So I think this is a theme that we’ve seen, really began before the pandemic, but I think has accelerated and I think as we’ve continued to align ourselves with such marquee partners, that reference ability has continued to persist and I think our pipeline continues to look very good. Obviously we continue to do significant work on identifying the target geographies that we feel are under bedded and that starts there. But where there is a partner that presents themselves in that market or that we proactively approach joint ventures can be a really attractive growth pathway for us and one that will continue to be a significant part of our growth and as I laid out in my opening remarks, in 2024, it really gives us the visibility into 2024 bed growth that we laid out at our Investor Day.
A.J. Rice: Okay. Thanks a lot.
Chris Hunter: Thank you.
Operator: And our next question will come from Kevin Fishbeck with Bank of America. Please go ahead.
Kevin Fishbeck: Great, thanks. I guess last night CMS finalized the Hospital Outpatient update and it included a bunch of things on behavioral health and allowing providers to set up these partial hospitalization programs and things like that. Is that something that you guys would directly participate in? Or is that something that would potentially be increasing competition for the services that you provide?
Chris Hunter: Kevin, this is Chris. Thanks for the question. I would say on the PHP IOP front, there is not as much opportunity for us with Medicare specifically. I think the rate increases would certainly apply to us, but we see them as relatively negligible and not a material impact on the business and pretty much in line with what we had expected.
Kevin Fishbeck: Okay. And then the revenue growth is pretty impressive and obviously EBITDA grew faster and I appreciate the $5 million charge in the quarter. But I would have thought that with rates growing faster than wages in the quarter and then really strong volume growth, there might be more leverage to the margin in the quarter. Is there anything that you would spike out there or anything that you would highlight there as to why there might not have been more leverage in the quarter on the EBITDA side?
Heather Dixon:
PLGL :
Kevin Fishbeck: Okay, great. Thanks.
Operator: And our next question will come from Ben Hendrix with RBC. Please go ahead.
Ben Hendrix: Thank you. I wanted to get a little bit more detail on the labor front. The periodic labor screen that we run has also suggested you’ve made good progress filling open clinical positions over the last few months. And I wanted to get your comments on where you’re seeing the strongest hiring activity across the business lines and if there are still areas or geographies where you’re seeing capacity constraints. And then finally what you’re expecting for wage inflation next year? Thanks.
Heather Dixon: Well, I’ll start maybe with wage inflation and what we’re expecting for next year. I mean, as you know, we’ve gone from 7.5% to 6.3% to 5.7%, ultimately in Q3, and that’s starting from Q4 last year at 8.2%. So we’ve made some significant progress there. We’re really happy with that progress, and we definitely expect to see continued progress. We continue to think that we have a path to see further reductions on the actions that we’re taking on our part. And Chris can talk about some of your specific hiring questions that you’re alluding to in a minute. But those are the actions we’re taking, and we feel really good about those things that we’re doing, but we remain a little bit cautious in regards to the macroeconomic environment and things that are outside of our control.
I mean, overall, as we just talked about, labor inflation, we think, will move in tandem with the overall inflation rates, and that will ultimately continue to support our reimbursement rate trends. We expect that labor inflation will moderate, and it’ll come more in line with other market trends, but it’s a little too early to really put out a number for the guide. We’ll come back in February next year with something more solid there, but we expect to continue to make progress.
Chris Hunter: Yes. And a couple of things that I would add. I would say that we have been very successful in increasing our net new hires and seeing a decline in the open roles that you were referencing. A number of strategies that we’ve put in place there and a number of actions that I think have really helped drive a reduction in turnover. I referenced in the prepared remarks employee engagement. We did our first employee engagement survey, first in the history of the company last year, and we recently did a pulse check to just check on the progress that we’re making. And we saw a pretty significant improvement over the baseline in only a short period of time. So we feel really good about the progress that we’re making there.
I think the other factor that has really helped us with clinical positions, particularly the impact of turnover for RNs and LPNs, has been being much more intentional about training and onboarding new employees. I think historically, as a company that has grown by acquisition, we’ve been very deferential to the facilities to put their own training programs in place. And by systematizing the way that we do training, we’ve seen a pretty meaningful reduction in the turnover of clinical employees because we’re managing their expectations better upfront. And I think while we saw this with both RNs and LPNs, LPNs are where we saw the most impressive improvement overall. So we continue to just focus significantly on 90 day turnover across the board, across all lines of business, and continue to work very closely with our operators as well as our HR team.
And just the final part of your question in terms of yes, there certainly are some geographies where we continue to see more challenges than others. There’s some that are obviously more advantageous, but I think we are doing a much better job as a company in the last year of having that very close working relationship within our HR department being much more closely aligned with our operators. Thanks for the question.
Ben Hendrix: Thank you.
Operator: And our next question will come from Brian Tanquilut with Jefferies. Please go ahead.
Brian Tanquilut: Hey, good morning and congrats on the quarter. Heather, maybe just a clarification on some of the comments you’ve already made. So if I’m looking at SWB maybe on a per patient day basis, should we think that as something as a KPI that will moderate in terms of growth rate going forward or maybe just track the rate growth number?
Heather Dixon: Yes, if you think about SWB on a per patient day basis, we have typically tracked that and we have seen – we saw in previous years how that was sort of growing. And it was – it has some other contributions that aren’t in the normal sort of day-to-day operations that contribute to it. And that includes it includes, obviously, same facility wage inflation, but it also has some of the corporate function cost benefits that are included in there and then startup losses and then closure. So it has all those different effects. So we started to call out sort of the base wage trends that we’re seeing, because there was a discrepancy between those two, because some of the investments that we were making. If you look at what’s happening with SWB per patient day, it’s starting to come back in line with where we’re seeing the other sort of the base wage inflation.
