Select Medical Reports Q1 2026 Financial Results and Future Outlook
Select Medical has released its financial results for the first quarter of 2026, showcasing increased revenues across operating segments. However, the company reported a decline in overall profitability compared to the previous year. Updates were also shared regarding the agreement to transition into a private entity and ongoing development projects in inpatient rehabilitation.
CEO Thomas Mullin highlighted a previously announced acquisition deal led by Executive Chairman Robert Ortenzio. According to the agreement, shares held by unaffiliated investors will be purchased for $16.50 each, with the transaction expected to close in mid-2026. This closing is subject to regulatory compliance requirements, shareholder consent, and other conditions. A significant regulatory milestone was achieved as the Hart-Scott-Rodino waiting period ended on April 27.
Post-transaction completion, Select Medical's senior secured credit facilities will incorporate an additional $1 billion in term loan borrowings. These borrowings will accrue interest at the Secured Overnight Financing Rate plus 3%, supporting the company's ongoing expansions.
Inpatient Rehabilitation Growth
The company remains focused on expanding its inpatient rehabilitation sector, adding 166 beds with three new hospitals this year. Looking forward, Select Medical aims to increase its capacity with 275 additional beds by 2027 through new hospitals and facility expansions.
Fiscal Performance Overview
Financially, Select Medical saw a total revenue growth of 5% compared to last year. However, adjusted EBITDA decreased by 6.5% to $141.6 million. Adjusted earnings per share fell to $0.36 from $0.44, excluding privatization costs. The board has declared a dividend of $0.0625 per share, payable on May 28, with a record date of May 14.
In the Inpatient Rehabilitation Hospitals division, revenues increased over 14% to approximately $351.9 million, with adjusted EBITDA rising by 15%. These gains were driven by higher revenue per patient day and increased patient census. The Centers for Medicare & Medicaid Services (CMS) has proposed a federal payment rate increase of 2.6% for fiscal year 2027.
Financial Position and Future Outlook
CFO Michael Malatesta reported that the company's debt stood at $1.9 billion by quarter-end, including substantial portions in term loans and senior notes. Despite positive operating cash flow, investment activities led to net outflows. Malatesta noted that full-year financial guidance remains unchanged, stressing efforts to enhance outpatient margins.
Select Medical is addressing challenges such as increased Medicare Advantage denials impacting hospital operations. Nonetheless, management is optimistic about aligning critical illness recovery hospital performance with projections, continuing to solidify its position in the healthcare sector through strategic growth, acquisitions, and partnerships.