Ladies and gentlemen, thank you for standing by, and welcome to the U.S. Physical Therapy Q1 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, that today's conference is being recorded.

[Operator Instructions] I would now like to hand the conference over to Chris Reading. Thank you. Please go ahead, sir..

Thank you. Good morning, everyone, and welcome to U.S. Physical Therapy's first quarter 2020 earnings call. I'm currently in our office with Larry McAfee, Executive Vice President and CFO. With us on the call include Graham Reeve and Glenn McDowell, our COOs; Jon Bates is here with us in the office as well.

Jon is our Vice President and Controller; Rick Binstein is on the line, our Vice President and General Counsel. Sorry for the background noise. I'm next to a fire house. Before we begin to cover our results for this more complicated than normal first quarter, I'll ask Jon to cover a brief statement..

Thanks, Chris. This presentation contains forward-looking statements, which involve certain risks and uncertainties. And these forward-looking statements are based on the company's current views and assumptions and the company's actual results can vary materially from those anticipated.

Please see the company's filings with the Securities and Exchange Commission for more information..

Thanks, Jon. In my comments this morning, I'm going to try to paint the picture of our early quarter pre-COVID for the purposes of this discussion, pre-COVID period, which will be the January and February months then a post-COVID period, period of March.

Importantly, I'll discuss steps we took quickly in advance to prepare us for the impact we began to fill acutely as communities began to ultimately adjust in early to mid-March.

I will also discuss how the steps have meaningfully and positively impacted the safety of our staff and patients, service to our partners and get financial performance, including our visits, revenue and especially important, our cash position and overall trajectory. To be sure, this has been a supremely challenging period.

However, I am so very, very proud of how our teams have led throughout this COVID-19 experience. First, January and February. Volumes started up strong again to begin the year, and in fact, same-store volumes picked up again from what was an excellent same-store at the end of 2019.

We began the year in January and February with 5.9% same-store visit growth. Visits per clinic per day improving from 26.5% in 2019, 27.7% in the first two months of 2020. Our revenue increased for this period approximately 8.3% after adjusting for the sale of single partnership that we transacted on and sold last June.

And our overall volumes grew by 9.7%. Despite the impact related to community closures and stay home orders which began to accelerate in mid-March, we grew revenues on an adjusted basis, 2% for the quarter overall.

This was in spite of an estimated $8 million revenue and contribution margin loss in the month of March, secondary to the COVID-19 pandemic. In our industrial injury prevention business, revenue was up for the quarter over 43% and the revenue impact in the quarter was much less than in our physical therapy business.

One exceedingly bright spot in the first quarter relates to several of our large Briotix Health client signing expansions of their existing contracts, which we begin to step up for as things began to unravel in other parts of the economy. Costco has been exceedingly helpful throughout this time.

This graciously expanded our service location footprint with them in order to assist us in keeping our workers active, resulting in significantly less furloughs in this part of the business. There have been a number of other bright spots as we have worked our way through the early stages of this pandemic.

One of those has been our teams' rapid deployment of Telehealth, which has been widely adopted and utilized by our partners. That was especially important during the height of the shelter in place orders where Telehealth quickly became a meaningful and effective bridge for those who are unable or unwilling to come to our clinics for therapy.

Special thanks to Ben Keeton, one of our very important partners for his assistance with this program. We expect to become part of the fabric of our alternative care delivery as we move forward.

Another bright spot was the across-the-board designation, a physical therapy as an essential health service, which allowed us with cap and with appropriate cautionary safety measures to keep the overwhelming majority of our facilities open throughout this time.

We remain actively working through our APTQI Alliance and a recent investment in a lobbyist with APTQI to keep the progress and ground we obtained with Telehealth and other positive adjustments as we work our way through to more normal post-pandemic period at some point.

Part of the pandemic accelerating in the U.S., we went through a preparatory drill of sorts to evaluate our readiness to function remotely should it come to that, and of course it did, which we have been doing now, we've been functioning remotely for the majority these past few months.

