of the surrounding areas that occurred in May and impacted us over 3,000 businesses between May and June.

Our partners did two things, they rallied around their team and their communities helped to rebuild homes and they stayed focused on the business and they had a plan this year and they have done a great job. So we’ve got some challenges in the market. We’ve got some opportunities we think. We are going to continue to grow our marketing in sales space. We are doubling down in some of our established markets creating a more focused territory for some of our long tenured people of bringing on some new people.

We right now have 14 or 15 new marketing positions that we’ve identified and approved and are looking to fill to continue to grow in those areas. And to continue to drive the 20 plus percent income in earnings growth that we are able to do this quarter.

We’ve seen margin expansion in this quarter over last year. When I looked at June last year we had an excellent a year ago. We increased our EPS just in the month of June more than a success some where we were June a year ago. Our margins are operating margins expanded from 27% in on that month to over 31% and up for the quarter. We will continue to work and on all these things we have more opportunity.

We’ve got to figure out a way to continue to be more efficient. And at the same time to deliver great care. I think our clinicians all understand that, we spend a lot of time on that, that’ not an easy thing. And that’s something that happens in increments over time as we learn how to remain focused on the outcome and not the process. And we continue to work on that, but the good news is we have opportunity and we have room.

We continue to be focused on development; we had a very good development quarter. We open seven new facilities and closed a few. We are going to continue to pair our facilities that makes sense but I will tell you that facilities we have opened are doing an excellent job, both the new partners and the satellites of existing partnerships; our recruiting team has done an excellent job identifying very good people. And this whole partnership thing this isn’t just about giving a share of the business away to anybody, this is about finding outstanding people, people who are driven, people who are the best at what they do in the communities, in which they live and work.

And incentivizing them in a way that make sense to them and gives them a reason to go out and make extraordinary things happen. I think we have got a great team of partners around the country, we remained focused on attracting new partners organically into acquisition, we think we have got lot to offer and we think we have got a great team that has ability to grow this business further and when we'll continue to be focused on that.

We have added some resources this year; we've added some resources to focus on more comp expansion and industrial expansion. Those guys are doing a great job and making a lot of good things happen, we have re-upped their Ford deal recently and that continues, we have open the doors on some other industries and places around the country and are making great strides there with the help of our partners and are very focused comp team.

And we are going to continue to do that, we'd like to diversify our payer base a little further away from our federal payers, you all are likely aware that TMS has some proposals out there that we don’t entirely agree with. We are working on a very focused grassroots effort to push back on that and to save time, we are doing a lot of the things so I think we need to do, to move forward if the environment remains challenging as it is today and face whatever challenges to come. And I think we are well prepared to do that. So with that I want to say thank you for your continued interest in our company and I would like to Larry to cover the financial details and then we will open up for questions.

Larry McAfee

Thanks, Chris. First, I will review the quarter results and then we will talk about the six months. In a second quarter 2010, net revenue grows by 4.5% to $54.1 million due to an increase in our average net break per visit to about 1.9% to over $105 and an increase of 10,000 in patient visits to 497,000.

Our gross margin increased by 100 basis points to 28.7%, as clinic operating cost were reduced as a percent of revenue. Corporate office cost at 10.2% of revenue in second quarter were down from 11.3% same time last year. Our operating income increased by 17.7% to just under $10 million and our operating income margin of 18.5% with a 210 basis point improvement from the second quarter of last year.

Our net income rose almost 23% or $4.45 million, our earning per share increased to $0.38 from $0.31. Our same-store revenues for de nova and acquired clinic open a year or more declined by less than percent. The average net rating increased by 1.6% while same store did (inaudible) 2.4. Now I quickly go through the first half year results. Net revenue increased 4.6% to $104.5 million, gross margin for the six months increased by 60 basis points to 26.8%, corporate office cost were 10.8% revenues compared to 11.3% a year ago. Our operating income increased in the first six months by 11.5% to $16,650,000, and our net income for the first half rose by almost 20% to $7.6 million. Earnings per share increased $0.64 to $0.84, we ended in June with 369 products during the six months, we’ve acquired five, opened eight, start up de nova so with the five great joint venture in the first quarter and we closed seven locations. Our cash flow has been really exceptional during the second quarter, notes and bank borrowings were paid down by $7.8 million down a balance of $4.3 million at the end of the quarter.

