QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) |
(I.R.S. EMPLOYER IDENTIFICATION NO.) |
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) |
(ZIP CODE) |
☑ |
Accelerated filer |
☐ |
|
Non-accelerated filer |
☐ (Do not check if a smaller reporting company) |
Smaller reporting company |
|
Emerging growth company |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Item 1. |
4 |
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4 |
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5 |
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6 |
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7 |
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8 |
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Item 2. |
28 |
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Item 3. |
37 |
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Item 4. |
37 |
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PART II—OTHER INFORMATION |
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Item 1. |
38 |
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Item 6. |
40 |
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41 |
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Certifications |
ITEM 1. | FINANCIAL STATEMENTS. |
March 31, 2020 |
December 31, 2019 |
|||||||
ASSETS |
(unaudited) |
|||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
$ |
||||||
Patient accounts receivable, less allowance for doubtful accounts of $ |
||||||||
Accounts receivable - other |
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Other current assets |
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Total current assets |
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Fixed assets: |
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Furniture and equipment |
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Leasehold improvements |
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Fixed assets, gross |
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Less accumulated depreciation and amortization |
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Fixed assets, net |
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Operating lease right-of-use assets |
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Goodwill |
||||||||
Other identifiable intangible assets, net |
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Other assets |
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Total assets |
$ |
$ |
||||||
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS, USPH SHAREHOLDERS’ EQUITY AND NON-CONTROLLING INTERESTS |
||||||||
Current liabilities: |
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Accounts payable - trade |
$ |
$ |
||||||
Accrued expenses |
||||||||
Current portion of operating lease liabilities |
||||||||
Current portion of notes payable |
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Total current liabilities |
||||||||
Notes payable, net of current portion |
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Revolving line of credit |
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Deferred taxes |
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Operating lease liabilities, net of current portion |
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Other long-term liabilities |
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Total liabilities |
||||||||
Redeemable non-controlling interests - temporary equity |
||||||||
U.S. Physical Therapy, Inc. (“USPH”) shareholders’ equity: |
||||||||
Preferred stock, $ |
||||||||
Common stock, $ |
||||||||
Additional paid-in capital |
||||||||
Retained earnings |
||||||||
Treasury stock at cost, |
( |
) |
( |
) |
||||
Total USPH shareholders’ equity |
||||||||
Non-controlling interests- permanent equity |
||||||||
Total USPH shareholders’ equity and non-controlling interests |
||||||||
Total liabilities, redeemable non-controlling interests, USPH shareholders’ equity and non-controlling interests |
$ |
$ |
For the Three Months Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Net patient revenues |
$ |
$ |
||||||
Other revenues |
||||||||
Net revenues |
||||||||
Operating costs: |
||||||||
Salaries and related costs |
||||||||
Rent, supplies, contract labor and other |
||||||||
Provision for doubtful accounts |
||||||||
Closure costs - lease and other |
( |
) |
||||||
Closure costs - write-off of goodwill |
||||||||
Total operating costs |
||||||||
Gross profit |
||||||||
Corporate office costs |
||||||||
Operating income |
||||||||
Interest and other income, net |
||||||||
Interest expense - debt and other |
( |
) |
( |
) |
||||
Income before taxes |
||||||||
Provision for income taxes |
||||||||
Net income |
||||||||
Less: net income attributable to non-controlling interests: |
||||||||
Non-controlling interests - permanent equity |
( |
) |
( |
) |
||||
Redeemable non-controlling interests - temporary equity |
( |
) |
( |
) |
||||
( |
) |
( |
) |
|||||
Net income attributable to USPH shareholders |
$ |
$ |
||||||
Basic and diluted earnings per share attributable to USPH shareholders |
$ |
$ |
||||||
Shares used in computation - basic and diluted |
||||||||
Dividends declared per common share |
$ |
$ |
Three Months Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
OPERATING ACTIVITIES |
||||||||
Net income including non-controlling interests |
$ |
$ |
||||||
Adjustments to reconcile net income including non-controlling interests to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
||||||||
Provision for doubtful accounts |
||||||||
Equity-based awards compensation expense |
||||||||
Deferred income taxes |
( |
) |
||||||
Write-off of goodwill - closed clinics |
||||||||
Other |
||||||||
Changes in operating assets and liabilities: |
||||||||
(Decrease) Increase in patient accounts receivable |
( |
) |
||||||
Increase in accounts receivable - other |
( |
) |
( |
) |
||||
Increase (Decrease) in other assets |
( |
) |
||||||
Increase in accounts payable and accrued expenses |
||||||||
Increase (Decrease) in other liabilities |
( |
) |
||||||
Net cash provided by operating activities |
||||||||
INVESTING ACTIVITIES |
||||||||
Purchase of fixed assets |
( |
) |
( |
) |
||||
Purchase of majority interest in businesses, net of cash acquired |
( |
) |
||||||
Purchase of redeemable non-controlling interest, temporary equity |
( |
) |
( |
) |
||||
Purchase of non-controlling interest, permanent equity |
( |
) |
||||||
Proceeds on sale of fixed assets |
||||||||
Net cash used in investing activities |
( |
) |
( |
) |
||||
FINANCING ACTIVITIES |
||||||||
Distributions to non-controlling interests, permanent and temporary equity |
( |
) |
( |
) |
||||
Proceeds from revolving line of credit |
||||||||
Payments on revolving line of credit |
( |
) |
( |
) |
||||
Principal payments on notes payable |
( |
) |
( |
) |
||||
Other |
( |
) |
||||||
Net cash provided by (used in) financing activities |
( |
) |
||||||
Net increase in cash and cash equivalents |
( |
) |
||||||
Cash and cash equivalents - beginning of period |
||||||||
Cash and cash equivalents - end of period |
$ |
$ |
||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
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Cash paid during the period for: |
||||||||
Income taxes |
$ |
$ |
||||||
Interest |
$ |
$ |
||||||
Non-cash investing and financing transactions during the period: |
||||||||
Purchase of businesses - seller financing portion |
$ |
$ |
||||||
Purchase of non-controlling interest - payable |
$ |
$ |
U.S.Physical Therapy, Inc. |
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Common Stock |
Additional |
Retained |
Treasury Stock |
Total Shareholders’ |
Non-Controlling |
|||||||||||||||||||||||||||||||
For the three months ended March 31, 2020 |
Shares |
Amount |
Paid-In Capital |
Earnings |
Shares |
Amount |
Equity |
Interests |
Total |
|||||||||||||||||||||||||||
Balance December 31, 2019 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
$ |
|||||||||||||||||||||||||
Issuance of restricted stock, net of cancellations |
||||||||||||||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax |
||||||||||||||||||||||||||||||||||||
Compensation expense - equity-based awards |
- |
- |
||||||||||||||||||||||||||||||||||
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans |
- |
- |
||||||||||||||||||||||||||||||||||
Dividends payable to USPT shareholders |
- |
( |
) |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Other |
- |
( |
) |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Net income attributable to non-controlling interest - permanent equity |
- |
- |
||||||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders |
- |
- |
||||||||||||||||||||||||||||||||||
Balance March 31, 2020 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
$ |
U.S.Physical Therapy, Inc. |
||||||||||||||||||||||||||||||||||||
Common Stock |
