Earnings Labs

U.S. Physical Therapy, Inc. (USPH)

Q3 2023 Earnings Call· Wed, Nov 8, 2023

$71.98

-0.77%

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Transcript

Operator

Operator

Good day. Welcome to the US Physical Therapy Third Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded [Operator Instructions]. I'd like to turn the call over to Chris Reading, President and CEO. Please go ahead, sir.

Christopher Reading

Analyst

Thank you. Good morning, and welcome, everyone, to our US Physical Therapy third quarter 2023 earnings call. With me on the call this morning, include Carey Hendrickson, our CFO; Eric Williams and Graham Reeve, our Chief Operating Officers; Rick Binstein, our Executive Vice President and General Counsel; Jake Martinez, our Senior Vice President Accounting and Finance. Before we being our discussion around our third quarter and year-to-date performance, we need to cover a brief disclosure. Jake, if you would please.

Jake Martinez

Analyst

Thank you, Chris. This presentation contains forward-looking statements which involve certain risks and uncertainties. These forward-looking statements are based on the company's current views and assumptions. The company's actual results may vary materially from those anticipated. Please see the company's filings with the Securities and Exchange Commission for more information.

Christopher Reading

Analyst

Thanks, Jake. So my commentary this morning is going to be at a high level, and following that Carey will cover the majority of our very detailed release more completely. Let me start with where volume is. Overall, we've been [ph] number of really good things, which our team of clinicians, partners and support staff were able to deliver this quarter. And there are a few challenges which we're continuing to work on as well. First, and importantly, volumes have been very strong this year and remain so throughout the third quarter, including during our normally seasonally slower summer months. Visits per clinic per day came in at 29.7, which is an all time high for us for any third quarter in our company's history. It serves as the best indication related to both the overall demand for our services and the way we're viewed by patients and referral sources alike, in a market where there is an abundance of choice. Truly our partners and our staff locally are providing care which is not just excellent, but which our patients and referral sources around the country are seeking out. My sincere thanks to all of you who are listening. That care you provide is not only changing lives for the better, but it is being recognized for driving the highest level of volume ever delivered by us at this time of the year. For the quarter that throughput, coupled with the strong development work, we've continued to produce, helped drive volumes year-over-year by 10.8%. Part of those volumes have come through de novo and tuck-in acquisitions with 31 additional clinics so far through October, which as you know, depresses our volume per clinic average some, drags a little bit on results early on. We've added nine de novo clinics in…

Carey Hendrickson

Analyst

Great, thank you, Chris. And good morning, everyone. In the third quarter, we had continued strength in patient volumes, strong growth in revenue, growth and our physical therapy and total operating income and year-over-year growth in both adjusted EBITDA and operating results per share. In addition, we added 19 clinics during the third quarter through acquisitions and de novos, with just three closures. We've now added 72 new clinics since the third quarter of last year through acquisitions and de novos, which is 14 closures which is a net addition of 58 clinics over the past year. We reported adjusted EBITDA for the third quarter of $18.6 million, which was an increase of $1.6 million over $17 million reported in the third quarter of 2022. Our operating results was $0.62 per share in the third quarter of 2023, which was a $0.04 increase over the $0.58 we reported in the third quarter of last year. Our total company revenues increased 7.5% in the third quarter growing from $139.6 million in the third quarter of '22 to $150 million in the third quarter of 2023. And our total company gross profit increased $1.1 million from $26.8 million in the third quarter '22 to $27.9 million in the third quarter of '23. As Chris noted in his remarks, our average visits per clinic per day in the third quarter were 29.7, which is the highest volume in the company's history for the third quarter, and it's a 3.1% increase of our average visits per day of 28.8 in the third quarter of last year. July was at 29.9 visits per day, August was a little lower as expected based on normal seasonality at 29.6. And then September came back up to 29.9. All three of those months were higher than the same…

Christopher Reading

Analyst

Carey, thank you. Great job. Operator, let's go ahead and open it up for questions.

Operator

Operator

Thank you. [Operator Instructions] We'll take our first question from Joanna Gajuk with Bank of America.

Joanna Gajuk

Analyst

Good morning.

Christopher Reading

Analyst

Good morning, Joanna.