Our cash less debt or net cash position at June 30 was positive; it was $2.8 million or about $0.25 per share. Based on our first-half results, in the earnings today, management raised its earnings guidance for the year, from on the low end $1.14 after $1.17 and on the upper end of the range of $1.20 to $1.22.

Chris Reading

Thanks Larry. With that operator I’d like to ask you to go ahead and open it up for questions.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from Larry Solow of CJS Securities.

Larry Solow – CJS Securities

You mentioned little bit like just the one negative is same store visits and it looks like they were down 2.5% this quarter or more than last quarter, anymore color on that and just any underlying trends there?

Larry McAfee

Larry, I will give you some I am slipping through a couple of my pages. I will give you a couple of thing, it’s been kind of mix around the country so it isn’t located to one part of the country are very capable long-term partnerships are actually for the most part doing pretty well. Where we struggled over the last two years when the market’s gotten tougher which we continue to struggle a little bit, we tried to augment that with some sales efforts and some other things.

When I look at, kind of find new quarter. When I look at our business per clinic per day for quarter we are actually up just very slightly from what we were at this time last year. So I think we are shifting a little bit and we sold some facilities in the quarter earlier this year and that’s impacted us a little bit because those numbers come out and they were around before we had the flood.

But in general I would say that the environment is a little bit tough right now. We had an excellent June, I think from the volume standpoint and from what I've seen. We don’t have certainly any financials for July but July has been very solid as well.

I don’t know when we are going to see absolute time in same-store. I think probably in some combination while we continue to fight for it very hard, it is going to take a little time until the economy improves a little but more. It is not bad.

Larry Solow – CJS Securities

Would you sell those businesses doesn’t that come out of same-store comp or is there fixed there.

Larry McAfee

They came out with the once we sold we are actually clinics that we growing at a pretty good cliff. So it hurt the numbers.

Larry Solow – CJS Securities

Got you then any reason why you would sell better performing clinic or was it?

Larry McAfee

Yes we made a lot of money of them.

Chris Reading

There was an opportunity in the market which it’s a little bit of a long story. But it was a partnership that needed to, that needed to go at different direction and it was a good opportunity for us to sell and we made decisions to do that.

Larry McAfee

Yes. It was an unusual situation that was a joint venture and we all buy and sell agreement with our partners there so that at least really got where we need to either buy them out or buy them now.

Larry Solow – CJS Securities

You mentioned Chris some of the CMS proposals out there that you guys don’t particularly agree with. This proposal to lower reimbursement on multiple services have performed and we have therapy, would that impact you guys?

Chris Reading

Yes, MPPR, Multiple Procedure Payment Reduction plan would impact us if it goes through I mean it will impact hospital providers, it will impact out patient providers as well. We have done any analysis on that. We have folks on the ground in Washington who are very connected with the folks at CMS; there is the common period that extends to the end of this month.

A number of alliance industry groups working in collaboration on this directly a very focused grass roots effort. It seems a little disconnected when you get a 2. Whatever percent increase becomes one week from Congress because they recognize that we are in the value end of this proposition, we are getting patients better and holding much more expensive procedures and then the next week CMS comes out with something that’s totally out of our field.

In some discussion with them, I think there is some methodology question in terms of how they come up with their assessment and I think at this point in time anything could happen but I think there is at least the possibility that some of this has the potential to change before install. That said, we are working on the business like we are working on the business like we always do and if doesn't change we do our very best to deal with that and grow the company as we have in the past. We are just going to have continued to be creative as we have been.