Additional |
Retained |
Treasury Stock |
Total Shareholders’ |
Non-Controlling |
|||||||||||||||||||||||||||||||
For the three months ended March 31, 2019 |
Shares |
Amount |
Paid-In Capital |
Earnings |
Shares |
Amount |
Equity |
Interests |
Total |
|||||||||||||||||||||||||||
Balance December 31, 2018 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
$ |
|||||||||||||||||||||||||
Revaluation of redeemable non-controlling interest, net of tax |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Compensation expense - equity-based awards |
- |
- |
||||||||||||||||||||||||||||||||||
Transfer of compensation liability for certain stock issued pursuant to long-term incentive plans |
- |
- |
||||||||||||||||||||||||||||||||||
Purchase of non-controlling interest |
- |
( |
) |
- |
( |
) |
( |
) |
( |
) |
||||||||||||||||||||||||||
Dividends payable to USPT shareholders |
- |
( |
) |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Distributions to non-controlling interest partners - permanent equity |
- |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||||
Other |
- |
( |
) |
- |
( |
) |
( |
) |
||||||||||||||||||||||||||||
Net income attributable to non-controlling interests - permanent equity |
- |
|||||||||||||||||||||||||||||||||||
Net income attributable to USPH shareholders |
- |
- |
||||||||||||||||||||||||||||||||||
Balance March 31, 2019 |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
$ |
$ |
Total |
||||
Cash paid, net of cash acquired |
$ |
|||
Seller note |
||||
Total consideration |
$ |
|||
Estimated fair value of net tangible assets acquired: |
||||
Total current assets |
$ |
|||
Total non-current assets |
||||
Total liabilities |
( |
) |
||
Net tangible assets acquired |
$ |
|||
Referral relationships |
||||
Non-compete |
||||
Tradename |
||||
Goodwill |
||||
Fair value of non-controlling interest (classified as redeemable non-controlling interests) |
( |
) |
||
$ |
IIPS* |
Clinic Practice |
Total |
||||||||||
Cash paid, net of cash acquired |
$ |
$ |
$ |
|||||||||
Payable to shareholders of seller |
||||||||||||
Seller note |
||||||||||||
Total consideration |
$ |
$ |
$ |
|||||||||
Estimated fair value of net tangible assets acquired: |
||||||||||||
Total current assets |
$ |
$ |
$ |
|||||||||
Total non-current assets |
||||||||||||
Total liabilities |
( |
) |
( |
) |
( |
) |
||||||
Net tangible assets acquired |
$ |
( |
) |
$ |
$ |
|||||||
Referral relationships |
||||||||||||
Non-compete |
||||||||||||
Tradename |
||||||||||||
Goodwill |
||||||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interests) |
( |
) |
( |
) |
||||||||
$ |
$ |
$ |
Three Months Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Net patient revenues |
$ |
$ |
||||||
Management contract revenues |
||||||||
Industrial injury prevention services revenues |
||||||||
Other revenues |
||||||||
$ |
$ |
Three Months Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Computation of earnings per share - USPH shareholders: |
||||||||
Net income attributable to USPH shareholders |
$ |
$ |
||||||
Credit (charges) to retained earnings: |
||||||||
Revaluation of redeemable non-controlling interest |
( |
) |
||||||
Tax effect at statutory rate (federal and state) of |
( |
) |
||||||
$ |
$ |
|||||||
Earnings per share (basic and diluted) |
$ |
$ |
||||||
Shares used in computation: |
||||||||
Basic and diluted earnings per share - weighted-average shares |
1. | Prior to the Acquisition, the Therapy Practice exists as a separate legal entity (the “Seller Entity”). The Seller Entity is owned by one or more individuals (the “Selling Shareholders”) most of whom are physical therapists that work in the Therapy Practice and provide physical therapy services to patients. |
2. | In conjunction with the Acquisition, the Seller Entity contributes the Therapy Practice into a newly-formed limited partnership (“NewCo”), in exchange for one hundred percent ( |
3. | The Company enters into an agreement (the “Purchase Agreement”) to acquire from the Seller Entity a majority (ranges from |
4. | The Company and the Seller Entity also execute a partnership agreement (the “Partnership Agreement”) for NewCo that sets forth the rights and obligations of the limited and general partners of NewCo. After the Acquisition, the Company is the general partner of NewCo. |
5. | As noted above, the Company does not purchase 100% of the limited partnership interests in NewCo and the Seller Entity retains a portion of the limited partnership interest in NewCo (“Seller Entity Interest”). |
6. | In most cases, some or all of the Selling Shareholders enter into an employment agreement (the “Employment Agreement”) with NewCo with an initial term that ranges from to |
7. | The compensation of each Employed Selling Shareholder is specified in the Employment Agreement and is customary and commensurate with his or her responsibilities based on other employees in similar capacities within NewCo, the Company and the industry. |
8. | The Company and the Selling Shareholder (including both Employed Selling Shareholders and Selling Shareholders not employed by NewCo) execute a non-compete agreement (the “Non-Compete Agreement”) which restricts the Selling Shareholder from engaging in competing business activities for a specified period of time (the “Non-Compete Term”). A Non-Compete Agreement is executed with the Selling Shareholders in all cases. That is, even if the Selling Shareholder does not become an Employed Selling Shareholder, the Selling Shareholder is restricted from engaging in a competing business during the Non-Compete Term. |
9. | The Non-Compete Term commences as of the date of the Acquisition and expires on the later of : |
a. |
b. |
10. | The Non-Compete Agreement applies to a restricted region which is defined as a 15-mile radius from the Therapy Practice. That is, an Employed Selling Shareholder is permitted to engage in competing businesses or activities outside the 15-mile radius (after such Employed Selling Shareholder no longer is employed by NewCo) and a Selling Shareholder who is not employed by NewCo immediately is permitted to engage in the competing business or activities outside the 15-mile radius. |
1. | Put Right |
a. | In the event that any Selling Shareholder’s employment is terminated under certain circumstances prior to a specified date (the “Specified Date”), the Seller Entity thereafter may have an irrevocable right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below. |
b. | In the event that any Selling Shareholder is not employed by NewCo as of the Specified Date and the Company has not exercised its Call Right with respect to the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, Seller Entity thereafter shall have the Put Right to cause the Company to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest at the purchase price described in “3” below. |
c. | In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after the Specified Date, the Seller Entity shall have the Put Right, and upon the exercise of the Put Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below. |
2. | Call Right |
a. | If any Selling Shareholder’s employment by NewCo is terminated prior to the Specified Date, the Company thereafter shall have an irrevocable right to purchase from Seller Entity the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest, in each case at the purchase price described in “3” below. |
b. | In the event that any Selling Shareholder’s employment with NewCo is terminated for any reason on or after Specified Date, the Company shall have the Call Right, and upon the exercise of the Call Right, the Terminated Selling Shareholder’s Allocable Percentage of Seller Entity’s Interest shall be redeemed by the Company at the purchase price described in “3” below. |
3. | For the Put Right and the Call Right, the purchase price is derived from a formula based on a specified multiple of NewCo’s trailing twelve months of earnings before interest, taxes, depreciation, amortization, and the Company’s internal management fee, plus an Allocable Percentage of any undistributed earnings of NewCo (the “Redemption Amount”). NewCo’s earnings are distributed monthly based on available cash within NewCo; therefore, the undistributed earnings amount is small, if any. |
4. | The Purchase Price for the initial equity interest purchased by the Company is also based on the same specified multiple of the trailing twelve-month earnings that is used in the Put Right and the Call Right noted above. |
5. | The Put Right and the Call Right do not have an expiration date, and the Seller Entity Interest is not required to be purchased by the Company or sold by the Seller Entity unless either the Put Right and the Call Right is exercised. |
6. | The Put Right and the Call Right never apply to Selling Shareholders who do not become employed by NewCo, since the Company requires that such Selling Shareholders sell their entire ownership interest in the Seller Entity at the closing of the Acquisition. |
