Okay. I cover healthcare facilities and manage for Bank of America. Thanks so much for joining us. This is, you know, gonna be exciting conference, and we're starting now this session with Encompass Health. They are the largest operator of inpatient rehab facilities. Today with us we have Doug Coltharp, the CFO, and Zabi Hotaki, who's the VP of Finance, but also Mark is here from IR. Just in case you have any follow-up questions, he's right there. Thank you so much for being here today with us. We appreciate. I guess maybe we'll go right into Q&A, by the way. I wanna start with volumes, because really this is like an exciting part of the story, for this company growing much faster than a lot of different provider types. You know, you guys targeting 6%-8% long-term discharge growth. Obviously, this quarter, you know, had some puts and takes, so maybe just kind of refresh people where we stand, you know, as we think about Q1 and also how you're thinking about the volume growth for this year. Absolutely. Excuse me. Thank you for hosting us, and thank you again for hosting the tour of our hospital yesterday. It was very well attended. In the way of further introduction, many of you may have not met Zabi before. Zabi joined us about 2.5 years ago as the Senior Vice President of Finance and Strategy. His last stop before joining us was at Stericycle, but he's had some great experience and relevant experience beforehand, and he is becoming an increasing participant in our Investor Relations functions as well. Glad to have him here today. As Joanna mentioned, back at our Investor Day in the fall of 2023, we laid out a five-year discharge growth CAGR. I say discharge growth because that is our primary measure of patient volumes in this industry. That objective was to have a five-year CAGR of 6%-8%. We attempted to be clear in our communications at that time, but apparently have fallen short that that 6%-8% was indeed meant to be a five-year CAGR and not a series of quarterly targets that would be 6%-8% or a series of annual targets. If you wind the clock forward to the end of 2025, we would be three years into that five-year CAGR, and we were fortunate that we had operated at the high end of that range with a 7.6% CAGR. We've said all along that there would be fluctuations, particularly from quarter-to-quarter, depending on things like the constitution of the calendar and what day of the quarter it ends on. Yes, that makes a difference because our discharge patterns based on the day of the week are a little different. As well as things like the comp that you're up against from the prior period, and when you have new capacity rolling in, because we've been adding a lot of new capacity to our business, both in the form of opening up new hospitals and then adding beds to existing hospitals. The last few quarters, our discharge growth has slowed from those levels a little bit, but it was readily explainable. In particular, when we look at the first quarter, our discharge growth was 4.3%, and that was impacted by a number of factors. First, something that's a little bit anomalous in the business is between the second half of last year and February of this year, we closed four units that we were operating that were actually housed within joint venture acute care hospital partners. All of those were situations where we were operating, three of them were that, and one of them was the lone SNF unit, skilled nursing facility unit that we operated. With regard to the three unit closures, those were leased space within the hospital. They operated as remote locations, so they were tied to the same Medicare provider number as a freestanding hospital that we operated in that market. We operated those units that all of which ran at essentially a break-even EBITDA as an accommodation to that acute care hospital partner. They were not strategic to us. They were not financially contributing. In each one of those cases, it was just coincidental that it happened within a one-year period of time. The host hospital wanted to take that space back for other purposes. We were glad to turn that back over to them. The aggregate impact of that, plus we closed our one skilled nursing facility. We had skilled nursing facility housed within one of our freestanding IRFs in Lexington, Kentucky. That was a facility that we acquired in 2014. Based on our relationship with the University of Kentucky, we agreed to continue to operate that skilled nursing facility, even though that too was not strategic for us for a period of time. They agreed that it was no longer necessary for us to do that, so we closed that as well. All of those together constituted about 85 basis points of a discharge growth headwind, but no impact to EBITDA. The second thing that we commented on, and I'm gonna ask Zabi to elaborate, is we got a high-class problem, which is because of that rapid discharge growth that we experienced over the three years, ending in 2025, our hospitals, even as we were adding capacity, filled up more quickly than we had anticipated. We had about 35% of our hospitals in the first quarter that ran at an average occupancy rate of 95%. We've got some plans to address that in the future. Zabi, maybe you just wanna take a moment and comment a little bit more on the occupancy situation. More than half of our high occupancy stores have bed addition plans over the next three years. When we look at 2026, 70% of the bed additions coming online are earmarked for these hospitals. As we move into 2027, and most of those bed additions are coming on in the back half