Larry Solow – CJS Securities

And how it will be implemented in 2011 I guess?

Chris Reading

As it's proposed right now that's correct.

Larry McAfee

In our 10-Q we got, they are identical notes but we have two things in the Q filed today. Talked about the proposal what our Medicare business is, the potential impact etcetera. I think in all probability what we have in there which is what our CMS has laid out initially will probably not be where it ends up the problem is, it seems like every time they come out with proposal gets modified one way or another but we have some information about it in the Q today.

Operator

The next question comes from Brian Tanquilut of Jefferies & Company

Brian Tanquilut - Jefferies & Company

Chris, thank you for all that color that you gave us on your partnerships and all the development things that you're doing. Just wanted to hear from you what your view is on the current pipeline for the year, both for acquisitions and de novos? What should we expect in terms of deal flow this year?

Chris Reading

I am not going to give you any hard numbers. I will tell you that for this current quarter our organic development looks very good and we have had this year a lot of good discussions. There were some very good partnerships around the country in terms of acquisition. We've got some things working on that may or may not happen. But it's been a very active for us and I think over some period of time we are seeing number of those things come to fruition.

Brian Tanquilut - Jefferies & Company

Okay and then on the Medicare comments that you just made earlier, I mean, Medicare is a pretty small percentage of your business but what are you guys thinking in terms of what you can do to your business to adapt let’s just say this proposal goes through in its current form?

Chris Reading

Number one, Medicare is you know what is the percentage count?

Larry McAfee

In terms of absolute receipts we get from them is 20.4%.

Chris Reading

Okay so Medicare is 20.4%, I don’t know if it’s small or not but we are working and it will take some time. But we are working on some comp related initiatives which give us annual with industry which helps to drive both volume and is also pretty solid in terms of our rate.

We’ve been able this year to get some expansion of rate whether that can continue or not sure but we remain focused on those things. And then really it comes down to figure we got to figure out how to continue to be more efficient as the environment changes and still deliver an excellent clinical product and that’s happening slowly but I think our people understand that the environment is not static and we can’t be static either and so I think there is more opportunity there where we are and where the rest of the industry is, its enough from the delta between now we’ve got continued progress to make.

I think the team has done an excellent job in these last two years taking up cost from our leases that we had one of the very detailed numbers of our audit committee pointed out the fact that we’ve had some pretty nice reduction in some of the categories in our cost structure. We have some very good negotiators here who work to take out contract cost in a variety of different areas.

We brought on some new partners in our equipment, in our supply areas. And have negotiated some great deals there and so, its not just on the labor side, we are looking at every available facet of our business seem to be honest two years ago I thought we run in good bid without and we found some more.

So it is not just one thing. It is a combination but we are working on all those things to try to overcome whether it is employment or CMS with Olympia proposal that maybe not happen, I think we are going to be okay.

Larry McAfee

Brian I gave you the wrong number, I gave you the Q1 number, our Medicare as percentage of actual revenues in the second quarter was 19.7%. It is actually come down.

Brian Tanquilut - Jefferies & Company

Coming down, yes. And, Chris, you talked about your view two years ago about expenses. I mean where you stand today? Do you feel like with all the stuff that you guys have done in the last couple of years and as I look at your P&L on a dollar basis, a lot of your costs are holding firm, do you think there is more that you can squeeze in terms of cost?

Chris Reading

I think the answer I think there is some more, the real answer is we are not going to get people cheaper and we are not going to look for a lesser quality person. But I think over time as we provide more resources and more tools as we’ve tried doing, on a very focused way these last few years.

We will get more efficient, that’s all I think that the relative for the delivery for the visits and the units were able to drive I think will go down.

Larry McAfee

If you look at the earnings growth in the most recent quarter, we have some gross margin improvement. We also have operating margin improvement. There are 10 basis points and a big chunk of that, which we said from the beginning when our corporate cost use to be about 14%, our goal was to get it to 10% invested revenues. Now we are real close the much recent quarter, but there is some important improvement as we continue to add businesses, we don’t have to add costs incorporate at the same pace.