Three Months Ended |
Year Ended |
|||||||
March 31, 2020 |
December 31, 2019 |
|||||||
Beginning balance |
$ |
$ |
||||||
Operating results allocated to redeemable non-controlling interest partners |
||||||||
Distributions to redeemable non-controlling interest partners |
( |
) |
( |
) |
||||
Changes in the fair value of redeemable non-controlling interest |
( |
) |
||||||
Purchases of redeemable non-controlling interest |
( |
) |
( |
) |
||||
Acquired interest |
||||||||
Sales of redeemable non-controlling interest - temporary equity |
||||||||
Reduction of non-controlling interest due to sale of USPh partnership interest |
( |
) |
||||||
Notes receivable related to sales of redeemable non-controlling interest - temporary equity |
( |
) |
||||||
Reduction in notes receivable related to the the sales of redeemable non-controlling interest - temporary equity |
||||||||
Ending balance |
$ |
$ |
March 31, 2020 |
December 31, 2019 |
|||||||
Contractual time period has lapsed but holder’s employment has not been terminated |
$ |
$ |
||||||
Contractual time period has not lapsed and holder’s employment has not been terminated |
||||||||
Holder’s employment has terminated and contractual time period has expired |
||||||||
Holder’s employment has terminated and contractual time period has not expired |
||||||||
$ |
$ |
Three Months Ended |
Year Ended |
|||||||
March 31, 2020 |
December 31, 2019 |
|||||||
Beginning balance |
$ |
$ |
||||||
Goodwill acquired |
||||||||
Goodwill related to partnership interest sold |
( |
) |
||||||
Goodwill write-off related to closed clinics |
( |
) |
||||||
Goodwill adjustments for purchase price allocation of businesses acquired in prior year |
||||||||
Ending balance |
$ |
$ |
March 31, 2020 |
December 31, 2019 |
|||||||
Tradenames |
$ |
$ |
||||||
Referral relationships, net of accumulated amortization of $ |
||||||||
Non-compete agreements, net of accumulated amortization of $ |
||||||||
$ |
$ |
Three Months Ended |
Three Months Ended |
|||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Referral relationships |
$ |
$ |
||||||
Non-compete agreements |
||||||||
$ |
$ |
Referral Relationships |
Non-Compete Agreements |
||||||
Years |
Annual Amount |
Years |
Annual Amount |
||||
Ending December 31, |
Ending December 31, |
||||||
2020 (excluding the three months ended March 31, 2020) |
$ |
2020 (excluding the three months ended March 31, 2020) |
$ |
||||
2021 |
$ |
2021 |
$ |
||||
2022 |
$ |
2022 |
$ |
||||
2023 |
$ |
2023 |
$ |
||||
2024 |
$ |
2024 |
$ |
||||
Thereafter |
$ |
Thereafter |
$ |
March 31, 2020 |
December 31, 2019 |
|||||||
Salaries and related costs |
$ |
$ |
||||||
Credit balances due to patients and payors |
||||||||
Group health insurance claims |
||||||||
Dividends payable |
||||||||
Closure costs |
||||||||
Federal income taxes payable |
||||||||
Other |
||||||||
Total |
$ |
$ |
March 31, 2020 |
December 31, 2019 |
|||||||
Credit Agreement average effective interest rate of |
$ |
$ |
||||||
Various notes payable with $ |
||||||||
$ |
$ |
|||||||
Less current portion |
( |
) |
( |
) |
||||
Long term portion |
$ |
$ |
During the twelve months ended March 31, 2021 |
$ |
|||
During the twelve months ended March 31, 2022 |
||||
$ |
Three Months Ended March 31, 2020 |
Three Months Ended March 31, 2019 |
|||||||
Operating lease cost |
$ |
$ |
||||||
Short-term lease cost |
||||||||
Variable lease cost |
||||||||
Total lease cost * |
$ |
$ |
Three Months Ended March 31, 2020 |
Three Months Ended March 31, 2019 |
|||||||
Cash paid for amounts included in the measurement of operating lease liabilities (in thousands) |
$ |
$ |
||||||
Right-of-use assets obtained in exchange for new operating lease liabilities (in thousands) * |
$ |
$ |
Fiscal Year |
Amount |
|||
2020 (excluding the three months ended March 31, 2020) |
$ |
|||
2021 |
||||
2022 |
||||
2023 |
||||
2024 |
||||
2025 and therafter |
||||
Total lease payments |
$ |
|||
Less: imputed interest |
||||
Total operating lease liabilities |
$ |
Three Months Ended March 31, 2020 |
Three Months Ended March 31, 2019 |
|||||||
Weighted-average remaining lease term - Operating leases |
||||||||
Weighted-average discount rate - Operating leases |
% |
% |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Two months ended February 29, |
One month ended March 31, |
Three months ended March 31, |
||||||||||||||||||||||||||||||||||
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
||||||||||||||||||||||||||||
Selected Financial Data: |
||||||||||||||||||||||||||||||||||||
Net revenues (in thousands) - reported |
$ |
78,193 |
$ |
75,901 |
3.0 |
% |
$ |
34,524 |
$ |
40,330 |
-14.4 |
% |
$ |
112,717 |
$ |
116,231 |
-3.0 |
% |
||||||||||||||||||
Net revenues (in thousands) - without sold clinics |
$ |
78,193 |
$ |
72,232 |
8.3 |
% |
$ |
34,524 |
$ |
38,314 |
-9.9 |
% |
$ |
112,717 |
$ |
110,546 |
2.0 |
% |
||||||||||||||||||
Operating Statistics (without sold clinics): |
||||||||||||||||||||||||||||||||||||
Number of clinics, at the end of period |
587 |
561 |
567 |
559 |
567 |
559 |
||||||||||||||||||||||||||||||
Working Days |
42 |
42 |
22 |
21 |
64 |
63 |
||||||||||||||||||||||||||||||
Average visits per day per clinic |
27.7 |
26.5 |
22.7 |
27.9 |
26.2 |
27.0 |
||||||||||||||||||||||||||||||
Total patient visits |
676,328 |
623,943 |
294,695 |
328,288 |
971,023 |
952,231 |
||||||||||||||||||||||||||||||
Net patient revenue per visit |
$ |
103.06 |
$ |
105.89 |
$ |
103.22 |
$ |
106.29 |
$ |
103.11 |
$ |
106.02 |
• | For the 2020 First Quarter, our Operating Results (as defined below) were $3.9 million, or $0.30 per diluted share, as compared to $8.4 million, or $0.66 per diluted share for the first quarter ended March 31, 2019 (“2019 First Quarter”). Operating Results, a non-GAAP measure, equals net income attributable to our shareholders per the consolidated statement of net income plus charges incurred for CFO search and closure costs, both net of tax. The earnings per share from Operating Results also excludes the impact of the revaluation of redeemable non-controlling interest. |
• | For the 2020 First Quarter, our net income attributable to our shareholders, in accordance with GAAP, was $1.0 million as compared to $8.4 million for the 2019 First Quarter. Inclusive of the credit or charge for the revaluation of non-controlling interest, net of tax, used to compute diluted earnings per share, in accordance with GAAP, in the 2020 First Quarter, the amount is $2.6 million, or $0.20 per share, as compared to $5.0 million, or $0.39 per share. In accordance with current accounting guidance, the revaluation of redeemable non-controlling interest, net of tax, is not included in net income but charged or credited directly to retained earnings; however, the charge or credit for this change is included in the earnings per basic and diluted share calculation. See above for a discussion of the effects of COVID-19 pandemic on our operations. |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Computation of earnings per share - USPH shareholders: |
||||||||
Net income attributable to USPH shareholders |
$ |
1,016 |
$ |
8,443 |
||||
Credit (charges) to retained earnings: |
||||||||
Revaluation of redeemable non-controlling interest |
2,129 |
(4,661 |
) |
|||||
Tax effect at statutory rate (federal and state) of 26.25% |
(559 |
) |
1,224 |
|||||
$ |
2,586 |
$ |
5,006 |
|||||
Earnings per share (basic and diluted) |
$ |
0.20 |
$ |
0.39 |
||||
Adjustments: |
||||||||
Charges incurred for CFO search |
133 |
- |
||||||
Closure costs |
3,752 |
- |
||||||
Revaluation of redeemable non-controlling interest |
(2,129 |
) |
4,661 |
|||||
Tax effect at statutory rate (federal and state) of 26.25% |
(461 |
) |
(1,224 |
) |
||||
Operating Results |
$ |
3,881 |
$ |
8,443 |
||||
Basic and diluted Operating Results per share |
$ |
0.30 |
$ |
0.66 |
||||
Shares used in computation - basic and diluted |
12,796 |
12,707 |
• | Excluding the loss of revenues from the clinics within the partnership sold in June of 2019 (“sold clinics”) of $5.7 million for the 2019 First Quarter, net revenues for the 2020 First Quarter of $112.7 million increased 2.0% from adjusted revenue of $110.5 million ($116.2 million less the $5.7 million) in 2019 First Quarter despite the adverse effects, beginning in mid-March, of the COVID-19 pandemic on the Company’s clinics. |
