Mark Tarr: Mike, we’ve tried to make sure that our hospitals have stayed at the market in terms of their rates with the market analysis that we have. Once you get behind market, it’s awfully difficult to catch up, and it typically costs you more once you get behind and if you had stayed at the market level all along through market adjustments. If you look at between the market adjustments we’ve done in the last 1.5 years and the new staff that we brought on, there’s a pretty high percentage of our overall staff that have had some adjustment or another. So that’s part of the logic that we took going into the assumptions for this year.
Doug Coltharp: And I think it’s all proving to be a very good trade. I mean you tie together a bunch of these domestic or metrics, look at the volume growth. At no point during 2023 did we find ourselves constrained in being able to take volume and to take it safely into the best interest of the patient because of labor constraints. Our turnover rates, as I cited before, are down markedly for both RNs and therapists on a year-over-year basis and our salaries are competitive enough that we’re continuing to have a great progress in recruiting new clinicians into our workforce.
Mark Tarr: One final note on labor. It should be noted that our talent acquisition team has helped us open up the vast majority of the de novos in the last couple of years with 0 contract labor at the time of opening. So, it’s been a huge support in terms of our ability to take the volume that Doug alluded to and to start off in these markets on the new markets on a good, solid fitting.
Doug Coltharp: And the efficacy of the centralized talent recruiting function also comes with an efficiency. And to their credit, our HR team has been very creative in looking at the ways that we were expending dollars across the recruiting function to find out where those were having the greatest impact and then concentrating the dollars in those areas. So even with the success we had on new hires during the course of 2023, we actually did that with a year-over-year decrease in recruiting costs.
Unidentified Analyst: Okay. That’s very helpful. Just shifting gears, a little bit. I know you’re working at moving more contracts towards case mix. I just wanted to see how this is progressing.
Doug Coltharp: Yes. We continue to make great progress there. We have just about 90% of our MA contracts are on an episodic versus a per diem basis. And the rate differential, even as we continue to grow Medicare Advantage at a rate greater than our other payer categories as compared to fee-for-service remains less than 5%.
Operator: Our next question will come from Brian Tanquilut with Jefferies.
Unidentified Analyst: This is Taji on for Brian. Thank you for taking my question, and congrats on the quarter. So unfortunately, just one more question about labor. Just currently, are you able to fill all the demand that you’re seeing in the market? And if not, how much more labor would you need to see you upsize like that volume growth?
Doug Coltharp: Yes. As I just mentioned, at no point in 2023, where we are unable to take volume because of labor constraints. And we’ll continue to prioritize, we are going to serve all of the patients who are in need of inpatient rehabilitative care in the markets in which we are in, even if it means paying premium labor.
Unidentified Analyst: Okay. And then this is a slight follow-up from Joanna’s question. I know you had called out differences you’re seeing in different condition categories. Just wanted to follow up and see if there are any specialties where you see that — see it as an incremental opportunity in terms of volume growth or revenue yield? I know you called out increasing investment and like expansion of your in-house dialysis, but I want to see if there’s anything else you’re thinking about?
Mark Tarr: No. So we’ve put a big focus on the neurological categories as a whole for the past several years. I would call out stroke because we think we have a particular strong outcome. We feel like there’s a huge demand for stroke rehabilitation. We think we do a really good job in getting these patients back to the community, and we’ve partnered with the American Stroke Association nationally to help promote the need and education for stroke patients. So, we call it stroke specifically. As Doug noted, we had almost a 5% growth in that last year, and it remains one of our top categories in terms of percentage of total discharges. So, between stroke and other neurological, I would call those out as areas that we see continued opportunities to grow.
Doug Coltharp: I think the other one that I would point to and perhaps one that we don’t count enough and maybe don’t get enough credit for in a forum like this is dealing with brain injury patients. And so, brain injury typically runs between 10% and 12% of our overall patient mix, and it was up 10.5% in the quarter. Obviously, that’s a very medically complex patient, and so they can’t be treated effectively in too many settings.
