Select Medical Holdings (SEM) Q4 2021 Earnings Call Transcript

Select Medical Holdings (SEM 1.00%)
Q4 2021 Earnings Call
Feb 25, 2022, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, and thank you for joining us today for Select Medical Holdings Corporation's earnings conference call to discuss the fourth quarter and full year 2021 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 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 the Select Medical plans, expectations, strategies, intentions, and beliefs.

These forward-looking statements are based on the information available to management of 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.

Robert Ortenzio -- Executive Chairman and Co-Founder

Thank you, operator. Good morning, everyone. Thanks for joining us for Select Medical's fourth quarter and full year earnings conference call for 2021. Prior to providing details on the quarter, I would like to thank all of our clinicians and operators for all their hard work and efforts this quarter and for the entire year.

Their ability to adjust to the changing COVID variance throughout 2021 is a great testimony to our team's adaptability and their professionalism. Our revenues grew nicely in all four of our business segments, with aggregate revenue growth for the quarter close to 7% and for the year, over 12%. However, we also experienced substantial wage pressure in Q4 in terms of agency, nursing rates and utilization, primarily in our critical illness recovery hospitals. Martin Jackson will cover these labor increases in more detail in his comments.

As we have done over the past year, we have outlined our business segment monthly revenue, volume and occupancy statistics in our earnings press release and public filings, including monthly results from 2019. This information will provide a data point for each of our business segments prior to the pandemic compared to the current filing. We will continue to include this information, as long as it provides meaningful insight to the impact of COVID-19 and the company's financial performance. I also wanted to note that we recorded $8 million in other operating income in the fourth quarter, and $124 million for the full year 2021 related to Provider Relief Fund grant payments.

In 2020, we recorded $36 million in other operating income in the fourth quarter, and $90 million for the full year 2020 related to these payments. The adjusted EBITDA results for our critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation segments do not include any recognition of these funds. The Concentra segment does include $1 million in the fourth quarter and $35 million for the full year 2021 of adjusted EBITDA related to these funds. Total company revenue for the fourth quarter was $1.56 billion, a 6.8% increase compared to the same quarter prior year.

For the full year, total company revenue increased 12.2% to $6.2 billion, compared to $5.5 billion in the prior year. Revenue in our Critical Illness Recovery Hospitals segment in the fourth quarter increased 7.3% to $577 million compared to $538 million in the same quarter prior year. Patient days were up 3.2% compared to the same quarter prior year, with over 294,000 patient days. Net revenue per patient day increased 3.5% to $1,946 per patient day in the fourth quarter, as case mix index was 1.32 in the fourth quarter compared to 1.30 in the same quarter last year.

For the year, revenue in our Critical Illness Recovery Hospital segment increased 8.1% to over 12 -- $2.2 billion compared to almost $2.1 billion in the prior year. Patient days were up 1.9% and revenue per patient day increased 6.1% compared to the prior year. Revenue in our Rehabilitation Hospital segment in the fourth quarter increased 10.5% to $216 million, compared to $196 million in the same quarter prior year. Patient days were up 8.1% compared to the same quarter prior year.

And net revenue per patient day increased 2.7% to $1,888 per day in the fourth quarter. For the year, revenue in our Rehabilitation Hospital segment increased 15.6% to $849 million, compared to $735 million in the prior year, driven by both volume and rate increases. Patient days were up 11.8%, as revenue per patient day increased 4.2% compared to the prior year. Revenue in our Outpatient Rehab segment in the fourth quarter increased 7.8% to $277 million, compared to $257 million in the same quarter prior year.

Patient visits were up 9.2%, compared to the same quarter prior year, with over 2.3 million visits in the fourth quarter. Our revenue per visit was $102 in the fourth quarter. For the year, revenue in our Outpatient Rehab segment increased 17.9% to over $1.08 billion, compared to $920 million in the prior year. Patient visits were up 21.1% with almost 9.2 million visits for the year.

Our net revenue per visit was $102 for the full year. Revenue in our Concentra segment for the fourth quarter increased 3% to $411 million, compared to $399 million in the same quarter prior year. For the occupational health centers, patient visits were up 8.3% with over three million visits in the fourth quarter. Revenue per visit in the centers was $125 in the fourth quarter.