• | Net patient revenues from physical therapy operations decreased $6.5 million, or 6.1%, to $100.1 million in the 2020 First Quarter from $106.7 million in the 2019 First Quarter primarily due to the $5.7 million of lost revenue from sold clinics and the adverse effects of COVID-19. Total patient visits were 971,000 in the 2020 First Quarter and 1,001,510 for the 2019 First Quarter (inclusive of 49,300 for the sold clinics). The average net patient revenue per visit was $103.11 for the 2020 First Quarter and $106.49 for the 2019 First Quarter. Excluding the 49,300 visits, the net revenue per visit was $106.02 for the 2019 First Quarter. Of the $0.8 million ($6.5 million less $5.7 million) decrease in net patient revenues, $5.4 million related to a decrease in business of clinics opened or acquired prior to April 1, 2019 (“Mature Clinics”) and was offset by $4.6 million related to clinics opened or acquired after March 31, 2019 (“New Clinics”). Revenue from physical therapy management contracts was $2.1 million for both 2020 and 2019 first quarters. |
• | Revenue from the industrial injury prevention business increased 43.1% to $9.9 million in the 2020 First Quarter compared to $6.9 million in the 2019 First Quarter due to internal growth and an acquisition in the second quarter of 2019. Management estimates that the industrial injury prevention business lost approximately $126,000 in revenue and contribution margin due to the pandemic. |
• | Other miscellaneous revenue was $0.6 million in the 2020 First Quarter and $0.5 million in the 2019 First Quarter. |
Three Months Ended |
||||||||
March 31, 2020 |
March 31, 2019 |
|||||||
Income before taxes |
$ |
3,630 |
$ |
15,083 |
||||
Less: net income attributable to non-controlling interests: |
||||||||
Non-controlling interests - permanent equity |
(526 |
) |
(1,537 |
) |
||||
Redeemable non-controlling interests - temporary equity |
(1,796 |
) |
(2,395 |
) |
||||
$ |
(2,322 |
) |
$ |
(3,932 |
) |
|||
Income before taxes less net income attributable to non-controlling interests |
$ |
1,308 |
$ |
11,151 |
||||
Provision for income taxes |
$ |
292 |
$ |
2,708 |
||||
Percentage |
22.3 |
% |
24.3 |
% |
• | the multiple effects of the impact of public health crises and epidemics/pandemics, such as the novel strain of COVID-19, for which the financial magnitude cannot be currently estimated; |
• | changes as the result of government enacted national healthcare reform; |
• | changes in Medicare rules and guidelines and reimbursement or failure of our clinics to maintain their Medicare certification and/or enrollment status; |
• | revenue we receive from Medicare and Medicaid being subject to potential retroactive reduction; |
• | business and regulatory conditions including federal and state regulations; |
• | governmental and other third party payor inspections, reviews, investigations and audits, which may result in sanctions or reputational harm and increased costs; |
• | compliance with federal and state laws and regulations relating to the privacy of individually identifiable patient information, and associated fines and penalties for failure to comply; |
• | changes in reimbursement rates or payment methods from third party payors including government agencies, and changes in the deductibles and co-pays owed by patients; |
• | revenue and earnings expectations; |
• | legal actions, which could subject us to increased operating costs and uninsured liabilities; |
• | general economic conditions; |
• | availability and cost of qualified physical therapists; |
• | personnel productivity and retaining key personnel; |
• | competitive, economic or reimbursement conditions in our markets which may require us to reorganize or close certain clinics and thereby incur losses and/or closure costs including the possible write-down or write-off of goodwill and other intangible assets; |
• | competitive environment in the industrial injury prevention business, which could result in the termination or non-renewal of contractual service arrangements and other adverse financial consequences for that service line; |
• | acquisitions, and the successful integration of the operations of the acquired businesses; |
• | impact on the business and cash reserves resulting from retirement or resignation of key partners and resulting purchase of their non controlling interests (minority interests); |
• | maintaining our information technology systems with adequate safeguards to protect against cyber-attacks; |
• | a security breach of our or our third party vendors’ information technology systems may subject us to potential legal action and reputational harm and may result in a violation of the Health Insurance Portability and Accountability Act of 1996 of the Health Information Technology for Economic and Clinical Health Act; |
• | maintaining adequate internal controls; |
• | maintaining necessary insurance coverage; |
• | availability, terms, and use of capital; and |
• | weather and other seasonal factors. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
ITEM 4. | CONTROLS AND PROCEDURES. |
(a) | Evaluation of Disclosure Controls and Procedures |
(b) | Changes in Internal Control Over Financial Reporting |
ITEM 1. | LEGAL PROCEEDINGS. |
ITEM 1A. | RISK FACTORS. |
ITEM 6. | EXHIBITS. |
Exhibit Number |
Description |
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. |
|
Rule 13a-14(a)/15d-14(a) Certification of Corporate Controller. |
|
Certification Pursuant to 18 U.S.C 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.1 to the Company Current Report on Form 8-K filed with the SEC on March 6, 2020]. |
|
Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Lawrance McAfee [incorporated by reference to Exhibit 10.2 to the Company Current Report on Form 8-K filed with the SEC on March 26, 2020]. |
|
Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Glenn McDowell [incorporated by reference to Exhibit 10.3 to the Company Current Report on Form 8-K filed with the SEC on March 26, 2020]. |
|
Amendment to Employment Agreement entered into as of March 26, 2020 by and between the Company and Graham Reeve [incorporated by reference to Exhibit 10.4 to the Company Current Report on Form 8-K filed with the SEC on March 26, 2020]. |
|
U. S. Physical Therapy, Inc. Objective Long-Term Incentive Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.1 to the Company Current Report on Form 8-K filed with the SEC on March 6, 2020]. |
|
U. S. Physical Therapy, Inc. Discretionary Long-Term Incentive Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.2 to the Company Current Report on Form 8-K filed with the SEC on March 6, 2020]. |
|
U. S. Physical Therapy, Inc. Objective Cash/RSA Bonus Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.3 to the Company Current Report on Form 8-K filed with the SEC on March 6, 2020]. |
|
U. S. Physical Therapy, Inc. Discretionary Cash/RSA Bonus Plan for Senior Management for 2020, effective March 3, 2020 [incorporated by reference to Exhibit 99.4 to the Company Current Report on Form 8-K filed with the SEC on March 6, 2020]. |
|
101.INS* |
XBRL Instance Document |
101.SCH* |
XBRL Taxonomy Extension Schema Document |
101.CAL* |
XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
XBRL Taxonomy Extension Label Linkbase Documen |
101.PRE* |
XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith |
U.S. PHYSICAL THERAPY, INC. |
||
Date: May 21, 2020 |
By: |
/s/ LAWRANCE W. MCAFEE |
Lawrance W. McAfee |
||
Chief Financial Officer |
||
(duly authorized officer and principal financial and accounting officer) |
||
By: |
/s/ JON C. BATES |
|
Jon C. Bates |
||
Vice President/Corporate Controller |
1. |
I have reviewed this quarterly report on Form 10-Q of U.S. Physical Therapy, Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
|
|
/s/ CHRISTOPHER READING
|
|
Christopher Reading
|
|
President and Chief Executive Officer
(principal executive officer)
|
1. |
I have reviewed this quarterly report on Form 10-Q of U.S. Physical Therapy, Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
|
|
/s/ LAWRANCE W. MCAFEE
|
|
Lawrance W. McAfee
|
|
Chief Financial Officer
|
|
(principal financial and accounting officer)
|
1. |
I have reviewed this quarterly report on Form 10-Q of U.S. Physical Therapy, Inc.;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter
(the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
|
|
/s/ JON C. BATES
|
|
Jon C. Bates
|
|
Vice President/Corporate Controller
|
/s/ CHRISTOPHER J. READING
|
|
Christopher J. Reading
|
|
Chief Executive Officer
|
|
|
|
/s/ LAWRANCE W. MCAFEE
|
|
Lawrance W. McAfee
|
|
Chief Financial Officer
|
|
|
|
/s/ JON C. BATES
|
|
Jon C. Bates
|
|
Vice President/Corporate Controller
|
|
NOTES PAYABLE AND AMENDED CREDIT AGREEMENT- Summary of Aggregate Annual Payments of Principal Required to Revolving Credit Facility (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Long Term Debt By Maturity [Abstract] | ||
During the twelve months ended March 31, 2021 | $ 728 | |
During the twelve months ended March 31, 2022 | 118,602 | |
Payments/Long term debt, Total | $ 119,330 | $ 51,089 |
REVENUE RECOGNITION |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION |
3. REVENUE RECOGNITION
Categories
Revenues are recognized in the period in which services are rendered.