Joanna Gajuk

Analyst

Thank you so much for -- hey good morning. Thanks so much for taking the question. So a couple of questions, I guess here. I guess on the last comment, from Carey around the outlook for this year that you slightly lowered it. Are we talking about kind of being towards the middle or lower? And so you kind of took off the higher end from the table. So I guess what are the main drivers for this lowered guidance, sounds like Q3, roughly in line. So I guess Q4 seems like there's some indicators that's pointing to a slower or lower number for Q4. Is that the way to think about this?

Carey Hendrickson

Analyst

Yes, Joanna. So I mean, I'd say it's within the expectations that we've had for -- I mean, it's probably a little bit lower than we expected. We need a little more net rate growth to get us to the higher end of the range than we've had. If we get more growth, we'll position ourselves close that middle, likely. But you mentioned that it looks like the fourth quarter would be less than the third quarter given the guidance that we provided. And that's not an unusual pattern. I mean, if you look back the last few years, in 2019, we went from $17 million of EBITDA down to about $15.6 million in the fourth quarter. Same thing in third quarter of '21. We went from that $19.9 million in the fourth quarter '21, to about $17 million. Last year went up a little bit. But that was because we had some large acquisitions we made. We made four large acquisitions in the fourth quarter, was actually two really larger and two other acquisitions in the fourth quarter of last year. And so that bumped our fourth quarter up a little bit. But it's a normal pattern for us that it's somewhat impacted by the holidays, which can happen, which bring down our volume some in late December, particularly. And then also in our IIP business, there's some seasonal decline, because some of the big manufacturers, auto in particular, closed down their plants in the last part of December, because of the holiday. So they're just shutting down the plants. When that happens, we don't have people on site that can bill. So last year in our IIP business, if you look back at it, our IIP income went down about a $1 million or so from the third quarter to fourth quarter. I don't expect it to go down that much this year. But it will likely come down some in the fourth quarter because of that phenomenon. Chris, anything you would add?

Christopher Reading

Analyst

No, I think you've covered it Carey. Joanna, the business is solid. This kind of follows our normal seasonal pattern. And we're just trying to be clear about where we think we're going to finish.

Joanna Gajuk

Analyst

Right, no, makes sense. And I guess just to follow up on that comment around the net rate vote, it sounds like that's where maybe things are a little bit softer. So I guess the question is, because you have been talking about, the negotiating contracts with commercial and some of the MA contracts improvement in our workers comps come out. When will we see that the benefit right to that net rate?

Carey Hendrickson

Analyst

Yeah, well, we have seen benefits from it. I mean, if you -- our commercial rates, and our workers comp rates are both up about 1.5% on a year-to-date basis. We'd like that to be more but we -- some of the negotiations have taken place during the year and it takes a while for them to take effect. And so we're hoping to see more of them in the fourth quarter and certainly in the 2024. The rate for our personal injury and self pay, which is our other, that's about 6% of our revenue, that's up about 2.5% year-to-date. Medicaid even is up about 1% year-to-date. The only payer categories, that's down is Medicare. And that's because the things we've noted, the higher ratio of PTAs to PTs. That increased a bit over the last 18 months or so. And we've had to do that in some cases, because the market is tough from a hiring standpoint, but also, we've had such heavy volume. So we've needed to hire, what we can hire to cover the volume. And then the heavy volumes have also caused a little bit of a downtick in build units for our Medicare. And then Medicare Advantage that's growing as a percent of our total Medicare visits. There's a big push out there for Medicare Advantage, for Medicare patients to move to Medicare Advantage, and that pays us less than traditional Medicare. So some of those things have factored in our Medicare rate this year. Like I said, everything else is up. Medicare has been down about 3.5% to 4%, year-to-date.

Christopher Reading

Analyst

So I would say, Joanna, when you look at the contracts, we've re-done, a lot of them have been double digit increases. Some of those are spread over two or three years, been pleased with the percent change. To your point, we need to see that show up in the P&L. And we're working to make that happen.