in 2026. As we move into 2027, we're seeing about 90% of the bed additions in 2027 slated for these high occupancy stores, with more of those stores having bed additions in the first half than the second half. When we look at the next 15 months or so, we'll see a nice ramp of bed additions coming on, specifically addressing this high occupancy and alleviating some of these constraints and enabling discharge growth. The last thing I would point to, I don't want to make this sound like a litany of excuses, because actually at 4.3% discharge growth, we weren't disappointed, particularly given the EBITDA flow-through we had in Q1. You may have heard from some of the upstream acute care hospitals that it was a particularly mild season for flu and respiratory illnesses. We do get volume in the first quarter attributed to those. There's some seasonality. One of the proxies that we have, it's not a direct correlation for what kind of volume we're seeing related to flu and respiratory, is debility, which is one of the RICs that qualifies for admission into the IRF. For the first quarter, our total debility growth was only 0.7%. It was actually negative 1.5% for the first quarter. That's, again, just a seasonal thing that varies, and so it's not necessarily a carryover. Last point on this, Joanna, because we've taken a lot of time to answer your first question. You said, "What about the rest of the year?" If you just go through our guidance assumptions and pare those back, and those were updated with our Q1 earnings report, it would imply volume growth for the full year between 5% and 6%. Obviously, as we progress through the year and we start to anniversary some of those unit closures I had mentioned before, and also consolidate some of the volume from those closures into the remaining capacity that we have in those markets, that impact will diminish, and we're gonna anniversary some of these other impacts. We should see volume growth accelerating from the first quarter level through the balance of the year. On these closures, just to wrap it up, originally you talk about 30 basis points- 35 basis points, I think, for the year headwinds. Remind us, are you on track with that? You also talk about the fact that you plan to sort of, you know, capture these patients somewhere else, right, in different locations. Kind of walk us through the growth versus the net headwinds. Yeah, in a couple of those markets, we need to add beds to the existing facilities to accommodate that demand. I think a reasonable estimate is that 85 basis point impact in Q1 drops by about 20 basis points in each of the remaining quarters in this year. And then- The 30 basis points, by the way, is more back half heavy, not full year, because the first half is, you know, 85 basis points in Q1, and then it starts to step down. Have you kind of- Yeah. You know, captured these patients? Yes. All right. Just talking about these bed additions, I appreciate. Sounds like you addressing these high occupancy markets first, right? The next like you said, the next 15 months. You're also talking about now, you know, adding the small format hospitals, the large format hospitals. I guess there's a lot of different options you have at your disposal. Maybe walk us through in terms of economics. Like does it kinda change your, you know, ROIC metrics, you know, whether you do the large format, the regular or the small format? Yes. Just going back, we mentioned 1/2 of these hospitals have bed addition plans, the other 1/2 do not. The portion that do not have bed additions planned are typically landlocked hospitals or hospitals in competitive markets where they're best suited for a small format hospital. We're evaluating a dozen or so markets within this high occupancy cohort for the smaller format concept. Just another subset of this high occupancy cohort, we had, you know, some of these hospitals grow at a faster pace than we had anticipated. Portion of that had to do with some of the recent de novos that are just outperforming our original model. We're addressing those in the next couple years with bed addition. As far as just the economics and maybe I'll kinda run through the different modalities, you know. At the top of that list, I would say I would put small bed additions at the top of that list as far as the returns, because it's the highest and best use of capital for us. Typically, returns on those bed additions are north of 30%, and the average investment or cost per bed is about $850,000. On the small format hospitals, you know, we're expected to generate a return somewhere between 20%-25%. The average cost per bed there is about $1 million. As we look at de novos, historically, that has generated a return somewhere between the low to mid-teens and the cost is about $1.2 million. You mentioned the larger format hospitals. You know, in theory, a larger hospital, so 60 beds or greater, would generate a slightly better return than, say, a 50-bed de novo, if all things are equal. There are so many different variables that go into that, depending on the ramp-up of the demand, the patient payer mix, the cost per bed, whether we have a partner or not. I wouldn't necessarily classify these 60-bed hospitals that we're doing into a new category. I'd probably put them in that de novo return category of low to mid-teens. Joanna, I don't wanna assume that everybody in our audience today knows what a small format hospital is because it's a relatively new concept for us. We've had a chance to explore that with you previously. Historically, our methods for increasing capacity