For the year, revenue at Concentra increased 15.4% to over $1.7 billion, compared to $1.5 billion in the prior year. For the occupational health centers, patient visits increased 13.4%, with over 12 million visits for the year. Revenue per visit in the centers was $125 for the year. Total company adjusted EBITDA for the fourth quarter was $138.4 million, compared to $221.3 million in the same quarter prior year.

Our consolidated adjusted EBITDA margin was 8.9% for the fourth quarter, compared to 15.2% for the same quarter of prior year. For the full year, total company adjusted EBITDA increased 18.3% to $947.4 million compared to $800.6 million in the prior year. Our consolidated adjusted EBITDA margin was 15.3% for the year, compared to 14.5% in the prior year. As mentioned previously, adjusted EBITDA results for the full year included $124 million of Provider Relief Funds grant income compared to $90 million in the prior year.

Our Critical Illness Recovery Hospital Segment adjusted EBITDA for the fourth quarter was $24.6 million, compared to $75 million in the same quarter prior year. Adjusted EBITDA margin for this segment was 4.3% in the fourth quarter, compared to 14% in the same quarter prior year. The reduction in EBITDA was primarily driven by labor cost increases due to utilization of agency staffing. For the full year, Critical Illness Recovery Hospitals segment adjusted EBITDA was $268 million, compared to $342.4 million in the prior year.

Adjusted EBITDA margin for this segment was 11.9% for the full year, compared to 16.5% in the prior year. The reduction of EBITDA is primarily related to increased labor costs throughout the year. Our Rehabilitation Hospital segment adjusted EBITDA for the fourth quarter was $39.3 million, compared to $42.4 million in the same quarter prior year. Adjusted EBITDA margin for the Rehab Hospital segment was 18.2% in the fourth quarter, compared to 21.6% in the same quarter prior year.

We also experienced nurse agency pressures in our rehabilitation hospitals during Q4. For the full year, Rehabilitation Hospital segment adjusted EBITDA was $184.7 million, compared to $153.2 million in the prior year. Adjusted EBITDA margin for this segment was 21.7% for the year compared to 20.9% in the prior year. Our Outpatient Rehab segment adjusted EBITDA for the fourth quarter was $27.6 million, compared to $27.7 million in the same quarter prior year.

Adjusted EBITDA margin was 9.9% in the fourth quarter, compared to 10.8% in the same quarter prior year. For the full year, Outpatient Rehab segment adjusted EBITDA was $138.3 million, compared to $79.2 million in the prior year. Adjusted EBITDA margin was 12.8% for the full year, compared to 8.6% in the prior year. Concentra adjusted EBITDA for the fourth quarter was $70.7 million, compared to $69.4 million in the same quarter prior year.

Adjusted EBITDA margin was 17.2% in the fourth quarter, compared to 17.4% in the same quarter prior year. For the full year, Concentra adjusted EBITDA was $389.6 million, compared to $252.9 million in the prior year. Adjusted EBITDA margin was 22.5% for the full year, compared to 16.8% in the prior year. Earnings per fully diluted share was $0.37 in the fourth quarter, compared to $0.57 per share in the same quarter prior year.

For the full year, earnings per fully diluted share were $2.98 compared to $1.93 per share in the prior year. Adjusted earnings per fully diluted share last year was $1.89, excluding non-operating gains and their related tax effects. At this point, I'll turn the call over to Martin Jackson for some additional financial details, before we open the call up for questions.

Martin Jackson -- Executive Vice President and Chief Financial Officer

Thanks, Rob, and good morning, everyone. For the fourth quarter, our operating expenses, which include our cost of services and general and administrative expenses, were $1.44 billion, which represents 92.4% of our revenues. For the same quarter prior year, operating expenses were $1.28 billion and represented 87.8% of our revenues. The primary driver of increases in our operating expenses is due to increased labor costs, particularly in our Critical Illness Recovery hospitals.

We have seen nearly a doubling of agency nursing rates in Q4, and also an increase in nurse agency utilization in our critical illness recovery hospitals. Our operators have done a good job of controlling other operating costs, as most have decreased on a per patient day and per visit basis. As we have mentioned in previous earnings calls, our critical illness recovery hospital strategy is to continue to admit critically complex patients sent to us by our referral partners, even though our labor costs have increased substantially. We have developed strong referral relations during this pandemic, and we believe continued acceptance of these referrals will provide for strong relationships over the long term.

