All right, we're gonna go ahead and get started with the next presentation. You know, thank you guys for joining us. I'm Joe Noyons with Three Part Advisors. Handling investor relations for U.S. Physical Therapy is up next. U.S. Physical Therapy is traded on the New York Stock Exchange under the symbol USPH. It's a leading provider of occupational and physical therapy throughout the nation. Also a leader in industrial injury prevention, and presenting on behalf of the company today is our CEO, Chris Reading.
Thanks, Joe. Okay. All right, let me figure out the clicker here. There we go. We're a company that's been around actually 34 years now. We specialize in outpatient orthopedic physical therapy, so rehabilitation from musculoskeletal injuries. We operate little under 700 facilities, 681 facilities, 42 states. We have a diversified payer mix. We operate our model is a little bit different than the rest of the industry. We believe that having ownership and skin in the game makes a difference, and so our partner owners are alongside us in the business, typically with about a 30% equity interest in their individual partnerships. The other thing that's a little bit unique, whether we buy existing partnerships or we've home grown them over time, is they all retain their individual brands.
So these are not locations like you'd see in Chicago here, under primarily two brands, Athletico or ATI. Our brands differ around the country. You'll see a slide on that in a minute. We have a business model, the business model, like I said, which revolves around partnership, that's been very consistent over time and has produced a lot of good growth for us over the years. So our footprint today, continuously updating and changing. We add 25 or 30 organic facilities a year, de novos, then we buy into successful existing partnerships around the country. We're home-based in Houston, Texas.
Texas is a big state, Tennessee, Virginia, my former home state, Michigan, one of our early states, and growing a presence out west, particularly in Oregon and some of the other high reimbursement states over the last few years. It's a large and growing opportunity. You know, it's estimated that the current market's somewhere in the $30 billion-$40 billion range. About 50% of Americans will develop a musculoskeletal problem that really needs to be addressed each year. Not everybody goes to physical therapy, but we're a more, I think, natural choice rather than just either rest, which doesn't fix many things, or medicine, particularly opiates and other things which just mask underlying problems. We've...
Again, we've grown about half our facility base from scratch, the rest we've acquired. Those acquisitions really different from a roll-up or traditional roll-up because these partners have significant skin in the game. They're with us until they retire, at which time we buy their equity interest out at the updated trailing 12 months EBITDA in the business, times the original multiple that we bought it, you know, for to begin with. And so I would say our blended average multiple over a period of time is about 7-7.5 times EBITDA, so very, very efficient, good use of capital. The clinics throw off a lot of cash. They don't cost tremendous amount to start, $170,000-$180,000, including working capital advances. They pay back inside of three years, and they cash flow terrifically after that.
You know, we all know that things are more efficient and effective in an outpatient setting. We don't have to spend a lot of time on this. We also know now we have good data that, you know, even a Medicare-aged person, somebody a little bit older than, but not too much older than me, who goes through a course of physical therapy, actually spends less on the entirety of their healthcare spend over the next year or two following a course of physical therapy. So you might say: Why does that happen? Well, you know, think about what happens if you're injured, you're not able to do things that you wanna be able to do. Maybe you can't garden, maybe you can't play pickleball with your friends, maybe you can't go walking.
So as we restore those things to people's list of things they love to do, not only does it help them mentally and emotionally, but physically, they're able to do more. Their A1C drops, they're more mobile, they're stronger, they're more socially connected. So all those things accrue well to their health over the coming period. And we know that physical therapy helps to prevent unneeded diagnostics and imaging. I came from a sports medicine background. You know, we have the ability to diagnose an ACL tear, which happens often in contact sports, with our hands. Surgeons don't use that diagnostic tool anymore because they can charge for an MRI, so they send you for an MRI. We get somebody, we can make the diagnosis, we can get the rehab done.
