Good morning and thank you for joining us today for Select Medical Holdings Corporation’s Earnings Conference Call to discuss the First Quarter 2014 Results and the Company’s Business Outlook. Speaking today are the company’s Executive Chairman and Co-Founder, Robert Ortenzio; and the company’s Executive Vice President and Chief Financial Officer, Martin Jackson. Management will give you an overview of the quarter highlights and then open the call for questions. Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company, including without limitation, statements regarding operating results, growth opportunities and other statements that refer to Select’s plans, expectations, strategies, intentions and beliefs. These forward-looking statements are based on the information available to management for Select Medical today and the company assumes no obligation to update these statements as circumstances change. At this time, I will turn the conference call over to Mr. Robert Ortenzio. Please proceed.

Good morning, everyone and thank you for joining us for Select Medical’s first quarter earnings conference call for 2014. For our prepared remarks, I will provide some overall highlights for the company and our operating divisions and then ask our Chief Financial Officer, Marty Jackson to provide some additional financial details before we open the call up for questions. I wanted to first note that the results for the first quarter reflect Medicare payment changes that became effective on April 1, 2013 including a 2% reduction in Medicare payments that was implemented as part of the automatic reduction of federal spending mandated under the Budget Control Act of 2011, which we refer to often as sequestration reduction; and an increase from 25% to 50% in the Multiple Procedure Payment Reduction for clinical therapy services as mandated by the American Taxpayer Relief Act of 2012, which we refer to as the MPPR reduction. The reduction in both the net operating revenues and adjusted EBITDA from sequestration was approximately $7.6 million in the first quarter. Reduction in both net operating revenues and adjusted EBITDA from MPPR was approximately $2.1 million in the first quarter. This is the final quarter, in which these adjustments will have an impact on our year-over-year comparative results. Net revenue for the first quarter was $762.6 million compared to $750 million in the same quarter last year. During the year, we generated approximately 74% of our revenues from our specialty hospital segment, which includes both our long-term acute care and in-patient rehab hospitals and 26% from our outpatient rehabilitation segment, which includes both our outpatient clinics and contract services. Net revenue on our specialty hospitals for the first quarter increased 1.2% to $564.6 million compared to $557.8 million in the same quarter last year. Growth was primarily related…

Thanks Bob. As Bob mentioned, the impact on sequestration in MPPR totaled $9.7 million in a quarter. We’re not experienced these Medicare payment reductions and net revenue would have increased by 3% and adjusted EBITDA would have increased by 6.5% in the first quarter. We also had the adverse impact of how winter weather in many of our outpatient markets in the first quarter. In the first quarter our operating expenses which include our cost of services, general and administrative expense and bad debt expense increased 2.5% to $667.9 million compared to the same quarter last year. As a percentage of our net revenue, operating expenses for the first quarter were 87.6%, this compares to 86.9% in the same quarter last year. Excluding the impact of sequestration and MPPR operating expense as a percentage of our net revenue would have declined by 40 basis points to 86.5%. Cost of services increased 2.2% to $638.8 million for the first quarter compared to the same quarter last year. As a percent of net revenue cost of services was 83.8% compared to 83.3% in the same quarter last year. The primary reason for the 50 basis point increase in our cost of services as a percent of net revenue were the sequestration and MPPR reductions. Cost of services as a percent of net revenue excluding the effects of these reductions would have been 60 basis points lower than the same quarter last year. G&A expense was $18.1 million in the first quarter, which as a percentage of net revenue was 2.4% compared to $17.4 million or 2.3% of revenue for the same quarter last year. Bad debt as a percentage of net revenue was 1.4% for the first quarter, this compares to 1.3% for the same quarter last year. Total adjusted EBITDA was…

(Operator Instructions) And your first question comes from the line of Frank Morgan with RBC Capital Markets. Please proceed.