For the full year, our operating expenses were $5.43 billion, compared to $4.85 billion in the prior year. As a percent of revenue, operating expenses were 87.6% in both this year and the prior year. As I mentioned in our Q4 operating expense section, the majority of increases in our expenses are the result of increased labor costs throughout the year. Cost of services were $1.4 billion for the fourth quarter.

This compares to $1.25 billion in the same quarter prior year. As a percent of revenue, cost of services were 89.9% for the fourth quarter, compared to 85.4% in the same quarter prior year. For the full year, cost of services were $5.2 billion. This compares to $4.7 billion in the prior year.

As a percent of revenue, cost of services were 85.2% for both the full year this year and prior year. G&A expense was $38 million in the fourth quarter. This compares to $35.2 million in the same quarter prior year. G&A as a percentage of revenue was 2.4% in both the fourth quarter this year and the same quarter prior year.

For the full year, G&A expense was $147 million. This compares to $138 million in the prior year. G&A as a percent of revenue was 2.4% for the full year. This compares to 2.5% for the prior year.

As Rob mentioned, total adjusted EBITDA was $138.4 million, and adjusted EBITDA margins was 8.9% for the fourth quarter. This compares to adjusted EBITDA $221.3 million and adjusted EBITDA margin of 15.2% in the same quarter prior year. For the full year, total adjusted EBITDA was $947.4 million and adjusted EBITDA margin was 15.3%. This compares to total adjusted EBITDA of $800.6 million and an adjusted EBITDA margin of 14.5% in the prior year.

Depreciation and amortization was $51.9 million in the fourth quarter. This compares to $51.5 million in the same quarter prior year. For the full year, depreciation and amortization was $202.6 million. This compares to $205.7 million in the prior year.

We generated $11.2 million in equity and earnings of unconsolidated subsidiaries during the fourth quarter. This compares to $9.8 million in the same quarter of prior year. For the full year, equity and earnings were $44.4 million. This compares to $29.4 million in the prior year.

We also had a non-operating gain of $2.2 million in the fourth quarter this year, and a non-operating loss of $303,000 in the fourth quarter last year. For the full year, we had non-operating gain of $2.2 million and non-operating gain of $12.4 million last year. Interest expense was $33.9 million in the fourth quarter. This compares to $35.5 million in the same quarter prior year.

We also recorded interest income of $600,000 in the fourth quarter this year. For the full year, interest expense was $136 million. This compares to $153 million in the prior year. We've also recorded $5.4 million in interest income this year.

We recorded an income tax benefit of $8.6 million in the fourth quarter this year, and income tax expense of $35.1 million in the same quarter prior year. For the full year, we recorded income tax expense of $129.8 million, which represents an effective tax rate of 21.6% compared to income tax expense of $111.9 million, and an effective tax rate of 24.5% in the prior year. Net income attributable to non-controlling interests were $16.5 million in the fourth quarter. This compares to $24.9 million in the same quarter prior year.

For the full year, net income attributable to non-controlling interests were $97.7 million. This compares to $85.6 million in the prior year. Net income attributable to Select Medical Holdings was $49.9 million in the fourth quarter and fully diluted earnings per share were $0.37. Net income attributable to Select Medical Holdings was $402.2 million for the full year and fully diluted earnings per share was $2.98.

At the end of the year, we had $3.6 billion of debt outstanding, $74 million of cash on the balance sheet. Our debt balance at the end of the year included $2.1 billion in term loans, $160 million in revolving loans, $1.2 billion in 6.25% senior notes, and $85 million of other miscellaneous debt. We ended the year with net leverage for our senior secured credit agreement of 3.77 times. For the fourth quarter, operating activities used $60.8 million of cash flow.

This includes repayment of Medicare advances of $75.7 million and deferred employment -- employer payroll tax of $53.1 million. We expect the remaining balance of the Medicare advances of $83.8 million to be repaid by April of this year. Our days sales outstanding, or DSO, was 53 days at the end of the year. This compares to 54 days at the end of the third quarter, and 56 days at the end of last year.