Joanna Gajuk

Analyst

All right. And if I may, a last question on the Medicare rate. So I guess we would get the final Physician Fee Schedule, the therapy rate there, down 2% or so. There's a potential work in progress on the relief for disposition fee schedule. And I know this latter bit could differ depending on your geographic mix and whatnot. So can you talk about what this reg means to you in terms of the net rate update? If there's no relief and if there is a relief, what it will be? And I guess anything else in direct that whether it could be impact for rehab therapy? Thank you.

Christopher Reading

Analyst

Carey, you want me to take care or you want to take it?

Carey Hendrickson

Analyst

You go ahead and I'll fill in.

Christopher Reading

Analyst

That's fine. So right now, I hate to say it, but sometimes these tables that are published, don't correspond with the actual realities, for the companies. And so the expected reduction for us is 3.5% in 2014 all factors considered. There are a couple of other things that we're in the final role, extends our ability to oversee physical therapy assistance in certain type of licensed facilities and do that on a remote basis, other than physically present on site. It's less beneficial. That's a continuation of something that was done during COVID, that's beneficial. Then there'd been some mildly beneficial things around remote therapeutic monitoring, which are net positive. They're not specially dollar wise impactful, but make more sense and will make it easier to capture those charges. On average, think of this as somewhere between 3.4% and a 3.5% reduction. Now you asked what it would be if it gets mitigated? I don't know the answer to that. We've had success in getting it mitigated through Congress every year since that original 9%, 9.5% cut was proposed, leading into COVID. I don't know what it'll be if it gets adjusted, we'll have to see.

Carey Hendrickson

Analyst

And just as a reminder, Joanna, that's one-third of our business, Medicare is, so that's on a overall rate that will have a lesser impact than the 3.5% if it were -- if it ended up at that rate. And I think we have momentum, as I've talked about in all of our other rate categories, going into '24.

Joanna Gajuk

Analyst

Great. Thank you so much.

Operator

Operator

We'll take our next question from Brian Tanquilut with Jefferies.

Christopher Reading

Analyst · Jefferies.

Hey, Brian.

Brian Tanquilut

Analyst · Jefferies.

Good morning, guys. Chris, maybe I'll follow up with one of your comments that you just made about remote. Obviously, an area or part of your business we haven't talked a lot about since COVID. So just curious how we should be thinking about your strategy on integrating remote to your workflow and the investments that you need to make to really take advantage of that, especially as we stare down this Medicare rate cut.

Christopher Reading

Analyst · Jefferies.

Yeah, so remote therapeutic monitoring codes that was introduced this year. We've rolled it out. It's been a little bit painful for a lot of companies, just because the companies who have the infrastructure that we've all used to be able to perform these additional codes, oftentimes are set aside and set alone on the infrastructure that exists in our Billing and EMR systems. And so that is and has been very recently addressed. I think, by the beginning of the year, we'll be positioned where all of our Medicare patients will be enrolled, auto enrolled on our Raintree system, which is covers about 90% of our company. That integration is completed. We believe that will be done and effectively out by the first of the year. So that we'll have a much greater percentage of our company that is able to efficiently address remote therapeutic issues. Then beyond that, from a digital perspective, I think there been a lot of companies that have come out, that have had some really nice additions. We're not there yet on a fully digital basis. But we continue to work directionally to evaluate that opportunity and make decisions. As we move forward we expect at some point to have the visual offering working on some of the high priority things at the moment. But that's certainly on the list.

Brian Tanquilut

Analyst · Jefferies.

Got it. And then Chris, maybe since we're talking about workflow, as I think about your IIP business, are you seeing anything that's changing in that world, as some virtual offerings emerge in the market?

Christopher Reading

Analyst · Jefferies.

On the prevention side, not so much. We see continued adoption among and across companies. Of course, companies go through ebb and flow. Uber is a great example, company that at the beginning of COVID, we had a very large contractor rollout with them. And that got paused. And then over the next couple of years, it rolled out and became substantially bigger than we originally envisioned. Then as an example, it kind of paused again, not completely. We still do a lot of work there. They are one of our bigger customers, but then their outlook affected what -- how they viewed the coming year, the year that we're in right now. And actually, we're hopeful that we can continue to expand that relationship, as things again, normalize. So I don't see on the prevention side, a lot of major technological changes. Again, we've added recently software deployment for ergonomics, which companies that want to control and to roll out their own ergonomics program, can now do on a guided basis with our software. That's a new offering for us. This is really still an embedded model where people need to be on-site, and evaluating individuals. Certainly, we can use technology and video monitoring and certain aspects of evaluative techniques we can now use, with cell phones and other forward camera devices to take measurements and do things. And I think that'll continue to evolve. We're using some of that now. But nothing that we see as disruptive to the core business.