Early start, we got enabled us to purchase needed equipment computers, which has allowed our team to make a rather seamless transition to remote work to ensure the safety of our Houston team, most of whom work in large central office where we provided the needed communication service and support to our partners, who are fighting the fight in the front lines as they came in and care for our patients each and every day.

Today we can say that we will be back in the Houston office on a rotating shift basis for the near-term to better understand the science around the progression in transmission disease as site begins to reopen. To date, our clinical services team has done a terrific job keeping us all abreast, the latest updates and thinking around the signs.

We in turn have kept our partners and staff informed so that we have been able to remain operational with very minimal amount of exposures in infections.

Because we were able to act quickly and make adjustments to the staffing through a variety of measures, including reductions to wages, hours worked, furloughs and other means, along with making some strategic decisions to close a good door in a small percentage of our facilities.

As a result, our cash position has remained strong and certainly stronger than we initially projected. And along with the advanced payments by Medicare of approximately $12.5 million, CARES Act payments of approximately $5.7 million, today our cash position is currently approximately $110 million.

At the same time, we are seeing weekly improvements in new patient referrals and overall patient volume. We are now solidly above 60% of our pre-COVID visit levels and still trending forward. At this point in time, we are beginning to bring back select staff as volume warrants.

And I think we are doing that for the most part in a PRN and as volume dictates basis. Additionally, Briotix has continued to do well. While some of our client companies have closed or operating with restricted hours or personnel, that has curtailed our revenue somewhat.

Our team has been able to offset some of those reductions with new or expanded business. Currently, we estimate that we are off in our Briotix Health business somewhere in the 10% to 15% range compared to our pre-COVID, but that is an improvement over prior month.

Our partners and our Houston teams have both done well throughout these past difficult months. We are ready to ramp back up safely and we look forward to what we hope is a gradual progression back towards ultimate normalcy. That concludes my prepared comments. I am going to turn things over to Larry to cover financials in more detail..

Hi. Thanks, Chris. Normally at this time, I would go line item by line item, quarter-over-quarter, but honestly that would be like comparing apples-to-oranges. So I'm just going to hit some highlights.

Included in the quarter were closure costs of I believe $3.8 million and we'll talk it in -- there is a bullet point on Page 3 of the release, but half of that was non-cash charges relating to write-off of goodwill, trade names, etc. The remainder is equipment that we couldn't salvage, severance and what the remaining lease obligations are.

The other thing I'll talk about is the average net patient revenue in the first quarter was lower than a year ago. There wasn't any one factor. We looked -- investigated that at length. It wouldn't surprise me if the rates are little higher going forward, sometimes it just moves around quarter-to-quarter.

One thing though that was probably of significant is the Medicare sequestration was in place in Q1 and that cost us over $1 a visit. That has been lifted I think in May. So I expect our net rate to be higher going forward. Something else I'll talk about is cash. As Chris mentioned, we have about $110 million in cash at present.

We have our credit line fully drawn down $125 million. We just did that to be on the safe side. We were in compliance and are still in compliance with our covenants under our credit agreement. Additionally, we received the Medicare advanced payments, obviously.

Our billings and collections have gone off, gone on, on a timely basis much better than I expected. I thought we'd see delays in payments, but that really hasn't happened. I mentioned the credit agreement. As we run our forecast, we might actually still be in compliance at the end of the second quarter as bad as it's going to be.

But that said, we've been in discussions with Bank of America every week. They couldn't be more supportive. And they offered to put an amendment in place that will keep us in compliance long-term. We will do that sometime in the next few weeks. That's all I got, Chris..

Okay, all right. Thanks, Larry. I know you have a lot of questions. Before we open for questions, we just want to talk about what we're comfortable discussing. So we certainly want to discuss the quarter and where we are right now.

We want to try to avoid any future guesswork around looking forward or estimating things relative to this pandemic just because of the uncertainty. So, I appreciate your interest and understanding as we open the line. Thank you..