You have had some success obviously with getting this patient criteria put in place it sounds like the proposed rule for fiscal ‘15 looks generally acceptable, I am curious if you all could maybe assess how you see the runway on visibility for the industry going ahead? And could you comment maybe on this recent development with this impact legislation floated in House, Ways and the Senate Finance on a post-acute bundled payment system or site-neutral payments? Thanks.

Sure. Frank, I am going to take the first one, your first question, which how we see the criteria impacting the broader LTAC community. I think it’s going to be choppy. It’s the – first of all, we really don’t have full implementation or even any implementation till 2016, so cost reports after late 2015 that is. So, I think it’s going to kind of – you are going to see kind of business as usual in the short-term, but when the criteria takes full effect, I mean, I do think as with a lot of these more significant regulatory or legislative changes, the impacts are going to be relatively uneven, you’re going to have – I think some providers are going to struggle and others will be able to adopt and do well. So, for us we’re really focused on our business and our hospitals fortunately, we generally have taking care of a patient population with much higher case mix index over the years. So, I think that positions us pretty well. I think our model which is the primary model, which is the hospital within a hospital more smaller hospitals also positions us fairly well so, I think we feel pretty good about the run rate that we have, the current profile of our hospitals and our prospects for adapting to the new criteria. I will add that it is our current strategy do not emphasized the site neutral payments, but to be more focused on the LTAC eligible patients. So, I’ll take a follow-up on that Frank if you like, but as you think about that, let me make a comment on the impact bill, for those of you who don’t follow as closely as many of us still the impact bill is the improving Medicare post acute care transformation bill and draft of that was released in March of this past year. That bill represents couple of years of work by both House Ways and Means and Senate Finance committees, it is relatively bipartisan. So, I think the main takeaway is that Congress is really looking at post acute care and I think that we were a little gratified with that they came generally to the same conclusion that we have been saying for some years and that is that there is bundling payments and preserving access to care is going to be a lot harder than some of the more abstract policy research suggested. So, I think the possible bundling approach acute services is still some years off and not take needs to be because of the complexity associated with bundling care in the post acute. Having said that, I don’t want to minimize the point that Congress and many policymakers would like to see greater integration across post acute care and we’re certainly find with that. So, I hope that answers the question, Frank, if it does not, I’ll take a follow-up.

No, that’s got it. Maybe just one more and I will hop off. Could you just talk a little bit more specifically about the strategies you are putting in place as we in early stages here in patient criteria? Thanks.

Well, some of the strategies are just as being more intensive in areas that we’ve been working on for some time obviously you want to do everything that you can to build an efficiencies in your hospitals. We want to expand and become better at those programs, those clinical programs that will attract those LTAC eligible patients. Beyond that, we’re really looking at a lot of dataset that allow us to identify where those LTAC eligible patients are, where they’re currently going or discharge destination and be able to identify those and really a market specific area at the same time looking at our competition in those markets, our market share and our position so that we can put ourselves in place to be able to replace any loss volume because of the criteria with LTAC compliant volume and I’ll let Marty comment a little bit on some of the information in data that we’re building and using around that strategy.

Before I comment on the data, Frank, I just like to point out that we’re very pleased with the operators and how they really focused on cost management. We think they’ve really done a very, very good job and one other reasons that we’ve been saying, we’ve been talking about sequestration and MPPR, I think it hides that. If you take a look at what we’ve done with our cost in our per patient day basis, the operators have done a traffic job. With regards to the market analysis that we’re doing, we really have done a deep dive into each of the different regions that we have and really identified specific patient populations that are compliant and what we’re doing is we’re retooling the marketing strategy that we have in each of those regions to really glad to those patients and that’s really two prong approach with people that are actually on the ground in those marketplace as long as well as with our Chief Medical Officer and his staff.

Great, thank you.

Your next question comes from the line of A.J. Rice with UBS. Please proceed.

Hi, everybody. Maybe just first kind of a question then I want to ask you about criteria as well, but the capital spending in the quarter of $27 million that is a higher run rate, I mean I think it is 70 or year last year. Is there anything worth highlighting there that or is that – is there a step-up this year that you’re expecting in capital spending?