Brian Tanquilut

Analyst · Jefferies.

Got it, and then maybe Carey or Graham, as I think about just tying it back to the core business, how much productivity opportunity do you think there's left in terms of driving the visits per clinic rate or per clinic, yeah, percentage per day?

Christopher Reading

Analyst · Jefferies.

Let me address part of that. And then I'll let Eric or Graham address the other part of what we really think of as productivity. But on the visits per clinic per day, there aren't any real constraints that we generally bump into that. It's a factor of additional staffing, oftentimes when we're if we're currently staffed where we need to be. So in order to grow, we've got to hire some increment on a part time basis for additional staff. Generally speaking, our facilities can handle it. It's grown this year about as we expected it to grow, all things considered. I think it's been pretty good. I guess you guys refer to that as productivity out. I think of productivity really as the amount of people that our clinicians can see. And Eric, you might want to speak to that part.

Eric Williams

Analyst · Jefferies.

Yeah, Chris, I think you summarized really well. Our turnover's at all time low. It hasn't been this low in years. And so I think our partners have done a really, really good job of hanging out the staff. We've had incredible growth. When you take a look at the de novos that we opened up last year, and the 32 facilities, we've added this year, de novos and tuck ins, that has been challenging to fill those growth positions for us. And so to your point, I mean, there's not a cap here. I mean, you look where we were two years ago. We hit the 30 mark for a couple of quarters this year. We got a record first quarter, second quarter and third quarter. So we still continue to see growth opportunities in front of us. We've invested a lot of resources in recruiting. We have eight recruiters at work for us. We really leverage social media as well as our relationships with the various school programs. I think there's 210 accredited PT schools out there. We have clinical affiliation agreements with 155 of them. So we're continuing to play the short game and the long game as it relates to staffing. The long game being developing these relationships with the school. So as these kids come out and do their clinical rotations, which is part of the program, they're more likely to end up working for us having done rotation. So that's a big investment for us. And then on top of that, just throwing more resources as it relates to reaching licensed staff out there. But the volume and demand is there. Staffing is what us and everyone else in the industry has got to solve for in order to continue to grow at the rate we've been growing.

Brian Tanquilut

Analyst · Jefferies.

Awesome, thank you, guys.

Christopher Reading

Analyst · Jefferies.

Thanks, Brian.

Operator

Operator

We'll take our next question from Larry Solow with CJS Securities.

Christopher Reading

Analyst · CJS Securities.

Good morning, Larry.

Lawrence Solow

Analyst · CJS Securities.

Hey, good morning, Chris. Thanks. Thanks for all the color. Just a couple of thoughts. I know you're not ready to give guidance for '24. But just from a high level, as you think about sort of the components, pricing -- price we will end up down this year, 1% is going to be a little bit more than that. And pretty well documented it's a Medicare cut there. But it feels like you have some good momentum in the commercial side. As you mentioned, you're on average getting, looks like mid-single digit annual increases on a lot of these negotiations. So I suppose some of them haven't actually hit your -- hit the P&L yet. And I suppose there's a lot more in the queue that you could start turning over. So it's fair to say that just from a high level, you think pricing could actually all-in go up next year, even if the Medicare rate is not changed by Congress.

Christopher Reading

Analyst · CJS Securities.

Maybe Carey, you want to address that one?

Carey Hendrickson

Analyst · CJS Securities.

Sure. Sure. Yeah. So I would say -- first of all, it's early for us to look at that and give any color really related to '24 yet, we'll be ready for that certainly the next time that we have our earnings call for the end of the year. But I would say it's going to -- we'll see where Medicare ends up. Right. So how much of a hurdle we have there. But we do, as I mentioned, have momentum in the other payer categories. And we have, as Chris noted earlier, put in place step increases. So it may be that we have an increase of a total of 12% or 13%. And we have a step in over three years where it's 5%, in year one, 4% in year two, and then another 3% in year three. We have those kinds of step increases that we're building into our contracts that will have continued increases. So I think we will have continued momentum in both commercial and worker's comp. And both of those and -- so I think certainly I feel good about our ability to -- as we sit here today, I feel great about our ability to offset the Medicare rate reduction going into 2024.