[Operator Instructions] Your first question in queue is from Larry Solow with CJS Securities..

Good morning, Larry..

Great. Good morning, guys. Good to hear your voices. I hope everybody is doing relatively okay. So just, I guess, a couple of questions. Obviously, volume is down a lot. And not really looking too much forward, but just sort of the trend down and the trend up.

Is it -- are you seeing more improvement today or a little bit better patient volumes as some of these restrictions open up? Is it -- I guess, my question is, is it more due to restrictions that you're also seeing just patients spiky and whatnot? I imagine there are different levels of demand in terms of I have to get to the physical therapist versus sort of somewhat of discretionary.

So I'm just trying to get an overall picture of how -- you mentioned different areas, obviously variance among volumes and regions. Is that based on -- obviously, the Northeast is probably a lot hit a lot harder than maybe in some other parts of the country.

Maybe you can just give us a little more color on that?.

Yes. So just a little perspective. So our volumes bottomed, the Northeast was hit harder. Our volumes bottomed there around April 12. Our volumes bottomed in the western, central and western parts of the country a week prior to that. Since they bottomed, they're picking back up each week.

Now I understand in the bulk of that period, I have a lot of friends who are PT surgeons, they sat at home, their offices were closed unless you're trauma, on trauma call, which is clearly not elective, you weren't doing any elective surgery. So, unless you're doing cancer-related tumor work or trauma, you are sitting at home with everybody else.

And so things have begun slowly on elective surgery side. It varies across the patch work, but have begun to open back up.

And as they've opened back up, I mean anecdotally, I got a note yesterday in San Antonio and we got literally dozens of referrals in the first couple of days of this week because the surgeons just started back in their surgery centers.

And so I don't think our volume where it is right now has picked up each and every week, referrals have picked up each and every week. I don't think it's related to people being afraid.

I think it's been more related to the restrictions that are in place and the fact that while we were essential and remained open, a lot of -- the rest of the healthcare environment was deemed non-essential and has been closed. And so it's going to take some time. It's going to be community-by-community, state-by-state.

But so far, we're -- each week is better than the week before..

Overall, we've bottomed out at 45%. We've stated in the press release, we're running at 60%. As Chris mentioned, it ticks up each week. Good news is that referrals are growing faster than visits. So it should accelerate. In the models we did, we didn't assume we'd be at 60% at this point. So we are ahead in our financial models..

I think our Monday volume, and Monday is at the moment our busiest days, but every Monday is our busiest day of the week and that was closer to 70% in both parts of the country this week. So it wasn't quite there, but it was close. So definitely picking up..

Also I would -- especially, investors that aren't -- as we got a lot of people on this call today, about twice what we normally do, I would urge you to look at our map on our website and see what states we're in. We're not in California. We're not in New York. And we are in states like Pennsylvania, Michigan and New Jersey that had been hit hard.

But the fact that we're in 40 plus states and so many different communities, frankly has been very helpful, it's given us a portfolio effect, so we didn't just get creamed by being in one or two locations..

You guys mentioned you've closed, I think 35 clinics or maybe a couple more subsequent to the quarter or won't 35 reopen, I should say in your plan.

Most of these -- can you sort of characterize these clinics? Were they mostly modestly profitable, cannibalizing other clinics? What's sort of the longer term view to close pretty expeditiously? And can you also just touch on, we've gotten some questions on the Put option, can you just refer -- review that again? And if there's any risk to the company in terms of terminated employees being able to require the company to buy the clinic back?.

Well, remember we -- normally, we close, permanently close 20 clinics a year..

Right..

And for the most part, the clinics we closed this time were one-offs. Some of them were very old. They either had some losses or were modestly profitable. And when we ran the math, if they come back and they're not running at what they were before, obviously they're going to lose even more money. Some of them have the leases up for renewal anyway.