ACLs need to be reconstructed, but there are a lot of surgeries, particularly spine surgeries, that don't need to happen. Again, just a slide to talk about the savings in a typical joint replacement surgery. They're very significant. Competitive landscape. So it's a fragmented market. It's estimated there are about 37,000 clinics around the country. Nobody's got more than 10% market share. In fact, if you aggregated the entire market share for all of the top providers across probably 15 or 20 different platforms, that would make up an estimate of about 25% of the market. So the market is consolidating, but there's still a long, long way to go. So what we try to do is grow a few different ways. We acquire somebody, again, we're buying a 60% or 70% ownership interest in their business.
We're immediately helping them to improve their pricing because we have people that are able and sophisticated when it comes to interaction with our, you know, commercial payers. We keep the entire facility and the people intact. We don't synergize that business by laying people off. Gives us a much more stable business to go forward, doesn't scare people, which sounds simple, but, you know, stability, particularly in an acquisition, is really important. And then we're able to help bring programs and services and market knowledge and sales and other things that help drive additional business and growth. We're also able to help tuck in acquisitions and fold in the other growth opportunities that sometimes are a challenge when individual homegrown partners don't have those resources readily available. So our partners stay with us pretty much forever until they retire.
That could be multiple decades. Many of our original partners are still with us. They're a little gray on the edges, just like me, but, you know, they're around 25, 30 years later, and so we have a great environment. We try to have great relationships with our partners. I talked a little bit about the brand already, and about the fact that when the partner does retire and along the way, they're working with us, not just to provide great care, which is a daily focus, but to grow that business over time, so their back end has even greater value than the portion they sold at the front end. So what do we do to help our partners? Think about it this way: Our partner oversees the care that happens daily, locally.
They manage local relationships with doctors and other community resources, and we pretty much do all the rest of the support to help them focus on those two things: growing the business, scaling the business, and managing, you know, the care locally. So the benefits, the back office, the collection oversight, legal, payroll, payables, cash management, diligence for, you know, opportunities, all those things we bring as support to the partnerships. So, you know, my background, one, is as a clinician, two, a long career in healthcare, in ambulatory healthcare, always physical therapy, but other things as well. So we've done a number of acquisitions. Again, we're not... I wouldn't say a roll-up. We're selective in terms of who we buy. We're not running to an exit or any exit.
For our company, we're looking to buy good, high-quality providers that are gonna be around for the foreseeable future. We don't have. We have, practically speaking, you know, very little to no net debt. We have cash on the balance sheet, significant cash, $100 million plus. We have about $140 million in borrowings, fixed and hedged at 4.66%. So, and we have an available credit facility from Bank of America and some other associated banks. It's about $175 million. We have a very good balance sheet. We have good cash flow dynamics. We have a lot of opportunity in front of us, so just again, kind of an overview of companies and clinics we've added around the country in the last year.
Again, you see the takeaway on here is different brands. We don't get brand dislocation when we buy somebody. Brand dislocation occurs when, particularly in healthcare, an acquisition's done, and somebody believes that, you know, they want their sign or their logo out front, and it's disruptive for the community, for physicians, referral sources, other things. There's also an emotional element to brand that doesn't get impacted when we do a deal, because these brands have been built over a period of decades. We did a deal recently in Oregon, in Portland, and it's a company that started in the 1960s, and it's been through three generations of this particular family, and if you want to talk about an attachment to the name and the brand, it exists here. It's very strong. It's not just strong there, it's strong everywhere.
So we keep the brand intact. We bring the resources of a big company behind the brand. Again, we've talked about some of this, what we bring. One of the things I didn't mention, which is big on our list, is compliance. You know, we make sure that these acquired companies are doing things the right way, that are following all the rules and regs, which in healthcare can get a little complicated at times. We surround ourselves with high integrity people, and, you know, we're looking to do things the right way over a long period of time. So our payer mix somewhere between 33% and 35% when you combine federal payers. For us, most of our federal payer group, about 33% is Medicare. A very small percentage is Medicaid.