A.J., you’re absolutely right, the first quarter was up to $27 million, a significant portion of that or good portion of that actually had to do with expenditures of that we made with regards to moratorium and different new projects that we had. There was a requirement that in order to be in a position to open-up new hospitals you had to have expanded 10% of cost of the projects and we accelerated some of those costs. I think historically what we’ve talked about at least the last earnings call we talked about – we thought we would be north of a 150 additional beds during this moratorium period. Today, we believe we’re going to be north of 300.

Okay.

Okay.

Alright. And then just going to the commentary on criteria, I mean, the strategy of really emphasizing the LTAC eligible mix of all the sense and deemphasizing some of the services lines that attract more of the site neutral. I guess I’m trying to think through so, we certainly have a two year still a fully or even start to facing really the new criteria. Do you start that process now and start shifting the patients over or shifting the emphasis for the patients who attract over or do you wait your closer to the timeframe and if you just start switching now is that a positive impact under the current roles financially or is that a drag financially, currently if you make that transition?

A.J., our plan at this moment is pretty clear. We will not be shifting over and then accelerating the model to comply with the new criteria in any significant way in advance of when it’s applied to our individual hospitals. So, well, we will be talking in future quarters about our preparation and what we’re doing and what we’re looking at which I think we’ll be targeted in significant efforts. I don’t see that’s changing our models very far in advance of the criteria. In some ways because our acuity is pretty high and because we have a pretty high percentage higher than the average percentage of compliant patients, now, we just don’t see any reason to start excluding patients that are currently eligible.

Okay.

A.J., now that doesn’t mean that we will be pursuing the compliant patients so for those hospitals that we have and have a capacity to the extent that we’re going through the retooling of the marketing process that we put in place. We anticipate that we’ll be in a position to take on some of those newly complaint patients. But as Bob said, the elimination of the non-compliant, we don’t see that happening until after new rates go in place.

Maybe just follow-up quickly on that so taking on more of the LTAC complaint wants today is not – does not have any negative financial implication to it right now under the old rules and then second when you do decide, they really push this I know you’re only talking about switching out probably 6 to 8 patients in every on average in the facilities in the hospitals and hospital model. How quick do you think you can execute that switch when you say, hey, this really make that happen?

Well, our plan is to be prepared and to do it as quickly as possible when the time is and that’s really what the preparation is now over the next year to two years. So that’s what we are planning for and that’s really in the execution.

And with regards to your – the first part of your question on the profitability of the compliant patients we anticipate that those patients are actually a little more profitable than…

Under the current system.

That’s correct.

Okay. That’s right. Thanks a lot.

Sure.

Your next question comes from the line of Kevin Fischbeck with Bank of America/Merrill Lynch. Please proceed. Kevin Fischbeck - Bank of America/Merrill Lynch: Okay, great. Thanks. Just want to go back to that last question. I think you mentioned Marty in the response that one that there are going to be some newly compliant patients under the new criteria, I mean how do you think about that opportunities that are expanding for you in terms of kind of percentage of business, is this something where you look at it and you say we are going to lose the X but there is Y, potential offset from a market expansion perspective?

Yes, Kevin the thought process is the compliant patients we are talking about are basically the new, in essence we are looking at the new regulations. So it is really the 3 plus day ICU stay or the 96 hours on a vent. As we are going back, we are taking a look at the MedPAR data. The industry is going back taking a look at the MedPAR data. For 2012 we took a look at what the size that market is. It’s a very large size and then we have broken it down by region. So when you take a look at it by region and then by discharging who is the discharging hospital, so being able to identify that we think will help us in the marketing approach.

But just to be clear and I think the comment that you made there are no newly compliant patients, I mean patients that are compliant now will be compliant under the new criteria are all compliant now. And I think the point that Marty and I have made consistently is there is a universal compliant patients out there that the industry and certainly select are not getting now, but they would still be compliant under the old criteria as well as the new criteria. Kevin Fischbeck - Bank of America/Merrill Lynch: Okay, that’s how I understood it as well. So I guess in that context, I guess it sounds like you have got maybe better data today than you did a couple of years ago which – this business a little bit better, but wouldn’t you expect this is the big competitive response of most of your peers as well that they are going to be going more aggressively after the compliant plans and how comfortable are you in your ability to kind of gain that share within that population.

