Specialist
Former Director, Clinical at ATI Physical Therapy Inc
Agenda
- Key trends and developments in physical therapy segment relating to ATI Physical Therapy (NYSE: ATIP)
- Challenges including labour rates, capacity constraints and margin compression
- Levers to improve business operations, including flexible staffing models, labour incentives and cost reduction opportunities
- Competitive positioning vs US Physical Therapy (NYSE: USPH), Select Medical (NYSE: SEM) and others
- 12-18-month outlook strategic assessments, turnaround potential and growth strategy
Questions
1.
How do you expect physical therapy visit volumes to trend over the next six months? How much deferred care or pent-up demand could there be for physical therapy and how might volumes vary regionally?
2.
CMS [Centers for Medicare and Medicaid Services] has cut rates substantially over the past couple years or so for physical therapy. Are there any unique factors to physical therapy that caused CMS to target the segment in 2020 with a 9% payment cut proposal?
3.
How are you assessing the risk of further cuts from CMS in 2022? How material is the threat here? Additionally, is it likely commercial payers may follow suit, using CMS cuts as justification?
4.
Could you discuss the negotiation leverage ATI enjoys with commercial payers given its scale? What additional levers can it pull to preserve reimbursements with commercial players?
5.
How much of a material risk is the recent investigation from shareholder rights law firm, Robbins LLP, into ATI for misleading statements and violations of the Securities Exchange Act of 1934? ATI assured shareholders it’s the “employer of choice” for physical therapy clinicians and touted that its staffing strategy “would achieve significant labour savings” through a more productive model. Could you break down the potential scenario implications here and the broader risk to ATI?
6.
Could you discuss the current climate surrounding labour costs for physical therapists? Is the spike in these costs temporary or do you expect it to become permanent? How comparable are these dynamics with what we’ve been observing in agency nursing where rates outpace salaries, thus exacerbating attrition issues?
7.
What are the working capital needs of a business such as ATI in normal times? Could a reopening spike create a working capital problem? Is there a material lag across providing services, paying employees and receiving reimbursement?
8.
How much contract labour has ATI used historically? Is this a scalable short-term solution to therapist attrition as the company aims to revamp its labour force?
9.
Why do you think labour issues have affected ATI so severely, especially given your comments about the company being a good place to work with favourable wages? Players such as Select Medical and US Physical Therapy have not had the same labour challenges. Why is this the case? What might competitors be doing differently or more efficiently?
10.
How would you assess ATI’s management realignment efforts to get the right executive team in place? What went wrong with the prior team and what should the company do to reset its company culture?
11.
What type of new CEO does ATI need to bring in? What qualifications would you be aiming for? What could ATI change to become a more attractive employer to physical therapists?
12.
How long could it take to stabilise ATI’s business? How much does seasonality factor in here and how much should we read into one improved quarter of performance?
13.
How hard is it to ramp up new physical therapists? Does the attrition ATI has observed in senior physical therapists affect its ability to recruit new staff and bring them up to speed? To what extent do the COVID-19 restrictions reducing first-hand clinical experience increase the ramp-up timelines in training for physical therapy graduates?
14.
How important is the referral pathway to ATI from individual physicians? The company has a national brand strategy, so do referral sources refer to ATI or a specific physician/clinic?
15.
If ATI lost or damaged some relationships as a result of their PT attrition problems, how difficult could it be for the company to recover this business? How impactful could this be to future referrals and potential loss of referrals?
16.
We’ve discussed that US Physical Therapy and Select Medical have not experienced the same labour issues as ATI. Why wouldn’t ATI’s referral pathways be lost to competition?
17.
To what extent can ATI substitute physical therapy assistants to fill staffing shortages? How viable is this solution and is there any risk associated with using physical therapy assistants or lesser-trained physical therapy graduates from a patient experience standpoint?
18.
What are your expectations for ATI’s growth strategy over the next 12 months? How much of a risk do staffing challenges pose to its clinic expansion efforts? Could you quantify this by reduced number of clinics or percentage decrease of new clinic openings?
19.
What’s the approximate ratio of ATI’s physical therapists to physical therapy assistants in both headcount and salary? How much revenue do physical therapy assistants generate as a percentage of total revenue for the business?
20.
How flexible can ATI be around where it opens new clinics? How much ability is there to increase exposure to areas with less labour inflation and stay away from areas with higher costs?
21.
Are any other regions other than the southeast US you would highlight as attractive for expansion? Which geographies might be favourable around patient population, reimbursement or less exposure to labour inflation headwinds?
22.
How would you compare the value of the ATI model vs a franchise/JV model? Could you discuss the strengths and weaknesses of each strategy? Is one favourable and, if so, why?
23.
Could you juxtapose ATI’s competitiveness versus Select Medical, US Physical Therapy and others? How does ATI compare in both reputation and geographic footprint? Do you expect any near term market share shifts?
24.
Do you think some of the smaller operators enjoy an advantage in service quality or patient relationships?
25.
How much market overlap is there with Athletico specifically in the Midwest and Upstream Rehab in the southeast? Are any of these players gaining traction at ATI’s expense? How do you assess the competitive dynamics here?
26.
What’s your 12-18-month outlook for ATI Physical Therapy, perhaps highlighting how reimbursement may shift and the company’s ability to ameliorate some of the labour issues it experienced in 2021?
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