Investing activities used $99.3 million of cash in the fourth quarter. This includes $55 million in purchases of property and equipment, and $60 million in acquisition and investment activities during the quarter, including the acquisition of Acuity Healthcare in this quarter. Financing activities used $513.7 million of cash in the fourth quarter. This includes over $160 million to purchase membership interest in Concentra, which we now own 100% of the voting interest.

For the full year, operating activities provided over $400 million of cash flow, which was after the repayment of $241 million in Medicare advances, and the repayment of the $53 million in deferred payroll taxes. Investing activities used $256.6 million of cash for the full year. This includes $180.5 million in purchases of property and equipment, and close to $103 million in acquisition and investment activities for the year. This was offset in part by $26.8 million of proceeds from asset sales during the year.

Financing activities used $647.4 million of cash for the full year. As I mentioned, this included over $660 million of purchased membership interest in Concentra in the fourth quarter. The company paid cash dividends to its common shareholders of $16.8 million in the fourth quarter, and $50.6 million for the year. The company also repurchased over 387,000 shares of common stock, for a total cost of $11.1 million during the fourth quarter and 1.77 million shares for a total cost of $58.6 million for the full year under the terms of its board authorized repurchase program.

Given the uncertainties due to significant increased labor costs resulting from higher-than-expected use of agency clinical staff, we are issuing our business outlook at this time for revenue only for 2022. We expect revenue to be in the range of $6.25 billion to $6.4 billion for the full year of 2022. We are also reaffirming our previously issued three-year compound annual growth rate target for revenue only, which we expect to be in the range of 4% to 6% for 2021 through 2023. We expect our capital expenditure to be in the range of $180 million to $200 million for this year.

We do plan to readdress our business outlook and target compound annual growth rates for adjusted EBITDA and earnings per common share when the labor climate stabilizes. This concludes our prepared remarks. And at this time, we would like to turn it back to the operator to answer all the questions.

Questions & Answers:

Operator

[Operator instructions] Our first question will come from the line of Justin Bowers with Deutsche Bank. Please go ahead with your question.

Justin Bowers -- Deutsche Bank -- Analyst

Hi. Good morning, everyone. So just on the withdrawal. Can you maybe just talk a little bit about the philosophy behind doing that? And then, it sounds like the -- kind of the labor issues are isolated to critical illness, but we did see some margin compression in some of the other segments in the quarter as well.

Is -- are you seeing any -- some labor issues in the other segments as well? Or do you think it's fairly isolated to LTAC at this point? 

Martin Jackson -- Executive Vice President and Chief Financial Officer

Yeah, Justin. This is Marty. Good morning. So we basically have two questions here.

One is the guidance that we provided. Typically, when we provide guidance, Justin, we provide guidance that we feel comfortable with, that we have knowledge of. We have very good knowledge on, and very good sight on what our revenue is going to be. The unfortunate thing is, we're looking at macroeconomic issues in the labor market.

And to give you historical numbers, we typically do our several ways in the benefits as a percentage of revenue in our critical illness recovery hospital in the 52% range. This past quarter, we were at 66%. And given that large variation, we're just not -- we just don't feel comfortable providing guidance or if we did, it would have to be the spread would have to be so large. It just wouldn't give anyone any comfort.

So for that purposes, we provided on the revenue line, which we feel is very strong. And, as we go throughout the balance of this year and we see changes in -- we hope to see changes in the labor market. We'll be able to provide clarity at that point in time. Your second question, could you repeat that, Justin?

Justin Bowers -- Deutsche Bank -- Analyst

Yes. It was just around if -- kind of what the labor issues are isolated to LTAC, or if you're seeing anything in the other segments as well? It did look like margins were -- came in a little lower in outpatient rehab and Concentra to some degree, and if you're seeing anything there, or in health as well?

Martin Jackson -- Executive Vice President and Chief Financial Officer

Yes. Got it.

Justin Bowers -- Deutsche Bank -- Analyst

And I guess, more importantly, on a go-forward basis, are you are you anticipating any margin contraction in those segments like for 2022, just directionally?

Martin Jackson -- Executive Vice President and Chief Financial Officer

Yes. As far as the labor cost in our business segments, it's predominantly in the critical illness recovery hospitals. That's by and far, the largest area. Now, we did see at the end of the fourth quarter, some impact associated with COVID costs, where we had to use agency in our rehab hospitals, and that was in the neighborhood of $5 million to $8 million, those costs.