Medicaid for us is a good payer in the states where we take it, like Texas. About 10% of our business is work comp, which is one of our highest payers and a focus of ours to grow that business. On a year-over-year basis, this last quarter, our comp business grew at a 12% rate, which outstripped the growth in some of our other areas. Roughly, give or take, about half our business is commercial. Let me go back and touch on one thing. Beginning really in the COVID year, Medicare came out that year and decided that they were under a lot of pressure to pay primary care doctors more. I'm almost 40 years in healthcare. Next year will be 40 years for me.
In those 40 almost years, there's never been a year where I remember somebody getting a double-digit increase or decrease, usually somewhere in the 1%-3% range, 3% would be a very good year. Medicare started by saying, "We're going to give primary care +14." In a budget-neutral environment, +14: 1 means you have to take from others, right? And so they leaned on MedPAC, which is the analytical subgroup that advises CMS on pricing, and they said, "We're going to take from the highest-paid physicians in the Physician Fee Schedule," and we're part of the Physician Fee Schedule.
So they said they identified orthopedic surgeons, interventional pain medicine specialists, so these are boarded anesthesia people that are doing back procedures and very complicated things on chronic pain patients, and physical medicine rehabilitation doctors who fall into that same subset. And they said, "They're the highest on the food chain from a reimbursement perspective. We're gonna take from them. We're gonna take 9.5% because they make so much money." What MedPAC has acknowledged, but they failed to recognize, and I don't know how they failed this, but this is an epic failure, that we were 85% of that code set that they were impacting. The average physical therapist with a doctorate degree makes about $85,000 a year.
So they weren't in the high-flying, high-income group, and MedPAC didn't even know we were there, and yet we made up the bulk of the code set that they impacted. So their comment was, "Yeah, you guys were collateral damage. We didn't intend to do that." But they haven't fixed it, and so those cuts, we've been able to blunt somewhat, but they've spread over a period of years. And so for the last five years, in succession, we had, you know, a meaningful rate cut that's aggregated, once all said and done, to about 11.5% over a period of time. You know, on one hand, obviously, we've been able to overcome that and still grow, and on the other hand, it's been a tremendous headwind for us.
This one we hear about, you know, a small another cut next year doesn't feel so small at this point, when we're moving down. One of the things that we've been able to do as a result of these cuts, you have to figure out, you know, what you've got or where business has been able to very aggressively renegotiate a lot of our commercial contracts, and so we're doing pretty commercial light right now. But these Medicare packages have, you know, slowed us down somewhat. More quickly, you know, we're on the back end of that cycle right now because, you know, they hit the guys, they didn't even think ahead. The guys that have been in the system, a lot of them are against this point.
One of the ways we've been able to offset that is by driving additional business each day rather than. On the last couple, if you visit today, we're the most profitable. All your visits covered. If you need recovery, your legs covered, everything's covered. It's no visits to the clinic per day. The clinical period and then help after that. Some of these are the issues. We have some seasonality, and second quarters usually are the biggest visit per day quarter. We coming out of record second quarter, our highest ever. Visitors are coming in every 0.06 . Some of our utilization goes down, perhaps slightly, with vacation of a lot of people and referral doctors. Then people stop the doctor, school's back in session, vacations largely stop.
You know, New York City and the Hamptons, as it seems to be. There we go. Gross margins in that quarter, but particularly on the PT side of the business. We'll talk about the injury prevention side here in a minute. But again, the intersection of some inflation and some employee scarcity, particularly after COVID and, you know, pressure from Medicare hit our margins a bit, working that back with some expanded rates on the commercial side, but it's not easy. Injury prevention's been, you know, just a really great blessing for us. We started this business in 2017, was tiny then. It's grown to be about 14% of our revenue. Somebody asked me a little bit earlier today, what percent of our EBITDA is?