Brian Tanquilut - Jefferies & Company

Okay. And then, Chris, sorry, one more question here. As it's relates to pricing in other areas of healthcare outside of Medicare, we're obviously hearing about commercial pricing pressure and all that kind of stuff. So I'm just wondering if you're seeing any of that in your industry right now.

Chris Reading

I'll characterize it this way, in the last two or three years we haven't felt a big change. So we remain very focused on where we have density I give you an example in Nashville when we did start deals, coming up on three years now. We did that deal; their net rate was $87 a visit through local efforts and efforts here, their net right now is right out of $100 a visit. Now we can't give that everywhere but we are able to get at Nashville.

So, we are able to go and look and where we have density and opportunistically where we have relationships and other things and little by little we made some decent progress.

Brian Tanquilut - Jefferies & Company

Okay. And then, Larry, last question. As we look at our model for the year, is there any seasonality factor that we should be baking into the back half of the year?

Larry McAfee

Yes, by far the second quarter is our best quarter. Things normally slow down pretty dramatically in the summer, Chris mentioned June was surprisingly good, but certainly July and August are normally slower and then when kids get back in school in September or October gets back up so the third quarter is a good quarter and in the fourth quarter really primarily around the times of the holidays week, Thanks giving and the week before and after Christmas through the New Year really slow. The fourth quarter is absolutely normally our slowest quarter of the year.

Operator

Next question comes from Mike Petusky of Noble Research.

Unidentified Analyst

This is actually Terry Baker in for Mike this morning. Nice quarter. I just have a few housekeeping questions for you. I know you said the Medicare mix was 19.7%; could you break out the rest of the payer mix for this quarter?

Larry McAfee

I want to explain historically this is long before Chris and I got here. The company has always reported, if you look at our investor presentation and pie chart there in terms of the payers. What the charges were as people familiar with medical billing know what you bill or what you get paid are two different things.

So we are going to start reporting what we actually get paid as a percentage of revenues by the different payers. And it's slightly different than what the charges are. So I give you for example, I get to Medicare what the charges were versus what we get paid.

These are charge numbers and we are going to update our investor presentation in other information so these going forward. Private pay which are really primarily PPS and those type indemnity plans, it's all insurance related was 25.6%; managed care was HMOs requested the field etcetera is 31.9%.

So those two combined which is really your insurance reimburse business and the copaid's from those. It's 57.5%. Workers' comp, which historically we report at a lower percentage because the charges as a percent lower of the payments are actually higher, workers' comp is 16.5% of revenue or actual receipt in the second quarter. Medicare was 19.7% of revenue and by comparison it was 22.8% of billings. So it represents about 23% of billings with less than 20% of revenues. Medicaid which we don’t normally breakout but I am going to do it in this case to see that if the board was 1.9% and that our other payers who constituted 4.4% of revenues.

Unidentified Analyst

Okay, thanks. Do you have the number for the visits per full-time employee for this quarter?

Chris Reading

Yeah. I have got it; it was an 11.22% for the quarter.

Larry McAfee

Which is up from 11.1% in Q1.

Unidentified Analyst

Okay, thanks. And then I just have a few quick questions about sales and sales coverage. Could you just tell me how many sales reps you had at the end of this quarter, what the ratio was for commission versus traditional sales reps?

Chris Reading

This is Glen's area and he left me some crib notes. So we have 78 total sales reps and that includes the commission only reps covering about 275 locations.

Larry McAfee

And we have 50 what we call traditional reps. So we have 20, 38 commissions.

Chris Reading

Right and so right now we have 14 or 15 full and part time sales reps that we are looking to fill, we are looking to again double up on some of our bigger markets where we have 8 to 10 locations also looking to fill in with some part time people. And we will keep the commission sales rep program going as long as we can it's still producing very good results although we continue to have some in flow and out flow there.