Operator: [Operator Instructions]. We’ll now hear from Jared Haase with William Blair.
Jared Haase : Good morning. Appreciate all the detailed commentary thus far. Maybe I’ll just take a step back and ask a bigger picture question. I’m curious to hear your perspective just around the outlook for Medicare Advantage environment in general. Obviously, there’s been a lot of focus lately just around rates for the plans and the broader utilization that those guys are experiencing. I would just love to get your perspective on the group in a general sense and then how you’re sort of thinking about maybe potential leverage in terms of rate negotiations or just your general value proposition in partnering with MA plans?
Doug Coltharp: Yes. So again, we think there continues to be significant upside in Medicare Advantage for us. Although the growth rate over the last several years has been very impressive. If you look again at the four-year CAGR same-store CAGR for Medicare Advantage extending from 2019, and I picked 2019 specifically to go back before COVID and run that through 2023. Our Medicare Advantage same-store is up 15.2%. So, it’s our fastest-growing category. But we’ve been able to grow that while maintaining or increasing the number of those contracts that are paid on a case rate basis versus a per diem and keeping that narrowing and then keeping that payment differential versus fee-for-service at less than 5%. And I think the real opportunity is that we continue to see conversion rates in Medicare Advantage, and that means the number of admits as a percentage of referrals that is lower, significantly lower than Medicare fee for service.
And some of the pressures or some of the focus that you’re now seeing from CMS on the MA plan is about denial of access to care and utilizing internal metrics and algorithms to authorize care for Medicare Advantage patients, which is not necessarily directing those patients to the place where they can expect the best outcome. We think that those trends will bode well for us in the future just based on the quality of outcomes that we’re producing and the complexity of the patients that we’re able to treat effectively.
Jared Haase: Got it. That makes a lot of sense. And then maybe I’ll just ask a quick follow-up, thinking about specifically any priorities you guys would call out in 2024, just around technology investments or other workflow improvements. I think you alluded to some of the things around predictive analytics and obviously, you have the dialysis technology that you’re rolling out as well. But just really curious to hear if anything new or incremental on the road map this year that’s focused kind of on driving clinical or operational improvement?
Mark Tarr: You’ve named a couple of them. We always look at innovations that are out there. Whether that is through the utilization and of this huge amount of data that we’ve been able to collect from our clinical information system over the years and working with our clinical team on predictive analytics and driving our clinical outcomes. We look at the new technologies that are out there, particularly on the clinical aspects, either for nursing or therapies that will help us assist in treating our patients. There are a number of them that were working in full this year around dysphagia, helping the patients and they’re swallowing difficulties, which is a common issue with stroke patients. We have wage-assisted devices and our gyms that can help our patients in ambulation around.
So there on any given year, including 2024, we take access to innovation in a number of different studies, particularly if it enables our staff to get better outcomes or helps them become more efficient.
Doug Coltharp: We believe our competitive advantage in this regard is self-perpetuating providing that we operate under a philosophy of continuous improvement. And by that, I mean, if you look at the common conditions that are treated in the IRF setting, just based on our scale and our market share, we see far more of those patients than any of our competitors by a very wide margin. And we utilize the data that comes from seeing that vast number of patients to get smarter about the clinical protocols and the outcomes that they produce. And our clinical leaders have been really, really focused. They never rest on their laurels and they’re focused on just continuously getting better at what we do, analyzing the data that comes through on almost every patient saying, how do we refine our models, how do we refine the protocols that we’re using to become even more effective in treating these patients.
Operator: Our next question will come from Scott Fidel with Stephens.
Doug Coltharp: We’d say Scott, but we don’t want to be presumptive.
Scott Fidel : Hi, good morning. It’s actually Scott here for the real…
Doug Coltharp: Which is not in any way to express disappointment regarding any of the others.