Some of them were already dark, temporarily closed and we didn't even have severance costs associated with it..

In aggregate, they were unprofitable..

Okay, okay. So is there a risk? So we've gotten the question in from many investors, just trying to clarify. Is there -- are there any risk from maybe not so much closed clinics, but from -- I know you've terminated a lot of employees.

Have you terminated -- are there any partners terminated or is there any risk from partners who require you to buyback the clinic?.

Yes. So first of all, we other than maybe a single site partnership that was unprofitable at the time we elected to close it, we didn't have the partners that were terminated as a result of this. None that I can think of. And thankfully, we haven't had any partners leave us in this period either for any of our partnerships.

And so we have a structure, a deal structure that after a predefined whole period usually four years, five years, these are after we do transactions, a partner, if that partner terminates his or her employment with us can put their interest to us, we have to repurchase it.

And so we've been fortunate I think that our partners, the vast, vast, vast majority and I think -- I won't say every single one because I don't know, I don't talk to every single one every day. But they expect to be around for the longer term. And they know that -- they believe, as I believe that the business is ultimately going to come back.

And so is it possible that we have some of these? I think right now, we're aware of loan repurchase that we can handle within our current facility. But other than that, I mean we're heads down working our way through this. Our partners have done the same and it's working the way that it's supposed to work..

Great, thanks. I really appreciate the color, guys..

Your next question in queue is from Brian Tanquilut with Jefferies..

Hey, good morning, Brian..

Hey, good morning. Hope everyone is okay. I guess, I'll just follow-up first on Larry's question on the closures. So obviously, like you said, Larry, all these facilities are closed anyway, like you closed 20, 25 locations a year.

But from a modeling perspective, should we assume that the drop in revenue for 2021 would be worse than your typical impact from the regular store or unit closures that you do most years? And I guess, my follow-up, Larry, would be just from a back office perspective.

Is there a corresponding decline that we should be modeling?.

I'll be honest with you, Brian. I don't know how you would model 2021 at this point..

Yes. I can say that facilities that we have decided to close, we'll certainly lose visits and revenue from those facilities, but we won't lose profitability in aggregate. We're going to have to right size our corporate office accordingly we have today and we'll have to keep it that way. But I agree with Larry. I don't know what '21 looks like yet..

That is really helpful. That's totally understandable. And then I guess, to your point, Larry, earlier on looking at the map, Tennessee obviously is one of your biggest states. The state has reopened, I think we've been opened for two weeks, two and a half weeks now.

Do you mind just walking us through the experience you've seen in terms of the re-ramp in those operations? And then how are you thinking about -- you said referrals are coming in above volumes.

So how are you thinking about expanding capacity to take advantage of the increase in referral flow outpacing volume growth?.

Yes. So Brian, I'll handle that. So I couldn't be any prouder than I am of our team in Tennessee, our Star Group. Those guys have done a remarkable job. The leadership has been incredible. Responsiveness has been incredible. How they adjusted their staffing to the volume and how it was accepted. We're now ramping back up and doing it the right way.

They've as a partnership found a way thus far to remain profitable through all this, even though their volume has been impacted just very significantly like everybody else's, but they're ramping back up. And I expect as we have the last really since the April 12 week, we've begun to pick back up.

When we talk about new patients being ahead of our, currently our volume growth, it's going to take a little time. Remember, we had such a low inflow of new patients during a substantial period, we have some patients that we need to discharge too.

And so there is some balance between patients who have been hanging around for a while and it's time for them to go and the new patient inflow. And that's going to for a little bit mute on a one-to-one basis, the growth of visits, but it's picking up. It's picking up nicely. It's picking up each week.

And I can't predict even three weeks out at this point, I don't know. But so far, it's been steady for March..

No, that's very helpful.

I guess, Larry, just housekeeping, I know you showed growth statistic, but would you be able to share the same-store numbers for the quarter is for the model?.

I think well, Chris gave it pre-COVID 5.7, what was that?.