But there is no reason to discontinue that at this point certainly but we will see that some reps over the course of the next six months.

Operator

Your next question comes from Mitra Ramgopal of Sidoti & Company.

Mitra Ramgopal - Sidoti & Company

Good morning, first question I just wanted to follow up, I know you mentioned couple of the difficulties you're seeing is pressure on same store from higher unemployment and potential CMS reimbursement risk. Now will that make you more inclined to be more aggressive in terms clinic expansion?

Chris Reading

I think we are inclined to be aggressive in terms of clinic expansion anywhere. I don’t know if it creates a further spur, I think the spur is pretty much there, it doesn’t make me anymore disinclined to do acquisition to open new facilities. We always look for portfolio position so I wouldn’t for instance.

We wouldn’t have before and we won’t now do an acquisition that’s predominantly federal funded. And nor will we do a start up in an area that was predominantly probably federally funded.

That said I think we are going to continue to be very focused on development we got the cash to do it. We got the people to do it and we got a nice model that works and so I think that challenges today, I think in one hand I think do creates some opportunity because I don’t think of companies are looking to expand as much as we are right now. I think we are good home, and I think we will continue to be for credit people and so we are going to continue to try to grow aggressively.

Mitra Ramgopal - Sidoti & Company

And I am getting if you look at the number of clinics you had at the end of this quarter I think was 369, was versus say 366 a year ago. Should we expect sort a more acceleration in that sort of, not necessarily reduced closures etcetera.

Larry McAfee

I think closures are going to be higher for a year then we initially thought they were much higher for quarter than I anticipated lets say as you can see form the financials, when the closed those it didn’t cost us any money, so we don’t worry so much about the clinic count we also sold five which helped mature the comparative numbers.

Chris Reading

I look at this as kind of a pruning of things that no longer contribute to the health of the organization and done in a thoughtful, deliberate way that allows the overall function to be stronger. I think that the clinics that we have closed, we haven't missed because they were either drag or non-contributor and I think conversely the clinics we have opened then acquired have been great contributors, and I think we will always have some that over some period of time change and will necessitate that we close but we are going to continue to these focus on development.

I'm not caught up on clinic count per say, I'm caught up on growing earnings we all are and value for the share holders and there is certainly development that goes into that and that will continue but I'm not going to hesitate to close a clinic if it needs to be closed.

Mitra Ramgopal - Sidoti & Company

Okay, thanks. And again if we look at the net revenue per visit, it's the highest I think we've ever seen, and the last few years, you've consistently been able to increase that number. As we look out again to next couple of years, is there a reason why we shouldn't see sort of similar increases?

Chris Reading

No, my crystal ball things are changing rapidly sometimes unexpectedly, we made some big progress last year and everybody said well can you do it again next year and we didn’t make any big predictions, we just trying to stay focused on what we do. My honest answer is I don’t know if we can continue to get rate expansion of this magnitude year-over-year. What I do know if you look historically we kind of figured out a way to get some growth in there even during tough times. There may be a point where we can't do that anymore. But right now we are still making progress.

Larry McAfee

Yes, I am in the company's 20 year history I don't think we've ever had a down year to that rate. Now that's not because we haven't done pressure from time to time whether from the government or the state, the insurance companies you can name it. We normally try to find a way to offset that and mitigate the impact from it. Part of it, it is not just pricing, our pricing has been increases historically been modest at best.

Some of this is small increase in units per visit, the combination of things. And that ultimately even if the rates are same if you increase your visits or therapist visits for FTE in each major corporate cost over larger base you can still continue drive increased profit.

Mitra Ramgopal - Sidoti & Company

I know it's just been a tremendous number given the environment. And finally, Larry, on the guidance, does it include a $0.03 gain in the first quarter?

Larry McAfee

Yes, that's actually end forecast. So it includes the gain from the sale on the first quarter.

Operator

The next question comes from Alex Gait of Castle Peak Asset Management.