An immediate response to your question is we are very confident that we can gain share. The fact is that we think we have done a pretty good job with the data sets that are out there. A lot of the data sets that we are reviewing are relatively new. So from our perspective we feel pretty comfortable with that.

And the other thing in terms of taking share, the other thing that I think plays into this is the moratorium. So this is the competition that’s there by and large is the competition that’s going to be there and that’s why I have always said that the moratorium cuts both ways for us. It is a barrier to growth in our LTAC division, but on the other hand it does allow you to execute on the new criteria without having additional competition in the local markets. Kevin Fischbeck - Bank of America/Merrill Lynch: Okay, that makes sense. And…

Kevin, the other thing I think you need to think about is when you take a look at there is a real bifurcation in the industry today between higher acuity providers such as us versus lower acuity providers. And if you take a look at the case mix index, there are a number of providers that have a very low acuity. And the ability to switch your clinical programs, the ability to change out your staffing to address the needs of that higher patient acuity is a very, very difficult thing to do. Kevin Fischbeck - Bank of America/Merrill Lynch: Okay, great. Thanks. And then I guess you mentioned I think in some of the prepared remarks that there is obviously going to be rate pressures to one of the offsets you highlighted was I think you said services provided system of the hospitals, (indiscernible) JV partners, can you talk a little bit about what those are and kind of where the run rate is for that line item?

Yes, I mean with a number of our JV partners, we actually take on all the employees and to a certain extent, we pass back those services on a cost basis and consequently that has a negative impact on the margin. Kevin Fischbeck - Bank of America/Merrill Lynch: Okay. And so that number though should continue to rise as you see more joint ventures?

Yes, as we see more joint ventures that will continue to rise. Kevin Fischbeck - Bank of America/Merrill Lynch: Okay, regarding JVs. And then I think just it’s the last question, could you give us a status on the JV opportunity out there?

We’re pretty pleased with where we are in our pipeline and our prospect for getting to our goals this year. And I think we said we will get another one to three new deals this year and I mean, I think I feel pretty good about where we are in terms of the game we get this. Kevin Fischbeck - Bank of America/Merrill Lynch: Okay, great, thanks.

Your next question comes from the line of Chris Rigg with Susquehanna Financial Group. Please proceed. Chris Rigg – Susquehanna Financial Group: Good morning guys, thanks for taking my questions. Just wanted to follow-up to A.J’s first question on the CapEx spending and I understand sort of big picture, the acceleration with regards to moratorium, but is that continue at that level because you now have to – you jump them 150 to 300 beds. And then secondarily can you give us sort of timing as to when those bends will be coming online?

Chris, to answer the first part of your question, the expenditures we’re really accelerated to make sure we made the deadline. Chris Rigg – Susquehanna Financial Group: Okay.

So, it will not be – we don’t think it will continue at that. We certainly don’t think it will continue with that base. Chris Rigg – Susquehanna Financial Group: Okay.

Okay, and the timing of those beds, we’ve had some beds come on this quarter and it will actually go through probably the first and second quarter of 2015 until we have all this bench on board. Chris Rigg – Susquehanna Financial Group: And is there any income statement impact in terms of the drag on earnings like why you bring them up the speed.

Yes, there were certainly be – there were certainly be an impact on earnings, but we’ve taken that into consideration in our – in the guidance that we provided to you. Chris Rigg – Susquehanna Financial Group: Okay and then I know Bob, you talked about the impact bill and it’s sort of having it’s show way out there, but is that at all, the sort of post keep bundling, you’ve been very focused on LTAC and patient rehab and patient rehab, but that all sort of broaden your horizons or you sort of fixated on the businesses that you are end for the time being.