in our business have been twofold. Since 2021, we have been opening, from a greenfield basis, eight new hospitals per annum. Not surprisingly, because there are great economies of scale for standardization, those hospitals have followed a pretty standard format. Essentially what we have looked to do to create the best labor efficiencies, because labor consumes about 54% for one of our revenue dollars, is we would go out and we would acquire, depending on the specific topography, anywhere between five and seven acres of land. We would start with typically a 50 all-private room, single-story building supported by administrative areas and a large therapy gym and a dining facility and so forth. On that acreage, there would be capacity, again, depending on the specific topography, to increase with future period bed additions of anywhere between 10 and 30 beds, so up to about 80 hospitals. The effect of those subsequent period bed additions, as Zabi mentioned, was to turbo boost the overall return because you're bringing on new capacity at 30% + return. What we have found as we've moved into more dense markets, is that finding a 5 acre- 7 acre piece of land can be challenging and can be expensive. If we fill those up as we've been able to do, then the opportunity to serve that market typically means that we need to move to another location. Sometimes the market dynamics, if you think about it, Dallas, where you sit and such, that between traffic patterns and the movements and the migration of population, you don't want to be in the same location. You want to put the beds more proximate to where the patients and the attending physicians are. We spent about three years developing this concept for a small format hospital. What does that mean? The prototype is gonna be 24 all-private rooms. It's gonna be a single story. It'll sit on 2 acres-2.5 acres of land. It's going to have a smaller amount of its square footage devoted to administrative space because you have fewer patients. The dining facility will be smaller, the therapy gym will be smaller. Importantly, this only works to the extent that these small format hospitals are set up as a remote location. Remote is a defined term under the Medicare regulations that says it's going to operate under the same Medicare provider number as an existing hospital in the market. That allows us to get economies of scale by sharing leadership functions, by sharing a marketing team and other administrative services. For example, in the small format hospitals, we're not going to be doing on-site food preparation. The food will be prepared and then brought over to that facility either by the host hospital or by a third party in the market. We are really excited about this. The first of these is gonna open up in 2027. It really gives us another important arrow in our quiver to address the high class problem of higher occupancy. It gives us a hub and spoke strategy in a lot of the denser markets that we're serving that are seeing a pretty significant growth in the age population over 65. Right. Since you mentioned that, kind of underlying demand, right? The population growing, pretty robustly here, but also another dynamic in the market is around Medicare Advantage. Like that growth clearly slowed down this year. The penetration seems like maybe that's gonna stall. I mean, we don't know what's gonna happen afterwards, but can you talk about your experience in your markets and I guess what implication that has to your company? We had a great run up into through the third quarter of last year with regard to Medicare Advantage growth. You know, I think from 2021 through the first three quarters of 2025, we had seen something like a 9% CAGR in Medicare Advantage. As a percentage of our payer mix, Medicare Advantage grew from just under 9% to a peak of about 17%. Over the last two quarters, we have seen some more challenging pre-authorization requirements from the Medicare Advantage plans, even on higher acuity patients. Our growth has slowed in that category. In fact, in the first quarter, it was 0.6% in total, and it was negative on a same store basis. Within that, the units that we closed that I mentioned before, particularly the SNF, were actually much more heavily weighted towards Medicare Advantage. If we factor out those units, we had a positive same store growth of, I think, 0.6% and a total discharge growth in Medicare Advantage of 1.9%. We've got a specific strategy that we began rolling out on a pilot basis at the end of February to try to address this. I'm gonna ask Zabi to talk about that in just a moment. I do wanna comment that the fact that the MA plans are pushing more self-pay back on the patients, that they're reducing benefits in part in response to the medical cost increases that they're seeing and the level of increases that they've been getting from Medicare, and that they're so stringent on pre-authorization is starting to show up in enrollment. Medicare Advantage enrollment and penetration looked like that for a long period of time, and it appears that it has now peaked at about 52% of Medicare beneficiaries and that it's actually started to recede a little bit more. In fact, if you look at the 12-month period from March 26 through March 25, 20 states had a decline in MA penetration. We have hospitals in 12 of those, and 54 of our 148 counties saw a year-over-year decline in Medicare Advantage penetration. That doesn't mean it's necessarily going away, but I think it is showing up in how beneficiaries choose a particular plan. Zabi, you wanna talk about- Yeah. The