Financial Data and Key Metrics Changes - In Q4 2025, revenue increased by 9.9% to $1.5 billion, while adjusted EBITDA rose by 15.9% to $335.6 million [14] - For the full year 2025, revenue grew by 10.5%, driven by 6% discharge growth and pricing growth, with EBITDA increasing by 14.9% [6][11] - Bad debt expense for Q4 was 2.1%, flat year-over-year, and premium labor costs declined by $5.8 million from Q4 2024 [14][15] Business Line Data and Key Metrics Changes - The company added 517 beds in 2025, with 390 from new hospitals and 127 from existing hospitals [7] - The full-year discharge to community rate was 84.6%, with discharge to acute care at 8.6% and discharge to SNF at 6.1%, all favorable compared to industry averages [6][7] Market Data and Key Metrics Changes - The company experienced strong fee-for-service growth in Q4, although challenges were noted with Medicare Advantage, particularly with one national payer [26][27] - The VA program represented 19% of managed care volume, with a discharge growth of over 20% in Q4 [30] Company Strategy and Development Direction - The company plans to augment its capacity expansion strategy with small format hospitals starting in 2027, facilitating a hub and spoke strategy [7][8] - The company is actively engaging with CMS regarding regulatory changes and believes it is well-prepared for the expansion of RCD into Texas and California [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to regulatory changes and maintain growth, citing a strong demand for IRF services [10][11] - The initial guidance for 2026 includes net operating revenue of $6.365 billion to $6.465 billion and adjusted EBITDA of $1.34 billion to $1.38 billion [17] Other Important Information - The company allocated $158 million to share repurchases and returned over $70 million in cash dividends in 2025, maintaining a strong balance sheet with a net leverage ratio of 1.9 times [11][16] - The company is implementing an admit and appeal strategy for Medicare Advantage denials, aiming to ensure compliance with Medicare coverage requirements [29][30] Q&A Session Summary Question: Volume evolution and comp issues for 2026 - Management noted that Q4 faced challenging comps due to strong prior year performance and unit consolidations impacting discharge rates [20][21][23] Question: Payer mix and Medicare Advantage challenges - Fee-for-service growth was strong, but there were significant challenges with one national Medicare Advantage payer, leading to a drop in conversion rates [26][27][28] Question: TEAM pilot program implications - Management explained that past pilot programs have had mixed outcomes, with some leading to national implementation while others did not [37][39] Question: Labor costs and staffing improvements - Management attributed lower labor costs to a softening labor market and improved staffing practices, with a notable decrease in turnover rates [50][52][55] Question: RCD experience in Alabama - The company reported a 93% affirmation rate in Alabama, with ongoing appeals for non-affirmed claims showing good success [63][66] Question: Small format hospitals strategy - Management discussed the advantages of small format hospitals, including cost-effectiveness and the ability to meet market demand without extensive new construction [90][92]