And we did see some impact associated on the outpatient rehab where we had call-offs. We had to close some of our clinics because in many of our clinics, we only have one therapist. So we had missed visits, and that was a couple of million dollars. But again, that was really -- it was either, someone that had COVID or had the quarantine because they had contact with COVID patients.

So it was really a 10 to 15 day type of impact. We saw a spike in December. We saw that spike continue in January, and that is down very significantly in February.

Justin Bowers -- Deutsche Bank -- Analyst

OK. So it sounds like the other segments largely in control. Things seem to be isolated to LTAC with the ICU and CCU nurses. And -- OK, and then just on capex.

You've put out a number there, but is that -- can you just kind of refresh us on the development plans for 2022 and where the capex is going?

Martin Jackson -- Executive Vice President and Chief Financial Officer

Yes. The majority of the capex is really maintenance capex. We're in that $130 million to $150 million as far as capex is concerned. The balance is in development.

And to the extent that we have additional development projects coming in this year, that may go up a little bit. But right now, we feel comfortable in that $180 million to $200 million range.

Justin Bowers -- Deutsche Bank -- Analyst

All right. Thanks. I appreciate all the detail. Hop back in queue. 

Operator

Your next question will come from the line of Kevin Fischbeck with Bank of America. Please go ahead with your question. 

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Great. Thanks. Wanted to go back to I guess the guidance for a minute. I guess your previous guidance had some assumptions about what the right margin would be for each business line.

Has your view on the target margin for those business lines changed at all? Or is it more just a near term uncertainty that's causing you to pull the profit guidance?

Robert Ortenzio -- Executive Chairman and Co-Founder

Yes, Kevin. This guidance is -- if you take a look at three of the four business segments, now those longer-term guidance on those margins that we think are very good. And I think even in the critical illness recovery hospitals, it is in the near term. We think that -- our expectations are for the next couple of quarters, we'll see some equilibrium in the supply and demand of nurses in that marketplace.

I think it's important to note that, at Select, being in the post-acute, we compete with the acute care hospitals for our ICU and CCU nurses. And unfortunately, we're not getting that 20% add-on for Medicare, and that puts us at a disadvantage. So, we think that once that 20% add-on expires, we think that will be helpful to us, and see the market adjust pretty rapidly.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

OK. So it's really not just uncertainty of labor market and certainty of labor market in the LTAC business that's causing, I guess, we call the profit guidance?

Robert Ortenzio -- Executive Chairman and Co-Founder

Yes. I'd say that's accurate. And this is -- I know it's not something that you -- it's not the first time you're hearing it. So it really is primarily in our critical illness recovery hospital division, and it is nurses.

Now, as Martin mentioned, we did have some call-offs, which -- if COVID continues to go on the downward trajectory that it has been over the last couple of weeks, I think you'll see that subside, and we'll be back to the margins in all of our business segments that we've had previously.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

OK. That's helpful. And I guess you mentioned COVID deciding that the 20% add-on for hospitals going away. Are there any other levers, I guess, if COVID remains elevated and the add-on is getting extended? Like are there things that you can do from a rate side or from a or management side or anything like else like that to help kind of create some improvement? Or is it really more about the market more broadly normalizing?

Robert Ortenzio -- Executive Chairman and Co-Founder

Well, yes. There's things that we can do, but they're going to cost money. So you would see a continuation of what -- so in a resurgence of COVID, you're going to -- you're probably going to see similar to what we saw in the fourth quarter. I mean, we don't expect that.

But those things that you mentioned of things that we can do, yes, there will be things that we can do to get -- attract and keep nurses, but there's going to be costs associated with that.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

OK. That's helpful. And I guess, I think a lot of the companies are talking about how 2023 should see like a better Medicare rate update or anything like that. So is there a reason to think that there might be some help from there in '23 on the rate side? Or is that not really the way to think about it? Like it's going to reflect the rate increase in 2023?

Robert Ortenzio -- Executive Chairman and Co-Founder

Yes, Kevin. I think that's fair. I think that to the extent we see inflationary increases in our expenses, you're going to see that in the basket increases. We would expect to see that in the basket increases for Medicare.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

OK. And then maybe just last question. It seems like COVID started to spike at the end of December and kind of peaked in January. So should we be basically be bracing for a similar cost headwind in Q1 as we saw in Q2 in the LTACs? Or is it actually something you'll be able to first in Q1?