admit appeal? We're taking several steps to counteract some of the MA denials, the aggressive MA denials. That includes maintaining active communication with the subject plan, highlighting our value proposition. We're also informing CMS of non-compliance with Medicare coverage criteria. We're making sure on our end our clinical liaisons are responding timely to referrals, but we also have this admit and appeal strategy that we implemented this past quarter, where we will admit MA patients that were denied through the pre-authorization process that we believe meet CMS criteria, and we have strong clinical support for admission. We're following up with a formal appeals process on those. Nine hospitals are part of a pilot that we kicked off a couple months ago. Early outcomes from that are very promising. It's not to say we are done. I think we'll let this play out over the next six to nine months and understand kind of the end-to-end process of appeals and what the full effect of this program is and our success rates as far as what gets overturned. Early outcomes look good. There are five different levels of appeal, and the first two happen very quickly. The first is called an expedited appeal, and essentially, as soon as you get a denial in the pre-authorization process, you fill out a form, which we've been using AI to help us do, and flip that back to the plan to see if the plan will overturn it based on that. We've actually seen this, you know, almost a 30% success rate on just flipping it back and saying, "Take another look." The second level of appeal is with a fiscal intermediary that is employed by CMS. That happens automatically if you get a denial, and the turnaround is very quickly. Then it moves to the ALJ, and things slow down. It's gonna take us a little while to develop an experience curve on this. Our historical practice, by the way, if you have to compare this to what we were doing before, is because of the sufficient patient flow within basically all payer classes, if we got a pre-authorization denial from an MA patient, unless there were really extenuating circumstances, we let it go, and we moved on to the next patient. As we've seen their conversion rates drop so dramatically over the last two quarters, we felt the need to take a more aggressive approach, really advocating for the patients. We're hopeful that this will change behaviors in two ways. One is that we're going to be successful on those that we're admitting and appealing. The second is that the plans are gonna wake up to the fact now that we're just not accepting their initial decision. They'll start approving more of those appropriate patients on the front end. More to come on that in the future. Do you see 'Cause it sounds like there was an issue with one particular payer, which is nationwide, but has that spread to other payers? It has not. It's been disproportionately concentrated with one large player. Okay. Are you seeing any, I mean, maybe different actions from other payers? 'Cause obviously we hear across the board, kind of providers talking about kinda your experience in terms of pre-authorization increasing and sort of more pushback from the payers. Just curious- No. If there's anything else. We really haven't. Okay, that's good. Yeah, it is good. Right. overall, I guess. We also want to remind everybody, we'd like to be able to serve the Medicare Advantage beneficiaries at the same rate that we do Medicare beneficiaries, fee for service. There are plenty of patients out there. Right. Again, nationwide, just as a proxy for the unmet demand in this business, you know, 60% of patients admitted into any IRF, ours included, in a particular year, have to have as a primary diagnosis, one of 13 categories established by CMS called CMS 13. We have the ability through the Medicare database to look upstream at all of the discharges coming out of acute care hospitals in the U.S. on an annual basis. We look at those that are coded CMS 13. We look up to the acute care hospitals because 93% of the patients who come into an IRF come from an acute care hospital. Only 14.5% of patients coming out of acute care hospitals with a CMS 13 diagnosis wind up in an IRF bed. That just tells you how much room there is to expand there. In many of the markets in which we operate in an existing hospital, and we track that same conversion rate, we're able to move that up north of 20%. I guess also maybe finishing up on the Medicare Advantage dynamics, 'cause, you know, it is important payer, right? Yep. As we think about the penetration. You guys, like you mentioned, you did a good job growing that penetration inside your business, right? Also, can you talk us and remind us where you stand in terms of the rates from these payers, right? Because historically, there was a bigger discount. Now it sounds like on average you're kinda closing the gap, so kinda- Yeah. More room to to close that gap, or are we kinda where we should be on that rate? There are positive aspects and there are concerning aspects about closing the gap between the two. If you roll the clock back 10 or more years ago, the payment gap between fee for service and Medicare Advantage for our IRF services would have been as large as 25%. For the first quarter of this year, it was 1%. That is a result of two things. One is over time, as we've been able to demonstrate our value proposition, we have converted over 90% of our MA contracts from being paid on a per diem basis to being paid on a per episode basis tied to the fee for service rate. That has helped close the gap