Select Medical Profit Slumps as Costs Outpace Revenue
Adjusted earnings per share fell to 36 cents from 44 cents a year earlier.
The specialty-hospital operator Select Medical Holdings (SEM) reported first-quarter profit that fell sharply as labor and administrative costs rose faster than revenue. Net income dropped 14.7% to $63.8 million.
The decline marked a reversal from the prior quarter, when one-time items had lifted year-over-year earnings more than fivefold. Adjusted EBITDA fell 6.5% to $141.6 million, extending a three-quarter slide in margins to 9.9%.
Revenue rose 5.0% to $1.42 billion, decelerating from 6.4% growth in the fourth quarter. The slowdown was most pronounced in the critical-illness recovery hospitals, where sales grew just 0.3% and adjusted EBITDA plunged 15.3% as patient days fell 2.2%. Rehabilitation hospitals fared better, with revenue up 14.5% and margin stable at 23.0%, while outpatient clinics posted 4.5% revenue growth but saw margins compress to 6.8%.
Costs climbed faster than sales. Service expenses rose 6.3%, outpacing the 5.0% revenue gain, and general and administrative expenses jumped 19.3% after a one-time benefit in the prior quarter. The company also recorded $846,000 in take-private transaction costs related to its pending acquisition by a consortium.
Select Medical reiterated its full-year guidance for revenue of $5.6 billion to $5.8 billion, adjusted EBITDA of $520 million to $540 million, and earnings of $1.22 to $1.32 a share, unchanged from the outlook issued in February. The company did not repurchase any shares in the quarter, pausing a $1 billion buyback program while the take-private deal is pending.