Robert Ortenzio -- Executive Chairman and Co-Founder

Yes, Kevin. I think you should expect to see that. Now we will say that, we certainly saw it in January, we've seen that come down significantly in the month of February. So I think, as long as there's no other spike, I think you should see a downward trend between February and March.

But we did see a significant impact in the January timeframe.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

OK. All right. Thank you. 

Operator

Next question will come from the line of Bill Sutherland with Benchmark Company. Please go ahead with your question.

Bill Sutherland -- The Benchmark Company -- Analyst

Hey. Thanks, everybody. So Marty, you were just referencing on that trend, the total compensation costs to revenue in LTAC, when you said it was still very elevated in January, improving this month into March. Well, were you referring simply to the -- just the labor cost? I mean -- it's one the same.

Martin Jackson -- Executive Vice President and Chief Financial Officer

It is purely focused on the labor cost, Bill. When I gave the numbers of 52%, salaries, wages and benefits as a percentage of revenue. So it was really just the labor cost, and we saw that spike in Q4.

Bill Sutherland -- The Benchmark Company -- Analyst

And then -- so the January number was very much like that for the Q4 number, and then you're saying it's starting to improve in February.

Martin Jackson -- Executive Vice President and Chief Financial Officer

We are saying we are seeing improvements in the February timeframe and expect to see that in March.

Bill Sutherland -- The Benchmark Company -- Analyst

Was it elevated earlier in 2021? I'm trying to remember what the margins were.

Martin Jackson -- Executive Vice President and Chief Financial Officer

Not to the extent that we saw in Q4. I can tell you that in Q4, agency rates on average was about $140 million -- $138 million to be exact. It was about $118 million in the first quarter of '21. That dropped to $107 million, and then down to $102 in the second and the third quarter.

So we saw it trending downwards, and then we saw this big spike in Q4.

Bill Sutherland -- The Benchmark Company -- Analyst

And that was pretty much nationwide -- that's interesting.

Martin Jackson -- Executive Vice President and Chief Financial Officer

Well, that was across all of our critical illness recovery hospitals.

Bill Sutherland -- The Benchmark Company -- Analyst

Yes. OK. And what was the -- your quarantine rate? Did it get up into like the mid-single digits at the peak?

Martin Jackson -- Executive Vice President and Chief Financial Officer

The quarantine? No, it was -- I mean.

Robert Ortenzio -- Executive Chairman and Co-Founder

Are you talking about -- for companywide or a specific division?

Bill Sutherland -- The Benchmark Company -- Analyst

Well, I'm thinking -- yes, it will both be -- I'm just kind of curious how you were impacted by that. It was 5% or 6% for some companies.

Martin Jackson -- Executive Vice President and Chief Financial Officer

No. It was double digit, Bill. I mean it was -- it had a two handle on it. It was in the north of 20% range for outpatient, Concentra, or inpatient rehab.

Bill Sutherland -- The Benchmark Company -- Analyst

OK. Switching gears. Last question is on just your priorities for cash. Now that the Concentra purchase is complete, what are -- how should we think about your priorities on cash going forward and how to return cash to shareholders?

Robert Ortenzio -- Executive Chairman and Co-Founder

Well, those priorities could always be shifting. Marty and I have been consistent that we want to be pretty opportunistic. I would say that our plan is to continue the dividend. I would say that that's a priority that will not be abated.

We have development projects that we're constantly looking at, as well as some smaller M&A projects on the outpatient and Concentra area, some development projects in the inpatient rehab, and the critical illness side of the business. And then, we obviously will be looking at debt repayment or stock buybacks. So, I mean, I think all of the above is on the table. I don't want to be evasive in the question.

But we will -- we're monitoring all the time in real time of where the best opportunities are. So -- and they can change.

Bill Sutherland -- The Benchmark Company -- Analyst

I understand there's no reason to set a priority list one, two, three, four, just without the circumstances.

Robert Ortenzio -- Executive Chairman and Co-Founder

Right. At any given time, at any given month, some opportunities rise to the top as being compelling, and that could be an M&A opportunity, or something else, or stock opportunity.

Bill Sutherland -- The Benchmark Company -- Analyst

Sure. OK. Great. Thanks for the color, guys.Appreciate it.