5.9 pre-COVID. I know our overall volume for the quarter was 2%, but that's not necessarily same store..

Same store. I mean honestly it would be, again, I would say it's apples and oranges. How can you compare March of this year to March of last year..

Yes, sir. Okay. Yes, no understandable. And then I guess, Chris my last question for you, as I think about the same store trajectory if I look back into your business you've definitely benefited from the strength of the employment fixture. And then as I look back to 2009-2012 timeframe, volumes were challenged during that time.

How are you thinking about as we stare-down to recession heading to 2021, how are you thinking about your volume outlook? And then I guess the other thing I would ask you is, as I look back to the last recession, rate growth was positive and that offset the volume headwinds. So obviously in the last few years, we've seen rate growth flattened out.

So putting all those pieces together, how are you thinking about the revenue outlook for the business?.

Yes, there is a lot packed in there. So....

Sorry..

That's okay. It's all right, it's all right. Let's try not to miss anything. So you're right, we're in a flatter rate environment. I would say through from 2008 through 2012, where there was probably I think a year or two where same-store was flat or even maybe in the worst of those slightly negative.

We were able to eke out some same-store in the remainder of that period, may not, it wasn't as high as it is or has been in the business lately. Look we follow some strong economic groups that are predicting a recession in '21 or maybe and still maybe they are not right, we'll see.

One of the things that we've learned here and it's been interesting and it's been tough as well, but we know who are A players are and we have tried our best. It's not perfect by any stretch, but we've tried our best to stay in touch, those people we forever stay in touch with our doctors who were at home and to do this the right way.

I know I have a lot of examples right now where we're getting calls from people who have referral base followings who have previously worked for somebody else, who were unceremoniously dismissed and nobody contacted them over a multi-month period and they're now looking to join our team just because they believe they will have a better long-term opportunity and work with the group that that is able to going to be able to care about them and the business that it brings.

So I am in no way shape or form knowing what '21 is going to look like on a same store basis. What I will tell you is we're very, very focused, this has been a greedy time but we've gotten through the worst part of it.

I think and I hope, and we're going to grind it out and the other thing I'll say is our competition, we think about hospitals who have had their hands incredibly full and who are really interested in getting their surgery, their imaging and those things back open again, maybe not as interested in PT, because that's a lot further down the line.

So we compete with there. We compete with a lot of small practices and we've got more resources that are focused on this business and both of those groups. So we may have to move some market share but we're ready to do that we're going to work with that. So we'll see what happens.

I can't predict, but we're focused on it and we're focused on overcoming at this point..

I appreciate it. I got it..

What I would add on to that that eight of the 10 largest companies in the sector are private equity-backed and are levered five plus times to one versus our pre-COVID at 0.6 to 1. So in terms of financial strength and flexibility after this, I think we'll be in a much better shape than they will..

Larry, I think you mentioned that I guess, sorry for my last question. You talked about the leverage and your credit facility and covenants. I think you're showing in the filings, flexibility to be above 2.5 times leverage and then 1.2 times on the fixed coverage.

So you know just walking us through how you're thinking about that and what the discussions are with the lenders in terms of your ability to adjust the covenants?.

Well, I mean, we have $110 million in cash today, $125 million in debt. Normally, we would carry $30 million in cash. So that remains maybe you could reduce your borrowings by $80 million if you do the amendments to the credit agreement. So I put it to $40 million to $50 million in debt.

They were a little higher with operating losses during this period. I mean, the business has always thrown off to cash flow, we've downsized including corporate costs, I think we're solid for the foreseeable future..

And we expect on the end of this, to be able to grow again and then grow means organic openings and acquisitions and the other things that we've done and on maybe prior years before this outlook. So we expect to get back to that..

I appreciate that. All right, guys, thank you and good luck..

Yes. Thanks, Brent..

Your next question is from Matt Larew with William Blair..

Hey, Matt..

Hey, good morning.

How are you doing guys?.