Christopher Reading

Analyst · CJS Securities.

Yeah, Larry, the short answer is I mean, the final rule just came out Thursday, late Thursday afternoon last week. We're still in the middle of our budgets and a lot of analysis. And we're pushing really hard on these contracts. But we're not at a point where we can give you a clear conclusion yet unfortunately for next year. Just too many moving parts and too short a period of time yeah, but we're working hard at it.

Lawrence Solow

Analyst · CJS Securities.

That's fair. In terms of you mentioned a lot of good internal growth, especially last year, in this quarter on the de novo side of dimension nine and five in September lot. I know de novos don't cost a significant amount to get on their feet. But is there I suppose some inefficiencies initially? And even with the acquired clinics that just by themselves, it's in the acquisitions and the de novo ramp, you have some sort of built in a little bit of dry powder to improve margins just from those two points. Is that a fair statement?

Christopher Reading

Analyst · CJS Securities.

Eric, do you want to take that?

Eric Williams

Analyst · CJS Securities.

Chris, sorry about that. My phone blinked out a little bit. Go -- can you --?

Christopher Reading

Analyst · CJS Securities.

That's okay. No, I got it, I got it. Yeah. Larry, on the de novo side, while they don't cost a lot of money to get out of the ground, it's not really the issue. They do bleed us a little bit, particularly in the first six months before they or until they break even some break even much quicker than that. But early on, certainly those ones we opened in September are going to be a drain from then. Then on the acquired clinics, yeah, there is, you refer to as dry powder, there is usually some upside that occurs, oftentimes an rate reset at the point where we do the deal, we credential that deal in 60 days before closing, through date certain bases, and then we get a pickup in rate usually, not across every contract, certainly, but across some of the contracts. And then there are other things that take a little bit more time that may be may be a little slower to happen. Program development and productivity or efficiency changes over time, those take a little bit longer. I'm more patient with those because we don't -- we want to make sure that relationship because the clinical levels are really strong and stay strong. And we're able to do that. So there is upside in the acquired clinics. There is some short term downside in the de novo clinics.

Eric Williams

Analyst · CJS Securities.

And Chris the one comment, I would add to that, the one comment I'd add on the de novo clinics is there's none of those de novo clinics are flyers. It's not building a network com, and those clinics were built because there were established referral relationships in the community. The biggest challenge in potential drag on those de novo clinics goes back to staffing. Typically, staff who might be relocating from an existing facility to help staff it. A lot of times, again, those clinics, we take advantage of the opportunity to open them, when we have the support, but sometimes very difficult to challenge right out of the gate. And that tends to be the biggest hurdle in terms of how fast they ramp.

Lawrence Solow

Analyst · CJS Securities.

To follow up on how is the staffing, obviously, it's been a couple of years of a tough stretch in staffing labor. Certainly labor pricing is much higher today. But does feel like at least you guys are having much more success in getting that. I don't know about quality, but hopefully quantity of labor.

Christopher Reading

Analyst · CJS Securities.

Go ahead Eric.

Eric Williams

Analyst · CJS Securities.

Yes, no question. I mean, I think the recruiters are doing a great job. As I said earlier, our retention is at an all time low here over the course of the last five years. And I think we do a better job filling positions than most other organizations. But there's no question. It's a challenge. And Chris referenced this earlier in his opening comments as it relates to PTA usage. I mean, our facilities, our staff of licensed physical therapist and licensed physical therapist assistants. And we've had to rely, especially with the growth spurt that we've had, on bringing PTAs on board in order to service the patient volume, as opposed to not servicing it. And again, with roughly 33% of our business being federally funded, every time that PTA touches a patient that has an impact. And you saw, if you see the breakdown on our rate, every category has gone up from the net revenue per visit perspective, with the exception of that federally funded bucket that includes Medicare and Medicare Advantage. We got very aggressive this year in terms of turning Medicare Advantage programs that we felt did not pay us the appropriate amount of money below our actual cost of providing service. I think we've done a nice job there. We're just going to continue to have to push in this category. And to Chris's point regarding these de novos the rolling out of additional programs takes a little bit of time, and in particular, the workers compensation initiative, which has really been successful this year. I mean, that's an initiative that's really just over a year old. We've grown rate for three consecutive quarters, and our third quarter '23 was almost 4%, higher than our third quarter '22 in terms of workers compensation rates. So these types of programs do have an impact, but they take a little while to roll out in new Nova clinics, as well as new acquired partners.