Robert Ortenzio -- Executive Chairman and Co-Founder

Sure. Thank you, Bill. 

Operator

Your next question will come from the line of A.J. Rice with Credit Suisse. Please go ahead with your question.

A.J. Rice -- Credit Suisse -- Analyst

Thanks. Hi, everyone. Just a couple of questions maybe. On the Concentra purchase.

I know a year ago or a little over a year ago, January '21, the stake you bought was about half as big as the one you're buying now. And I think the sense was, it was about $0.10, $0.11 accretive. Is it fair -- I know a lot has potentially changed over the last year, but is it fair to think because this stake is about twice as much, it's potentially about twice as much accretive as that original -- as that purchased last year?

Robert Ortenzio -- Executive Chairman and Co-Founder

Yes. I mean that's -- you're in the ballpark, A.J.

A.J. Rice -- Credit Suisse -- Analyst

OK. And I know you just mentioned about some of your capital deployment priorities. But is there anything about the Concentra business because on 100 -- and I mean, you couldn't pursue unless you own a 100% of it. You'll move forward with some initiatives more rapidly, or move in a little bit incremental way?

Robert Ortenzio -- Executive Chairman and Co-Founder

No, I don't think so. I mean I think that when we were operating Concentra in the joint venture with some of our minority partners, I think the way we thought about the business was the same way we would think about it when we owned a 100%. I mean, they have some good initiatives going on right now. And I think they put out an announcement that we've allocated some capital for them to do some more cutting-edge stuff on the work comp business for employer Services, and so we'll deploy some capital to that.

We'll continue to do acquisitions, one-off or two-off on the med centers, and continue to do development. I think they've accelerated some de novo projects which we were not pushing as much during the time that we had minority partners. But we think that, that's a good use of Concentra cash to do some de novos as well. So some strategic investments, some de novos, and continue with their small acquisitions, I think, which is very consistent with the way Concentra was run prior to the last buyout of the minority partners.

A.J. Rice -- Credit Suisse -- Analyst

OK. And then another question was, I understand you're not giving expense guidance and probably try to keep talking about that, but you are giving revenue guidance. And I wonder if you would give us a sense of what your assumptions you baked in? Where do you see Concentra? Where do you see the outpatient rehab business? Is it back to sort of pre-pandemic levels, maybe even a little better in terms of same facility type of comparison? And obviously, the critical access -- or critical illness hospitals have -- were benefiting from some COVID patients and some quicker discharges out of acute care ICUs into your facilities. Have you sort of assumed that, that moderates a little bit? Can you give us any parameters around that?

Robert Ortenzio -- Executive Chairman and Co-Founder

Sure, A.J. Let me start with the critical illness recovery hospitals. We have seen a substantial reduction in COVID patients that are being admitted to our hospitals. And one of the things that we're very pleased with is, those strong relationships that we've talked about with our referral sources -- we've seen this reduction in COVID patients, and yet, occupancy remains very strong.

And not only does occupancy remains strong, but case mix index is up. So we think that really it is -- as we look into the future, we believe that, that is really a terrific event that's occurring there. On the Concentra and on the outpatient rehab side, I think in most cases, we're well above where we were even on a pre-pandemic basis. And we continue to see nice growth opportunities in both of those areas, and certainly, on the inpatient rehab.

That continues to grow strongly, too, and the pipeline looks very good there with regards to joint venture partners.

A.J. Rice -- Credit Suisse -- Analyst

OK. Maybe one final thing. Obviously, there has been some benefit with the public health emergency around the site-neutral payments for the critical illness facilities, and then there's the Medicare sequestration benefit. Can you just -- if that rolls off in the second half of the year, can you just remind us what the -- I guess, quarterly run rate of benefit that might go away in the back half of the year is for those two things, and anything else that we should highlight from that kind of thing?

Robert Ortenzio -- Executive Chairman and Co-Founder

Well, Marty can comment on the sequestration. I'll say that, on the site-neutral change, we don't expect any change. We have not utilized the exception to take the site-neutral patients, and we'd be opposed to extending that. We've been long time believers that we want to position the LTAC industry to be a segment that takes highly acute patients.