Net patient revenues consists of revenues for physical therapy and occupational therapy clinics that provide pre-and post-operative care and treatment for orthopedic related disorders, sports-related injuries, preventative care, rehabilitation of injured workers and neurological-related injuries. Net patient revenues (patient revenues less estimated contractual adjustments) are recognized at the estimated net realizable amounts from third-party payors, patients and others in exchange for services rendered when obligations under the terms of the contract are satisfied. There is an implied contract between us and the patient upon each patient visit. Generally, this occurs as the Company provides physical and occupational therapy services, as each service provided is distinct and future services rendered are not dependent on previously rendered services. The Company has agreements with third-party payors that provide for payments to the Company at amounts different from its established rates. The allowance for estimated contractual adjustments is based on terms of payor contracts and historical collection and write-off experience.
Management contract revenues, which are included in other revenues in the consolidated statements of net income, are derived from contractual arrangements whereby the Company manages a clinic owned by a third party. The Company does not have any ownership interest in these clinics. Typically, revenues are determined based on the number of visits conducted at the clinic and recognized at the point in time when services are performed. Costs, typically salaries for our employees, are recorded when incurred.
Revenues from the industrial injury prevention business, which are also included in other revenues in the consolidated statements of net income, are derived from onsite services the Company provides to clients’ employees including injury prevention, rehabilitation, ergonomic assessments and performance optimization. Revenue from the industrial injury prevention business is recognized when obligations under the terms of the contract are satisfied. Revenues are recognized at an amount equal to the consideration the Company expects to receive in exchange for providing injury prevention services to its clients. The revenue is determined and recognized based on the number of hours and respective rate for services provided in a given period.
Additionally, other revenues include services the Company provides on-site, such as schools and industrial worksites, for physical or occupational therapy services, and athletic trainers and gym membership fees. Contract terms and rates are agreed to in advance between the Company and the third parties. Services are typically performed over the contract period and revenue is recorded at the point of service. If the services are paid in advance, revenue is recorded as a contract liability over the period of the agreement and recognized at the point in time, when the services are performed.
The Company determines allowances for doubtful accounts based on the specific agings and payor classifications at each clinic. The provision for doubtful accounts is included in clinic operating costs in the statements of net income. Patient accounts receivable, which are stated at the historical carrying amount net of contractual allowances, write-offs and allowance for doubtful accounts, includes only those amounts the Company estimates to be collectible.
The following table details the revenue related to the various categories (in thousands):
Medicare Reimbursement
The Medicare program reimburses outpatient rehabilitation providers based on the Medicare Physician Fee Schedule (‘‘MPFS’’). For services provided in 2018, a 0.5% increase was applied to the fee schedule payment rates; for services provided in 2019, a 0.25% increase was applied to the fee schedule payment rates before applying the mandatory budget neutrality adjustment. For services provided in 2020 through 2025, a 0.0% update will be applied each year to the fee schedule payment rates, before applying the mandatory budget neutrality adjustment. However, in the 2020 MPFS Final Rule, CMS proposed an increase to the code values for office/outpatient evaluation and management (E/M) codes and cuts to other codes to maintain budget neutrality of the MPFS. This change in code valuations would be effective January 1, 2021. Under the proposal, physical/occupational therapy services could see code reductions that may result in an estimated 8% decrease in payment. In announcing this possible reduction in the applicable physical/occupational therapy codes, CMS indicated that it would further consider and address industry and provider concerns before finalizing the 2021 code values.
Our physical therapists and occupational therapists are able to provide services to patients on a remote basis, using a variety of technologies. This is particularly helpful during the pendency of the Coronavirus emergency, as some patients are reluctant to travel. Reimbursement and coverage for these services vary among payors. Effective as of March 1, 2020, CMS provided a temporary waiver to allow physical therapists and occupational therapists (and their respective assistants) to perform and be reimbursed for the full scope of services performed remotely as “telehealth visits,” provided the telehealth services ae performed by therapists associated with clinics that are enrolled with Medicare on a private practice basis. Currently, clinics enrolled with Medicare as certified rehabilitation agencies are not authorized to perform and be reimbursed for telehealth visits for Medicare beneficiaries. Approximately 60% of our clinics participate with Medicare as private practices. The foregoing telehealth temporary waiver will continue until the end of the Coronavirus emergency as determined by CMS, unless extended further by CMS.
Beginning in 2021, payments to individual therapists (Physical/Occupational Therapist in Private Practice) paid under the fee schedule may be subject to adjustment based on performance in the Merit Based Incentive Payment System (“MIPS”), which measures performance based on certain quality metrics, resource use, and meaningful use of electronic health records. Under the MIPS requirements, a provider’s performance is assessed according to established performance standards each year and then is used to determine an adjustment factor that is applied to the professional’s payment for the corresponding payment year. The provider’s MIPS performance in 2019 will determine the payment adjustment in 2021. Each year from 2019 through 2024, professionals who receive a significant share of their revenues through an alternate payment model (“APM”), (such as accountable care organizations or bundled payment arrangements) that involves risk of financial losses and a quality measurement component will receive a 5% bonus in the corresponding payment year. The bonus payment for APM participation is intended to encourage participation and testing of new APMs and to promote the alignment of incentives across payors. The specifics of the MIPS and APM adjustments will be subject to future notice and comment rule-making.
The Budget Control Act of 2011 increased the federal debt ceiling in connection with deficit reductions over the next ten years, and requires automatic reductions in federal spending by approximately $1.2 trillion. Payments to Medicare providers are subject to these automatic spending reductions, subject to a 2% cap. On April 1, 2013, a 2% reduction to Medicare payments was implemented. The Bipartisan Budget Act of 2015, enacted on November 2, 2015, extended the 2% reductions to Medicare payments through fiscal year 2025. The Bipartisan Budget Act of 2018, enacted on February 9, 2018, extends the 2% reductions to Medicare payments through fiscal year 2027. The CARES Act, enacted on March 27, 2020, temporarily suspended the 2% payment adjustment, effective for claims with dates of service from May 1, 2020 through December 31, 2020.