Lawrence Solow

Analyst · CJS Securities.

Okay, I appreciate that. If I can just sneak one more in just on the acquisition. It sounds like in the Q on the PT, side, on the physical therapy side, it kind of sounds like you're queuing opportunities remains strong and you want to put your capital to work. Can you just comment just on that the ergonomic software and sort of the IP acquisition, you made, a little bit different than your de novo acquisition, how you -- any color on that, how you plan to leverage that?

Christopher Reading

Analyst · CJS Securities.

Thanks. Yeah, so these are some people that I've known for a number of years. They're really, really good folks. They've been working on the software, product, software sales product, software service product, a number of years. It's really, really strong. Enable us we have -- we employ ergonomists, we do virtual ergonomic programs, but some of our customers don't want -- they want to do it themselves. And yet, they don't have the tools really available to do that. And so we think that we can deploy this software not just to new customers who are new to us, but to existing customers, across our portfolio. And as well, with many, many, many more sales people than niche, the niche folks have had in their own company utilized our sales force to ramp that up. So that was part of the offering. The other part of the offering was more in line with what we already do, which is just, you know, embedded people on the prevention side, but it's a nice fit for us. It's a new offering. We should be able and expect to be able to sell it to our existing client base, in many cases.

Eric Williams

Analyst · CJS Securities.

Chris, my one additional comment on this would be, I mean, this was a niche that our bariatric team recognized. This was a client profile that we weren't servicing today. These are folks who are going to be a little bit more cost conscious, that not just want to manage his own, want to manage these types of projects on their own ergonomics projects, but need to from a financial perspective, we do see a cross selling opportunity. But [indiscernible] was looking at going down the path of creating their own software, spending the time and money to do it, in order to chase this market segment that they weren't servicing today. So this ERGO Plus [ph] represented an opportunity for us to go in speak first with software that was already developed. And they were really under resourced, ERGO Plus in terms of their ability to market and sell that software. So we feel we have an opportunity here to dump gas on a fire. It's a terrific product. We think this is a great market opportunity for us and really excited about this acquisition.

Lawrence Solow

Analyst · CJS Securities.

Right. Appreciate the enthusiasm. Thanks for all the color.

Operator

Operator

We'll go next to Calvin Sternick with JPMorgan.

Christopher Reading

Analyst

Hey, Calvin. Good morning.

Calvin Sternick

Analyst

Good morning. Thanks for squeezing in here. Just one quick one for me on IIP. I know that, some of their customers have pulled back on spending just given some the macro concerns. How are those conversations evolving? Are employers still hesitant? Are you seeing any signs of a shift in demand next year? And I know you talked about expecting net growth for 2024. Is the expectation at this stage that growth rates improve your every year but still below the 20%? Just any color you could give on sort of what the IIP revenue growth rate looks like next year would be helpful. Thanks.

Christopher Reading

Analyst

Yeah, thanks. I guess on a macro basis, I would say yes, I expect the growth rate to pick up next year. I actually expect '24 from the macroeconomic standpoint will not be great for the country. I think we still have some headwinds, but we're making good progress with sales that will carry us through next year, I think. In terms of the exact percentage of growth as Carey mentioned before, that was our budget that we're still working through that. We haven't guided to that yet. It would be premature for me to peg that number at this point in time. We certainly haven't used that 20% number. That was the number that we had coming out of '21, was the last most recent number, maybe finishing '22, I guess, before we guided to '23. So bottom line is we're not there yet. We should be there sooner than later. And once we have that number, we will work that into our guidance and give you a little bit more transparency, then we're able to right now.