I calculated it's about 18.5% of our EBITDA. It's growing at an outsized rate. Our year-over-year growth, second quarter. Our second quarter compared to prior year, second quarter is up 27% on profitability. Has a great organic element to it. What we do is very similar to what I used to do when I took care of high school, college, and professional teams. As you know, as a caregiver, as a trainer or therapist, you're there not just to wait until somebody gets hurt and then treat them, you're actually there to prevent them from getting injured to begin with, and so early symptom kind of things. We have employees embedded in large Fortune 100, Fortune 500 companies that are there to help injuries, or help issues not progress to a full-blown injury.
What type of companies? We're embedded in almost every major car company in the country, with the exception of our two domestic providers. We work with Ford, we don't work with GM, but we're inside of Toyota. We just got a Hyundai, I'm sorry, Nissan contract. We're in Hyundai as well. We just got the Nissan contract in Tennessee. That'll be almost 50 FTEs embedded in that business, which is probably, I don't know, a million sq ft of manufacturing. Return for a company that they can expect early on is a 3:1 return for what they pay us, which is on an hourly basis. They pay us directly, and they contract for a year at a time.
They get a 3:1 return in terms of actual, hard cost expense reduction, and then there's some soft cost and other ancillary related savings as well, so it's a great return. Injury prevention, we report a gross margin that's really a fully loaded margin with our corporate cost, loaded onto it. Actual gross margins really are double what our PT margins are. You know, this is a fully loaded margin. It compares to our facility-based margin in PT, so, you know, low to mid-20s, but without any real capital outlay in terms of equipment. Talked about our balance sheet a little bit. It's, if I get any criticism, you know, over the years, over what now for me is over two decades, you know, leading the company, it's you, you don't have enough leverage.
You haven't used your balance sheet well enough. We've actually deployed hundreds of millions of dollars in capital to grow the company. We just throw off a lot of cash and we use it. We do pay a dividend. We're a company, small cap, healthcare services company. There aren't many that pay a dividend. We pay a dividend. We've paid for, I think, since 2011 or 2012. Dividends increased over the period. It's roughly right now, I think, with where we are, about a 2% yield. But cash flow dynamics are really good. Again, I've been there for 21 years. Our CFO has been there for a few, replacing my other CFO, who was with me for 17 or 18 years before he retired.
The rest of the team I've worked with across a couple of decades, terrific people who know this business very well. You know, that's kind of the summary. We're make a difference in people's lives. We do it quickly and efficiently. We're a low-cost provider. We have industry dynamics, which are in our favor. We have a little payer dynamic currently, which we've got to work our way through, which is a little bit of a challenge. We're working on that, and we're working through that.
We have a great balance sheet, and we're really seen by the rest of the profession as extremely high integrity, great consolidator in the industry, and we line up really well against private equity, which, you know, as you know, I mean, when, when they buy a business, and this isn't a slight to private equity, it's what they do, and what they do well, they're going to sell it in three to four years or five years, maybe on the outside. These clinical-based practices, they're built to be forever practices. They like certainty, clinicians like stability. They don't wanna think about themselves being in the grinder every two or three or four years, and so our life after is very different.
We compete, we compete very well on that, and we don't have to be, even in these competitive deals, the highest price often to win the deal, because life after is so much better, in, in my view, in a lot of people's view. So, that's the summary. The rest of it is some balance sheet and some other things that you can look up on our website, and I wanna leave us time for a few questions. Yes, sir?
Given the current lower reimbursement structure, has that led to more closures or practices that want to stay?
Yeah. Yeah. So the question is, and this is true, the current difficult environment, does that create more opportunity for us on the acquisition front? And the answer is gonna be a qualified answer. For the smallest providers, it's a very, very difficult environment. For more sophisticated providers, they're able to navigate a little bit better. Again, there's a food chain here, and so as we tend to be attracted to not the distressed ones, but the more sophisticated ones. So they're not really afraid. They feel the bumps like we do. They see opportunity like we do. And so it really comes down to when is the right timing and what is the right fit.
But in general, whether it's COVID or whether it's the government reimbursement or whether it's the next thing that happens that affects everybody, you know, if you're in a bigger boat and you're in a storm, you don't feel it as much as if you're in a little dinghy. And so, same storm for everybody, but maybe different impact at the local level. And so, yeah, it does create opportunity for us. In the back.