Well, we are fixated on the business that we’re in. So, it is not broaden our horizons in terms of looking at other business lines if that’s a question. So, I think we feel as though we now with the LTAC criteria legislation we have good visibility on our LTAC division, our rehab hospital group. I think as we feel good about allocating capital there and growing and saying with our outpatient rehab. So, the impact field legislation is really has not changed our focus and more is it likely too in the near to mid-term. Chris Rigg – Susquehanna Financial Group: Understood and then just one last one here. Are you able to quantify the weather impact in the quarter at all?

Yes, we are, Chris, it’s – it was around $3.3 million. Chris Rigg – Susquehanna Financial Group: Okay, great. And that would go straight to EBITDA.

That’s correct. Chris Rigg – Susquehanna Financial Group: Alright, thanks a lot.

Sure.

Your next question comes from the line of Gary Lieberman with Wells Fargo. Please proceed. Gary Lieberman – Wells Fargo: Good morning. Thanks for taking the question. I think the stated update in the LTAC all about 0.8%. Would you expect that to be similar for Select or because your patient mix would you expected to be materially different from that.

Yes, Gary, we’re evaluating that right now, there is a whole host of variables to go into that calculation and we have typically or historically been under that whatever the number they give, we’ve been under that. You’ve got wage rate index, you’ve got reweighting that take place so there is a whole host variables. So, and we’re going through that right now, we’ll give an indication over time as we come up with those answers.

I think CMS always gives the headline of what they think it’s going to be and I’ve never experienced that it to that. It’s usually less. Gary Lieberman – Wells Fargo: Okay, that’s helpful. And then any initial thoughts on the in-patient rehab, you guys have had a chance to look at it?

No, not really. That really feels that we can comment on that yet. It kind of came out last night and rather than to give a sound bite, we really need to look at that. It does on its face, it doesn’t look like there is anything or shattering to it, but we need to really take a little bit closer look at it. Gary Lieberman – Wells Fargo: Okay. And then maybe just finally, could you maybe just more color on some of the expanded services that you mentioned in the contract therapy business?

Expanded services, I mean, we continue to provide the same types of services. Gary Lieberman – Wells Fargo: Yes, it has.

I mean, the only expanded services, is more therapy per patient. Gary Lieberman – Wells Fargo: Okay.

So there has been no change in that business, but just incremental service per patient. Gary Lieberman – Wells Fargo: Got it. Understood. Alright, thank you very much.

Your next question comes from the line of Whit Mayo of the Robert W. Baird. Please proceed.

Hey, Marty. Can you just remind us, do you have a restricted basket in your facility and just so where is it, I am just trying to think about capital restrictions?

Sure. With currently, we are at on the bank side we are at $32 million. On the bond side, we are about $72 million. But as you know that gets refurbished every quarter. So depending on certain assumptions that you make, you can take a look all the way up to 2016. At the end of 2016, it’s going to be over $300 million.

Got it. And my other question, the LTAC world is relatively small and I am sure that Bob, you had several conversations with maybe some of I guess what you guys have called the low acuity providers. And I mean, I have, and I am just kind of curious what you are hearing from the industry and one small public company has announced that they are going to be exiting that business? And I am just curious if you have any anecdotes that you could share that gives us a sense of what others in the market are sort of thinking about these regulatory changes coming over the next two years? Thanks.

Yes, I don’t know what that I can add a lot to what you may have heard out there. I mean, as I said earlier, just looking at the data and looking at the information, it’s going to be an uneven impact. And so everybody is I think going to have their own strategy about the way they are going to approach it. And I don’t really want to speak for the strategy that others are using or how they feel about their prospects, because it is a little – it is a year or two years out. And so there is ample time for people to adjust, but I think that the providers that have higher acuity now have a pretty significant head start on the process, so…

No, that’s fair. I thought I’d give it a shot. Thanks a lot guys.

And we have no further questions at this time. I will now turn the call back over to Mr. Ortenzio for any closing remarks.

Well, thank you all for joining us and we will look forward to updating you the next quarter.