Calvin Sternick

Analyst

Great, and then maybe one more on workers comp, I know you just had a couple of quarters there where volumes have been increasing and payer mix improving. Just wondering how you're thinking about that trend continuing into next year? Do you think the momentum in worker's comp really is an opportunity for accelerate? Or you are thinking about it as basically, sort of steady progress year-over-year.

Christopher Reading

Analyst

We are working on something, I can't really talk about right now. I don't -- we're working hard. Let me just say we're working very hard on the comp side to do something that would be a difference maker for us. But we've got some more work to do. It's certainly a focus, and we have the resources and the attention on it. And I expect to make continued progress.

Calvin Sternick

Analyst

All right, great. Thanks.

Operator

Operator

[Operator Instructions] We'll go next to Michael Petusky with Barrington Research.

Christopher Reading

Analyst

Good morning.

Michael Petusky

Analyst

Good morning. So Chris, on the meeting, you all attended private PT, we've sort of heard out there not in terms of PT specifically, but in terms of healthcare in general, a lot of the private owners have not gotten the memo. The valuations have come down in transactions and that expectations are sort of out of whack with reality of interest rates, etc. And I'm just curious, as Carey pointed out, you got a lot of opportunities from a balance sheet perspective, the revolver to do something. I guess, what was the vibe at the private meeting? I mean, do you think this -- in the next 12 months, do you hope to be as active more active than the last 12 months? Thanks.

Christopher Reading

Analyst

Let me just say we have more really strong discussions that are going on right now than we've ever had. And there's a good mix, not just smaller practices, but some larger practices as well. I expect it to be a good year, a very good year. We had one deal that we still expect to get on. That was bigger in size for us. That got hung up around a divorce proceeding that got -- slowed everything down. This would have been a fantastic year, if not for that. I expect next year to be even better based upon the activity that we have right now. In terms of valuations, look, I think it depends on a lot of things. There are a lot fewer buyers in the market right now. Because individual private equity companies are really at kind of a limit. And so it's a good time for us and we expect to make hay while the sun shines, as they say.

Michael Petusky

Analyst

And sort of pivoting, but staying on the idea of making hay. How far along would you estimate in terms of your efforts at getting better pricing in commercial and worker's comp? I mean, if this was a nine inning baseball game, are we in the third inning, seventh inning. Where would you sort of say in terms of your efforts to sort of renegotiate rates with your various customers are you?

Christopher Reading

Analyst

Carey?

Carey Hendrickson

Analyst

Yeah, I it's hard to fit into that kind of measurement. But I would we're -- I'd say we're about the fourth inning or so. We still have some work to do, but we've done a lot of good work, fourth and fifth inning is some somewhere in that range, but we haven't necessarily seen all the impacts of that come into our net rate yet. But that's where we are from a negotiation standpoint. That makes sense.

Michael Petusky

Analyst

I got an honor of the Texas Rangers, that I'd throw the baseball analogy.

Christopher Reading

Analyst

There you go.

Michael Petusky

Analyst

Okay, so I guess in -- I didn't hear if you guys mentioned October patient volumes. Any insight into that? And sorry if I missed it if you mentioned it.

Christopher Reading

Analyst

I don't think we mentioned -- go ahead Carey.

Carey Hendrickson

Analyst

Yet we didn't mention. But it's -- I'd say it's it came in, it's coming in strong. I mean, we don't have the final numbers yet for exactly where it was. But based on we get weekly reports on the progress through the month. And it's come in at our expectations and continuing to be strong, just like it has been all year long.

Michael Petusky

Analyst

Very good. Thanks, guys. Appreciate it.

Christopher Reading

Analyst

Thanks, Mike.

Operator

Operator

At this time, we have no additional questions standing by and like to turn the conference back over to management for any additional or closing comments.

Christopher Reading

Analyst

Thank you. Well, thanks, guys. I know this was a little bit longer call than normal. Carey and I are standing by and happy to take additional questions offline. Thank you for your time this morning and hope you have a great rest of the week.

Carey Hendrickson

Analyst

Thank you everyone.

Operator

Operator

Once again, ladies and gentlemen that does conclude today's program. Thank you for your participation.