The states that you're not in, why is this not in the state?
It's a good question, and it's one I usually get. Historically, it's been a couple of reasons, and those reasons for a couple states, California and New York, particularly, are, I think, changing for us. Traditionally, they've been strong, very strong anti-corporate practice statute states. Now, there have been enough influx by, traditionally, by private equity-owned platforms and other things have been some challenges to some of those statutes, and there's been some legislation that's changed, in some cases over time, to where both of those states now are gonna be open for business for us. The only other state that I know that has a really strict corporate practice state, very small state, is Rhode Island. Again, we go where... The other issue, traditionally, over time, has been some states have had different reimbursement profiles.
And so, for instance, Colorado was a state we weren't in for a long time. Beautiful place, a lot of people, you know, otherwise good environment, but lower than average reimbursement on the commercial payer side. And so we've tended to gravitate toward places where we can have adequate margin and where we can recruit and retain staff. And so that's been some of the dynamic that's created the patchwork.
What about patients who actually?
Sure. So the question is, I guess, do we see the cash pay market as being an opportunity? Look, there are a lot of people that are trying a lot of things, and we're trying some different things, too. Generally, where we're situated, where these clinics are, most people have insurance. Now, in some of the more affluent markets, we've seen people try to do cash-only practices. And in some markets, occasionally, somebody's able to pull that off, kind of on a concierge basis. But it's difficult because in those more affluent markets, everybody has insurance, and they wanna use it, and why would you pay $150 a visit when you could pay a $20 copay and get the same thing?
And so, look, I think copays have gone up little by little over a period of time. Most of our patients pay somewhere between $20 and $30 a visit. Our duration of care lasts about 11 or 12 visits, and in order to get their body back to do the things that they love to do, they pay less than it costs you to take your car in and get almost anything fixed. And this is for their most important machine, so it seems like a pretty good value.
So we're all familiar with services. Are you essentially the health safety officer on the job, or are you more-
We're not.
The person has something that doesn't feel great, and they say, "You know, I need a little help with this. I'm worried that if I lift this box-
Yep.
or do that, it's gonna turn into a-
It's the latter. We don't care whether the beginning of symptoms happens. And look, life is 24 hours, and we spend our time at work, and we sit, which isn't great for your back, and then you go home and you work on the honey-do list on the weekend, then, you know, maybe you do something heavy, which exacerbates that. It's rather fluid. A lot of work comp injuries are not injuries that truly are isolated to a. You know, somebody's not falling off a ladder all of the time. They have a problem, it gets reported. It's a real problem, but whether it happened or started at work, probably questionable. We don't care, and neither do the employers.
They wanna keep that symptom, whatever it might be, wherever it may have started, including if it started on the Sunday softball league. They wanna keep that from impacting their ability to produce at work and keep their people healthy. And the people appreciate that. The workers appreciate it. So we're agnostic in terms of the how or where or when. We're there to help intervene and educate and do some early first aid things, so that it doesn't progress.
Agnostic in terms of safety programs, just like I would expect physical therapists to funnel down to the,
We do some. We do safe lifting. We do material handling. We have engineering-based ergonomists that help to revise and retool, you know, work, settings and other things. We have a whole host of services that we provide, so it kinda runs the gamut, but we're not seen as, like, the corporate safety officer. Look, we're not there like a catcher's mitt to wait until somebody gets hurt, so we can suck them over to PT. Do injuries occasionally happen? Sure. Do they need treatment? Sure. We may or may not be in that market because we do this in all fifty states. We do it in Canada. We do it globally, virtually, where we can do virtual services in some cases, but the idea isn't just to try to pull them into physical therapy.
We keep a little bit of a Chinese wall there so that people understand we're truly there for prevention, and it builds trust, and trust allows for other good things to happen. I think that's about it on time. Thank you. Thanks, Joe.