Historically, the total amount paid by Medicare in any one year for outpatient physical therapy, occupational therapy, and/or speech-language pathology services provided to any Medicare beneficiary was subject to an annual dollar limit (i.e., the ‘‘Therapy Cap’’ or ‘‘Limit’’). For 2017, the annual Limit on outpatient therapy services was $1,980 for combined Physical Therapy and Speech Language Pathology services and $1,980 for Occupational Therapy services. As a result of Bipartisan Budget Act of 2018, the Therapy Caps have been eliminated, effective as of January 1, 2018.
Under the Middle Class Tax Relief and Job Creation Act of 2012 (‘‘MCTRA’’), since October 1, 2012, patients who met or exceeded $3,700 in therapy expenditures during a calendar year have been subject to a manual medical review to determine whether applicable payment criteria are satisfied. The $3,700 threshold is applied to Physical Therapy and Speech Language Pathology Services; a separate $3,700 threshold is applied to the Occupational Therapy. The MACRA directed CMS to modify the manual medical review process such that those reviews will no longer apply to all claims exceeding the $3,700 threshold and instead will be determined on a targeted basis based on a variety of factors that CMS considers appropriate The Bipartisan Budget Act of 2018 extends the targeted medical review indefinitely, but reduces the threshold to $3,000 through December 31, 2027. For 2028, the threshold amount will be increased by the percentage increase in the Medicare Economic Index (“MEI”) for 2028 and in subsequent years the threshold amount will increase based on the corresponding percentage increase in the MEI for such subsequent year.
CMS adopted a multiple procedure payment reduction (‘‘MPPR’’) for therapy services in the final update to the MPFS for calendar year 2011. The MPPR applied to all outpatient therapy services paid under Medicare Part B — occupational therapy, physical therapy and speech-language pathology. Under the policy, the Medicare program pays 100% of the practice expense component of the Relative Value Unit (‘‘RVU’’) for the therapy procedure with the highest practice expense RVU, then reduces the payment for the practice expense component for the second and subsequent therapy procedures or units of service furnished during the same day for the same patient, regardless of whether those therapy services are furnished in separate sessions. Since 2013, the practice expense component for the second and subsequent therapy service furnished during the same day for the same patient was reduced by 50%. In addition, the MCTRA directed CMS to implement a claims-based data collection program to gather additional data on patient function during the course of therapy in order to better understand patient conditions and outcomes. All practice settings that provide outpatient therapy services are required to include this data on the claim form. Since 2013, therapists have been required to report new codes and modifiers on the claim form that reflect a patient’s functional limitations and goals at initial evaluation, periodically throughout care, and at discharge. Reporting of these functional limitation codes and modifiers are required on the claim for payment.
Medicare claims for outpatient therapy services furnished by therapy assistants on or after January 1, 2020 must include a modifier indicating the service was furnished by a therapy assistant. Outpatient therapy services furnished on or after January 1, 2022 in whole or part by a therapy assistant will be paid at an amount equal to 85% of the payment amount otherwise applicable for the service.
Statutes, regulations, and payment rules governing the delivery of therapy services to Medicare beneficiaries are complex and subject to interpretation. We believe that we are in compliance in all material respects with all applicable laws and regulations and are not aware of any pending or threatened investigations involving allegations of potential wrongdoing that would have a material effect on our financial statements as of March 31, 2020. Compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties, and exclusion from the Medicare program. For the three months ended March 31, 2020 and 2019, net patient revenue from Medicare accounted for approximately $27.5 and $28.3 million, respectively.
Contractual Allowances
Contractual allowances result from the differences between the rates charged for services performed and expected reimbursements by both insurance companies and government sponsored healthcare programs for such services. Medicare regulations and the various third party payors and managed care contracts are often complex and may include multiple reimbursement mechanisms payable for the services provided in Company clinics. The Company estimates contractual allowances based on its interpretation of the applicable regulations, payor contracts and historical calculations. Each month the Company estimates its contractual allowance for each clinic based on payor contracts and the historical collection experience of the clinic and applies an appropriate contractual allowance reserve percentage to the gross accounts receivable balances for each payor of the clinic. Based on the Company’s historical experience, calculating the contractual allowance reserve percentage at the payor level is sufficient to allow the Company to provide the necessary detail and accuracy with its collectability estimates. However, the services authorized and provided and related reimbursement are subject to interpretation that could result in payments that differ from the Company’s estimates. Payor terms are periodically revised necessitating continual review and assessment of the estimates made by management. The Company’s billing system does not capture the exact change in its contractual allowance reserve estimate from period to period in order to assess the accuracy of its revenues and hence its contractual allowance reserves. Management regularly compares its cash collections to corresponding net revenues measured both in the aggregate and on a clinic-by-clinic basis. In the aggregate, historically the difference between net revenues and corresponding cash collections has generally reflected a difference within approximately 1% of net revenues. Additionally, analysis of subsequent periods’ contractual write-offs on a payor basis reflects a difference within approximately 1% between the actual aggregate contractual reserve percentage as compared to the estimated contractual allowance reserve percentage associated with the same period end balance. As a result, the Company believes that a change in the contractual allowance reserve estimate would not likely be more than 1% at March 31, 2020.
A contract’s transaction price is allocated to each distinct performance obligation and recognized when, or as, the performance obligation is satisfied. To determine the transaction price, the Company includes the effects of any variable consideration, such as the probability of collecting that amount. The Company applies established rates to the services provided, and adjusts for the terms of payor contracts, as applicable. These contracted amounts are different from the Company’s established rates. The Company has established a “contractual allowance” for this difference. The allowance is based on the terms of payor contracts, historical and current reimbursement information and current experience with the clinic and partners. The Company’s established rates less the contractual allowance is the revenue that is recognized in the period in which the service is rendered. This revenue is deemed the transaction price and stated as “Net Patient Revenue” on the Company’s consolidated statements of income.
The Company’s performance obligations are satisfied at a point in time. After the clinic has provided services and satisfied its obligation to the customer for the reimbursement rates stipulated in the payor contracts (i.e. the transaction price), the Company recognizes the revenue, net of contractual allowances, in the period in which the services are rendered. The Company recognizes the full amount of revenue and reports the contractual allowances as a contra (or offset) revenue account to report a net revenue number based on the expected collections.
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INTANGIBLE ASSETS, NET (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS, NET [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, Net |
Intangible assets, net as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands):
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Amortization Expenses |
The following table details the amount of amortization expense recorded for intangible assets for the three months ended March 31, 2020 and 2019 (in thousands):
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Amortization of Tradename, Referral Relationships and Non-Competition Agreements |
Based on the balance of referral relationships and non-compete agreements as of March 31, 2020, the expected amount to be amortized in 2020 and thereafter by year is as follows (in thousands):
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REVENUE RECOGNITION (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE RECOGNITION [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue, Categories |
The following table details the revenue related to the various categories (in thousands):
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LEASES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES |
10. LEASES
The Company has operating leases for its corporate offices and operating facilities. The Company determines if an arrangement is a lease at the inception of a contract. Effective January 1, 2019, right-of-use assets and operating lease liabilities are included in its consolidated balance sheet. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term and operating lease liabilities represent net present value of the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and operating lease liabilities are recognized at commencement date based on the net present value of the fixed lease payments over the lease term. The Company’s operating lease terms are generally five years or less. The Company’s lease terms include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating fixed lease expense is recognized on a straight-line basis over the lease term.