significantly. The gap that we're talking about also is not acuity neutral. Within both payer classes, reimbursement is tied to acuity, and we skew higher in acuity, not surprisingly for Medicare Advantage. For instance, just a comparison, one of the most medically complex conditions that we treat in our facility, and we're better than anybody else in the world at doing that, are patients that are recovering from stroke. Within our fee for service book of business, about 14% of our patients are stroke patients. Within Medicare Advantage, it's 35%. As we're seeing these more stringent pre-authorization requirements for Medicare Advantage, what we're also witnessing is that we're retaining the higher acuity patients and we're losing some of the still IRF appropriate, but lower acuity patients. That's closing the payment gap between them, but it's impacting volume. Ultimately, you know, I would rather see that payment gap open up a little bit because the MA acuity spectrum is broadening. Maybe, we have a couple of minutes left, but I wanna touch on the fee for service reimbursement. We got the proposal, I guess, that was very benign. Nothing in there. I mean, there's some language around, you know, some CMS looking on some things, and they're quoting MedPAC analysis. Maybe kinda how we should think about the reimbursement outlook. I mean, we kind of had a view of 2027, right? I'm thinking about could there be something else that could happen in the future? 'Cause obviously there's a lot of discussion in D.C. around fraud and abuse and, you know, going after certain providers. I mean, there's nothing out there that would suggest that, you know, their inpatient rehab is being targeted, but I'm just kind of putting out there in terms of how you're thinking about the bigger picture kind of reimbursement changes in the future. I think the greatest comfort that everyone in this room should take around fraud and abuse in the IRF sector is the extension of RCD, Review Choice Demonstration. When the providers in this space are having 100% of their claims reviewed by a Medicare fiscal intermediary on the front end and still prevailing at rates of 98% and higher in states like Pennsylvania, and our early experience in Texas has been the same, that should be very comforting. I mean, that's not our reviewer, that's their reviewer, and it's 100% on a pre-claim basis. The proposed rule was relatively benign. The market basket update and the pricing increase were a little bit lower than we anticipated. We had been anticipating 3% for the fiscal year that'll begin October 1st of this year. It came in at 2.4%. That impacts our fourth quarter revenue and EBITDA by about $7 million. We absorbed that within our guidance and still increased those guidance ranges. There were a couple of provisions that are operational components about just including functional status within the pre-screen, about when you have to initiate the initial team conference and so forth. Some of those don't make a good deal of sense. As we normally do during this comment period, we will be providing comments to CMS, both as an individual company and part of the trade association. There was one RFI in there that has confused a lot of people because it talked about within certain patient categories wanting to basically converge coding of those patients between the SNF system and the IRF system. We do not believe that that is any kind of step, disguised or otherwise towards site neutrality. We really think that that is just an attempt to reconcile some coding differences on similarly situated patients. The intent is to be budget neutral with those changes. As we see some of these categories maybe moving down, other categories moving up, it will potentially have a net offset. We saw that when Section GG was initiated in the IRF payment system in 2019. You just moved the pieces around the chessboard and wound up in the same place. By law, again, as Zabi mentioned, CMS cannot promulgate any changes that are not budget neutral for the industry. Maybe last question, capital deployment and I guess leverage of kinda your targets there, because I guess clearly your leverage is now, you know, below 3x. Yeah. Now kinda as we're thinking about- It's below 2x. Below 2 x actually. Yes, you're right. Thank you. It's, it's a good place to be. One of the real attributes of our business is that we generate really high and sustainable levels of free cash flow. We've been in a position the last several years where even as we've ramped up CapEx to address these occupancy issues and add more capacity, we're funding that almost exclusively with internally generated funds. Because EBITDA has been growing in the low double digits for the last several years, the leverage has been coming down. That's been giving us capacity to augment the capital that we're deploying for growth in the business with an increase in share repurchase program. There was a time when we said our target leverage was about 3 x, and we'd go up and above and below that. The last several years in speaking with our investors and just we've observed the overall environment, it feels like 2x-2.5x is the new 3x-3.5x. We're at 1.9x. It doesn't mean that we're capped there. I think you're gonna see us, because we can do this without sacrificing the opportunities we have to grow the business and buy back shares, I think you're gonna see us probably hover in that 2x-2.5x range for the foreseeable future. All right. That is all we have today. Thank you so much, everyone. Thanks so much as well, and enjoy the conference. Thank you.