Alex Gait - Castle Peak Asset Management

Just one question for you. Plenty of guys may have gone over this already. But could you maybe say something about the main growth drivers going forward, say, like do you expect a number of new qualified therapists entering the market to increase anytime soon?

Chris Reading

I will tell you that the job market in general, in other worlds our ability to attract good people, fill open positions from a staffing standpoint. I think definitely has improved over this difficult period I think we have we are seeing I think is a pretty good home as a good stable place and on our time to fill positions and number of open positions have gone down much of that entirely answers your question.

On the partners side I think we continue to look for exceptional people. Those people don’t grow on trees so we have to look hard and we are very selective about who we will work with but that continues to go well and we’ve continued to find very good people in our traffic to our ongoing client website is up and we continue to do things to drive people and so the interest seems to be very good right now.

Larry McAfee

On our macro basis that there is any big influences in there.

Chris Reading

I think the schools continue to be pretty steady. The educational requirements have been steady the last few years. It’s pretty much a doctors degree now and that’s not going to get any worse and it’s not going to get any better and so I think that’s been static and maybe that’s helpful because they are for a while, there was a migration for masters to doctor programs and so that probably created a little bit of a drag.

So right now the environment it's not easy from a hiring perspective but its better and we are doing okay.

Operator

(Operator Instructions) Your next question comes from Larry Solow of CJS Securities.

Larry Solow - CJS Securities

Did you guys give the visits or lets see did you give out the units build per visit, the change in that do you have that?

Larry McAfee

4.22 again its in Q1.

Chris Reading

Yeah I think that’s a typo that’s Q2, its 4.22.

Larry McAfee

We are looking Glenn’s notes. So it was about the same as Q1. Q1 was 4.20; Q2 is 4.22, so not much of a change.

Larry Solow - CJS Securities

And you know one last one, I should probably go find that too.

Larry McAfee

Yeah, it was 4.21.

Larry Solow - CJS Securities

So it was similar, and just you sound like you are still obviously aggressively trying to increase, clinics, that’s in the acquisition environment and potentially gain something done over the next six months.

Larry McAfee

We are talking to lot more people right now than we were this time last year.

Chris Reading

And we have some we have some interest that we have expressed a few places and thing that we are working on, so yeah if you give me over the next six months I feel pretty confident we will get some things done and we will have some leverage.

Larry Solow - CJS Securities

And then just lastly maybe more your queue I know you mentioned in the queue, but in this (inaudible) reading therapies. Anywhere to quantify I mean if 20% of your services are Medicaid or Medicare about that I mean how much not really that too many how many is it generally a patient goes in there receives more than one service or.

Larry McAfee

Typical patients they are given about typical manicure patients is about 3.5 units from especially can determine and you can see the foot note I am looking on page 22 it is in there somewhere else too but we did a sample of that actually over a 100 actual bills for Medicare patients. We estimated positioning in (inaudible) saying that other people published that the reduction to us in terms of range would be about 10 to 12%.

Chris Reading

That’s net of the 2% increase that we had this year.

Larry McAfee

So if you looked at what the current reimbursement is and what it would be what they promote remains unchanged if we have a 10% to 12% rate reduction on Medicare patients.

Again that’s a preliminary number it is given common period there are lot of people that are worked up about this, there is some other public companies in addition to a lot of stuff on that.

Larry Solow - CJS Securities

Right, but in theory if that came out it will be 10% on your 20% portion of your business obviously which would impact obviously revenue per visit that would be right out of the figure revenue per patient summarizing I guess?

Larry McAfee

Right.

Operator

At this time there are no further questions. I'll now turn the call back over to management for any closing remarks.

Chris Reading

Okay, well I just want to say thank you one more time we appreciate your interest. Larry and I are here for the rest of the day and the week entering, remaining questions you might have offline and again we thank you, hope you have a great day.

Operator

Thank you. This concludes your conference. You may now disconnect.

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Source: US Physical Therapy Inc. Q2 2010 Earnings Call Transcript
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