In accordance with ASC 842, the Company records on its consolidated balance sheet leases with a term greater than 12 months. The Company has elected, in compliance with current accounting standards, not to record leases with an initial terms of 12 months or less in the consolidated balance sheet. ASC 842 requires the separation of the fixed lease components from the variable lease components. The Company has elected the practical expedient to account for separate lease components of a contract as a single lease cost thus causing all fixed payments to be capitalized. Non-lease and variable cost components are not included in the measurement of the right-of-use assets or operating lease liabilities. The Company also elected the package of practical expedients permitted within ASC 842, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage are not included in the right-of- use assets or operating lease liabilities. These are expensed as incurred and recorded as variable lease expense.
The components of lease expense were as follows (in thousands):
* Sublease income was immaterial
Lease cost is reflected in the consolidated statement of net income in the line item – rent, supplies, contract labor and other.
Supplemental information related to leases was as follows (in thousands):
* Includes the right-of-use assets obtained in exchange for lease liabilities of $82.6 million which were recognized upon adoption of ASC Topic 842 at January 1, 2019.
The aggregate future lease payments for operating leases as of March 31, 2020 were as follows (in thousands):
Average lease terms and discount rates were as follows:
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GOODWILL |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL |
6. GOODWILL
The changes in the carrying amount of goodwill consisted of the following (in thousands):
The derecognition (write-off) of goodwill in the amount of $1.9 million was related to certain clinics that have been permanently closed.
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NOTES PAYABLE AND AMENDED CREDIT AGREEMENT - Summary of Notes Payable and Credit Agreement (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Dec. 31, 2019 |
|
Debt Instruments [Abstract] | ||
Payments/Long term debt, Total | $ 119,330 | $ 51,089 |
Less current portion | (728) | (728) |
Long term portion | 118,602 | 50,361 |
Credit Facility [Member] | ||
Debt Instruments [Abstract] | ||
Payments/Long term debt, Total | $ 114,000 | 46,000 |
Average effective interest rate | 2.40% | |
4.75% through 5.50% Notes Payable due in Next Year [Member] | ||
Debt Instruments [Abstract] | ||
Payments/Long term debt, Total | $ 5,330 | $ 5,089 |
Annual installments | $ 728 | |
4.75% through 5.50% Notes Payable due in Next Year [Member] | Minimum [Member] | ||
Debt Instruments [Abstract] | ||
Percentage of interest accrued | 4.75% | |
4.75% through 5.50% Notes Payable due in Next Year [Member] | Maximum [Member] | ||
Debt Instruments [Abstract] | ||
Percentage of interest accrued | 5.50% |
REVENUE RECOGNITION (Details) - USD ($) |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
Feb. 09, 2018 |
Nov. 02, 2015 |
Apr. 01, 2013 |
|
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | |||||
Revenue related to the various categories | $ 112,717,000 | $ 116,231,000 | |||
Medicare Reimbursement [Abstract] | |||||
Estimated percentage of decrease in payment | 8.00% | ||||
Percentage of clinic participation in medicare as private practices | 60.00% | ||||
Federal debt ceiling in connection with deficit reductions | 10 years | ||||
Reductions in federal spending | $ 1,200,000,000,000 | ||||
Medicare spending cut percentage | 2.00% | ||||
Expected reduction in Medicare spending percentage | 2.00% | 2.00% | 2.00% | ||
Percentage of payment adjustment temporary suspended | 2.00% | ||||
Combined physical therapy/speech language pathology expenses | $ 3,700 | ||||
Reduction in combined physical therapy/speech language pathology expenses | $ 3,000 | ||||
Percentage of practice expense component | 100.00% | ||||
Percentage reduction for service | 50.00% | ||||
Percentage of payment for outpatient therapy services | 85.00% | ||||
Net patient revenue from Medicare accounts | $ 27,500,000 | 28,300,000 | |||
Contractual Allowances [Abstract] | |||||
Difference between net revenues and corresponding cash collections, approximately of net revenues | 1.00% | ||||
Difference between actual aggregate contractual reserve and estimated contractual allowance reserve percentage | 1.00% | ||||
Maximum contractual allowance reserve estimate | 1.00% | ||||
Year 2017 [Member] | Maximum [Member] | |||||
Medicare Reimbursement [Abstract] | |||||
Annual limit on physical therapy and speech language pathology services | $ 1,980 | ||||
Annual limit occupational therapy services | $ 1,980 | ||||
Year 2018 [Member] | |||||
Medicare Reimbursement [Abstract] | |||||
Percentage of increase in Medicare payment rates | 0.50% | ||||
Year 2019 [Member] | |||||
Medicare Reimbursement [Abstract] | |||||
Percentage of increase in Medicare payment rates | 0.25% | ||||
From 2019 through 2024 [Member] | |||||
Medicare Reimbursement [Abstract] | |||||
Percentage of bonus payment by APM | 5.00% | ||||
From 2020 through 2025 [Member] | |||||
Medicare Reimbursement [Abstract] | |||||
Percentage of increase in Medicare payment rates | 0.00% | ||||
Net Patient Revenues [Member] | |||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | |||||
Revenue related to the various categories | $ 100,126,000 | 106,650,000 | |||
Management Contract Revenues [Member] | |||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | |||||
Revenue related to the various categories | 2,149,000 | 2,146,000 | |||
Industrial Injury Prevention Services Revenues [Member] | |||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | |||||
Revenue related to the various categories | 9,876,000 | 6,900,000 | |||
Other Revenues [Member] | |||||
Revenue from Contract with Customer, Excluding Assessed Tax [Abstract] | |||||
Revenue related to the various categories | $ 566,000 | $ 535,000 |
INTANGIBLE ASSETS, NET - Intangible Assets, Net (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Dec. 31, 2019 |
|
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | $ 55,648 | $ 52,588 |
Tradenames [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | 33,549 | 32,049 |
Referral Relationships [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | 19,354 | 18,367 |
Accumulated amortization | $ 12,290 | 11,677 |
Referral Relationships [Member] | Minimum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 6 years | |
Referral Relationships [Member] | Maximum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 16 years | |
Non-compete Agreements [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Total | $ 2,745 | 2,172 |
Accumulated amortization | $ 5,601 | $ 5,424 |
Non-compete Agreements [Member] | Minimum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 5 years | |
Non-compete Agreements [Member] | Maximum [Member] | ||
Finite-Lived Intangible Assets, Net [Abstract] | ||
Estimated useful life | 6 years |
COMMON STOCK |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
COMMON STOCK [Abstract] | |
COMMON STOCK |
11. COMMON STOCK
From September 2001 through December 31, 2008, the Board authorized the Company to purchase, in the open market or in privately negotiated transactions, up to 2,250,000 shares of the Company’s common stock. In March 2009, the Board authorized the repurchase of up to 10% or approximately 1,200,000 shares of its common stock (“March 2009 Authorization”). The Amended Credit Agreement permits share repurchases of up to $15,000,000, subject to compliance with covenants. The Company is required to retire shares purchased under the March 2009 Authorization.
Under the March 2009 Authorization, the Company has purchased a total of 859,499 shares. There is no expiration date for the share repurchase program. There are currently an additional estimated 217,391 shares (based on the closing price of $69.00 on March 31, 2020) that may be purchased from time to time in the open market or private transactions depending on price, availability and the Company’s cash position. The Company did not purchase any shares of its common stock during the three months ended March 31, 2020.