And right after the public emergency, we're supporting back to criteria patients -- to have full criteria patients to benefit from a higher reimbursement and to return the site neutral to the much more reduced reimbursement. So for your sequestration question, I'll let Marty comment on that.

Martin Jackson -- Executive Vice President and Chief Financial Officer

Yes, A.J. When we take a look at sequestration in the back half of the year to the extent that that does not continue. That represents about an $18 million headwind for us.

A.J. Rice -- Credit Suisse -- Analyst

Is that for the full second half or per quarter?

Martin Jackson -- Executive Vice President and Chief Financial Officer

For the full second half.

A.J. Rice -- Credit Suisse -- Analyst

OK. All right. OK. Thanks a lot.

Martin Jackson -- Executive Vice President and Chief Financial Officer

Thank you, A.J.  

Operator

Your next question will come from the line of Ben Hendrix with RBC Capital. Please go ahead with your question.

Michael Murray -- RBC Capital Markets -- Analyst

Hi. This is Michael Murray on for Ben. It looks like Concentra's screening and testing revenues decelerated during the quarter, and really over the course of the year. Given the current environment with rapid tests, how do you view the testing and screening outlook for 2022? And could you give us a general sense of cadence for this segment as we look at year-over-year costs? Thanks.

Martin Jackson -- Executive Vice President and Chief Financial Officer

With regards to the screening, yes, we anticipated that would decrease toward the end of '21. And certainly, going into '22, we don't anticipate the same amount of revenue and EBITDA coming in from those activities. As far as -- could you repeat the second question?

Michael Murray -- RBC Capital Markets -- Analyst

Just given that declining revenue source, could you just help us with cadence through the year and year-over-year comps as COVID wanes, but the testing revenues also decreased?

Robert Ortenzio -- Executive Chairman and Co-Founder

Yes. I mean I think Concentra is doing a very good job replacing those dollars associated with the screening and testing. So I would anticipate that we'd still see a growth in revenue for Concentra in '22.

Michael Murray -- RBC Capital Markets -- Analyst

Thank you.Please go ahead. 

Operator

We do have a follow-up from the line of Justin Bowers with Deutsche Bank.

Justin Bowers -- Deutsche Bank -- Analyst

Hey. Thanks for squeezing me back in. I just wanted to follow up on A.J.'s question and your commentary on Acuity being up and COVID patients being down. I just -- was the -- when you look at kind of your mix of patients in LTAC in 4Q and maybe throughout the year, was that lower than 3Q or earlier in the year, in terms of like the mix of COVID patients? And then, can you tell us what the case mix index was in 4Q as well? It sounds like that was up sequentially.

Robert Ortenzio -- Executive Chairman and Co-Founder

Yes, Justin. The case mix index was up in Q4 to 1.32. And I think we've been in that 1.3 range. So yes, it's up nicely.

With regards to admissions of patients with COVID, through the first three quarters, it was a little bit north of 20%, and the fourth quarter, it was about 7%.

Justin Bowers -- Deutsche Bank -- Analyst

OK. Thank you. And then just a quick modeling one. Now that Concentra -- now that that's wholly owned, what's kind of the level of NCI we should be thinking about on a go-forward basis? I just think it would help everyone with the models.

Martin Jackson -- Executive Vice President and Chief Financial Officer

Yes. Justin, we're going to have to get back to you on that one. I think -- if you don't mind -- we don't have that with -- yes. I mean, as you know, as we acquired more and more of Concentra over the past two years, that has come closer to what we anticipate NCI will be, but I don't have the exact number for you.

Justin Bowers -- Deutsche Bank -- Analyst

Got it. OK. Thank you so much for follow ups.

Operator

With no further questions in queue at this time, I would now like to turn the call back over to Mr. Ortenzio.

Robert Ortenzio -- Executive Chairman and Co-Founder

Thank you, operator. Thanks, everyone, for joining us, and we look forward to updating you again next quarter.

Operator

[Operator signoff]

Duration: 51 minutes

Call participants:

Robert Ortenzio -- Executive Chairman and Co-Founder

Martin Jackson -- Executive Vice President and Chief Financial Officer

Justin Bowers -- Deutsche Bank -- Analyst

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Bill Sutherland -- The Benchmark Company -- Analyst

A.J. Rice -- Credit Suisse -- Analyst

Michael Murray -- RBC Capital Markets -- Analyst

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