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INTANGIBLE ASSETS, NET |
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS, NET [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTANGIBLE ASSETS, NET |
7. INTANGIBLE ASSETS, NET
Intangible assets, net as of March 31, 2020 and December 31, 2019 consisted of the following (in thousands):
Tradenames, referral relationships and non-compete agreements are related to the businesses acquired. The value assigned to tradenames has an indefinite life and is tested at least annually for impairment using the relief from royalty method in conjunction with the Company’s annual goodwill impairment test. The value assigned to referral relationships is being amortized over their respective estimated useful lives which range from
to sixteen years. Non-compete agreements are amortized over the respective term of the agreements which range from to six years.The following table details the amount of amortization expense recorded for intangible assets for the three months ended March 31, 2020 and 2019 (in thousands):
Based on the balance of referral relationships and non-compete agreements as of March 31, 2020, the expected amount to be amortized in 2020 and thereafter by year is as follows (in thousands):
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ACQUISITIONS OF BUSINESSES (Details) |
1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 27, 2020
USD ($)
Clinic
Partnership
|
Sep. 30, 2019
USD ($)
Clinic
Installment
|
Apr. 11, 2019
USD ($)
State
Location
|
Apr. 30, 2018
Business
|
Mar. 31, 2017
Business
|
Mar. 31, 2020
USD ($)
|
Mar. 31, 2019
USD ($)
|
Dec. 31, 2019
USD ($)
Partnership
|
||||
Business Combination, Description [Abstract] | |||||||||||
Number of partnerships in which interest acquired | Partnership | 4 | ||||||||||
Cash paid, net of cash acquired | $ 11,633,000 | $ 0 | |||||||||
Estimated fair value of net tangible assets acquired [Abstract] | |||||||||||
Sale of non-controlling interest percentage in partnership one | 1.00% | ||||||||||
Tax effect on sale price | $ 196,000 | ||||||||||
Minimum [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Percentage of interest acquired | 1.00% | ||||||||||
Maximum [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Percentage of interest acquired | 55.00% | ||||||||||
Referral Relationships [Member] | |||||||||||
Estimated fair value of net tangible assets acquired [Abstract] | |||||||||||
Estimated useful lives of acquired intangibles | 11 years | 11 years | |||||||||
Non-compete Agreements [Member] | |||||||||||
Estimated fair value of net tangible assets acquired [Abstract] | |||||||||||
Estimated useful lives of acquired intangibles | 6 years | 6 years | |||||||||
IIPS [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Number of states of network services | State | 45 | ||||||||||
Number of onsite client locations | Location | 11 | ||||||||||
Percentage of interest acquired | 76.00% | 65.00% | 55.00% | ||||||||
Number of clinics | Business | 2 | 1 | |||||||||
Aggregate purchase price for the acquired clinic practices | $ 23,600,000 | ||||||||||
Cash paid for acquisition of interest in clinic | $ 18,900,000 | ||||||||||
Percentage of interest accrued | 5.50% | ||||||||||
Net of cash acquired | $ 700,000 | ||||||||||
Cash paid, net of cash acquired | [1] | 18,427,000 | |||||||||
Payable to shareholders of seller | [1] | 486,000 | |||||||||
Seller note | $ 4,000,000.0 | 4,000,000 | [1] | ||||||||
Total consideration | [1] | 22,913,000 | |||||||||
Estimated fair value of net tangible assets acquired [Abstract] | |||||||||||
Total current assets | [1] | 1,641,000 | |||||||||
Total non-current assets | [1] | 878,000 | |||||||||
Total liabilities | [1] | (2,884,000) | |||||||||
Net tangible assets acquired | [1] | (365,000) | |||||||||
Referral relationships | [1] | 1,500,000 | |||||||||
Non-compete | [1] | 590,000 | |||||||||
Tradename | [1] | 2,500,000 | |||||||||
Goodwill | [1] | 18,688,000 | |||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interests) | [1] | 0 | |||||||||
Total consideration | [1] | $ 22,913,000 | |||||||||
Clinic Practice [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Percentage of interest acquired | 65.00% | 67.00% | |||||||||
Number of clinics | Clinic | 4 | 11 | |||||||||
Aggregate purchase price for the acquired clinic practices | $ 11,900,000 | $ 12,400,000 | |||||||||
Cash paid for acquisition of interest in clinic | $ 11,600,000 | $ 12,100,000 | |||||||||
Number of installments | Installment | 2 | ||||||||||
Principal installments | $ 150,000 | ||||||||||
Number of partnerships in which interest acquired | Partnership | 4 | ||||||||||
Percentage of interest accrued | 4.75% | 5.00% | |||||||||
Cash paid, net of cash acquired | $ 12,170,000 | ||||||||||
Payable to shareholders of seller | 0 | ||||||||||
Seller note | $ 300,000 | 300,000 | |||||||||
Total consideration | 12,470,000 | ||||||||||
Estimated fair value of net tangible assets acquired [Abstract] | |||||||||||
Total current assets | 696,000 | ||||||||||
Total non-current assets | 3,028,000 | ||||||||||
Total liabilities | (2,816,000) | ||||||||||
Net tangible assets acquired | 908,000 | ||||||||||
Referral relationships | 1,500,000 | ||||||||||
Non-compete | 700,000 | ||||||||||
Tradename | 1,600,000 | ||||||||||
Goodwill | 13,991,000 | ||||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interests) | (6,229,000) | ||||||||||
Total consideration | $ 12,470,000 | ||||||||||
Clinic Practice [Member] | Minimum [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Percentage of interest acquired | 10.00% | ||||||||||
Clinic Practice [Member] | Maximum [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Percentage of interest acquired | 83.80% | ||||||||||
Acquisitions [Member] | |||||||||||
Business Combination, Description [Abstract] | |||||||||||
Cash paid, net of cash acquired | $ 11,633,000 | $ 30,597,000 | |||||||||
Payable to shareholders of seller | 486,000 | ||||||||||
Seller note | 300,000 | 4,300,000 | |||||||||
Total consideration | 11,933,000 | 35,383,000 | |||||||||
Estimated fair value of net tangible assets acquired [Abstract] | |||||||||||
Total current assets | 991,000 | 2,337,000 | |||||||||
Total non-current assets | 400,000 | 3,906,000 | |||||||||
Total liabilities | (469,000) | (5,700,000) | |||||||||
Net tangible assets acquired | 922,000 | 543,000 | |||||||||
Referral relationships | 1,600,000 | 3,000,000 | |||||||||
Non-compete | 750,000 | 1,290,000 | |||||||||
Tradename | 1,500,000 | 4,100,000 | |||||||||
Goodwill | 13,632,000 | 32,679,000 | |||||||||
Fair value of non-controlling interest (classified as redeemable non-controlling interests) | (6,471,000) | (6,229,000) | |||||||||
Total consideration | $ 11,933,000 | $ 35,383,000 | |||||||||
|
GOODWILL (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
Dec. 31, 2019 |
|
Goodwill [Roll Forward] | |||
Beginning balance | $ 317,676 | $ 293,525 | $ 293,525 |
Goodwill acquired | 13,632 | 31,330 | |
Goodwill related to partnership interest sold | 0 | (7,325) | |
Goodwill write-off related to closed clinics | (1,859) | $ 0 | 0 |
Goodwill adjustments for purchase price allocation of businesses acquired in prior year | 1,320 | 146 | |
Ending balance | $ 330,769 | $ 317,676 |
ACCRUED EXPENSES (Details) $ in Thousands |
Mar. 31, 2020
USD ($)
Clinic
|
Dec. 31, 2019
USD ($)
|
---|---|---|
Payables and Accruals [Abstract] | ||
Salaries and related costs | $ 19,230 | $ 19,340 |
Credit balances due to patients and payors | 5,115 | 4,303 |
Group health insurance claims | 2,499 | 2,277 |
Dividends payable | 4,110 | 0 |
Closure costs | 1,843 | 0 |
Federal income taxes payable | 1,891 | 0 |
Other | 5,957 | 4,935 |
Total | $ 40,645 | $ 30,855 |
Number of clinics closed | Clinic | 22 |
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