Good..

Great. Larry, I wanted to ask a little bit about that last comment, and you've noted in a couple of case, you expect to incur losses during this time, but you also noted in the press release today that you like to identify about $87 million of annualized cost savings, and I think you said that the 50% was ahead of your plan in terms of volumes.

So could you just maybe give us a sense of that $87 million, what is sort of run rate savings on the back end of this versus things that you've been able to reduce with the lower volumes..

So the $87 million is if everybody we furloughed or terminated did not return to work. That's why I said it would be not [indiscernible]. On an annualized basis. Annualized basis. So as we, as business gets better. We started to bring back clinical staff. I think we've added, brought 30 people back from furlough in the last couple of weeks.

And we'll continue to do that. We've only brought back one person in corporate, down 40% in corporate. So again, we're going to size the business to what our run rate is. Our run rate is 10% or 20% or whatever less than it was before then we will have at least that much lower in staff.

But I mean I can't tell you what things are going to look like in June, much less at the end of the year..

Sure, okay. And then, I wanted to actually ask about, Chris, about Telehealth. Just what is the experience been like, are you getting paid for visits on Telehealth? Do you think longer term, this is a step change in the way that you're going to be delivering services. Yes, if you could help us there..

Yes, I don't think it's a step change. I think it's an added up -- five minutes service. So there are times if we can all think back to what life was like three months ago when we were all on planes, trains and automobiles, going around doing our thing and going to ballgames and doing all that.

Sometimes delay happens and patients can't make it, physically make it into the facility. On those occasions, a lot of those people might be able to do a Telehealth visit.

Sometimes you just you wake up and you don't feel good or somebody who is a little bit older, they worry that they might be getting the cold and so they're going to, they're going to cancel. We can do a Telehealth visit in those cases. So, I don't expect that we're going to convert existing patients and say, why don't you do Telehealth.

That's not the case, but there are going to be lots of times in circumstances and this period has been one of those magnified where Telehealth is really nice adjunct to be able to get to somebody that you wouldn't be able to get to otherwise. And so the receptivity by the patients and our staff has been very, very high.

We're going to continue with it. We are getting paid by the vast majority of our payers, including Medicare for our PTP facilities where we're in discussion about 50% or 60% of our facilities are certified, we have agencies.

Medicare isn't currently paying for Telehealth for those facilities, which I'll be honest makes literally an absolutely zero sense, but we, there are a lot of providers select medical, many others were working those angles and finding that spike for that to make sense, but when we just found out this week, Blue Cross, Tennessee has decided to Telehealth is going to be a permanent offering for them.

And so for some, it's been indicated like Medicare that Telehealth is going to be for physical therapy, and other places that's going to have it before during this pandemic period, whatever that means, none of us know how long it's going to be and then we're working on the beltway in DC and with CMS where that ultimately to be permanent.

We think a lot of commercial carriers will allow it to be permanent but it's uncertain on a complete basis as of yet..

And if this were to become permanent, is this something that would require some additional investment for you to scale up a platform or has it been relatively easy plug and play for you or your clinicians?.

Right now, we're completely plug and play and there has been no, honestly and this is going to sound crazy, other than the -- and I don't know that we did this at the clinic, we don't have to buy laptops because we already have them, but to date we have had to make an investment.

At some point, depending upon how this plays out and it won't be in the immediate or even near future. If we go to a different platform, it would require some investment, we would let you all know what that looks like ahead of that.

But right now we're okay with where we are in the platform that we have which is compliant with all the rules and regs and simple and easy to use. And we're going to be on that platform for the foreseeable future without having to make an investment..

All right, that's great. And just a final one here. You mentioned the potential for M&A on the other end of this as many of your smaller competitors maybe are under pressure.

Have you started to get additional calls already or has the Medicare advanced payments and carriers relief funds help kind of stem the tide? And then the second piece maybe just be in terms of new referral sources, a number of other non-hospital providers have indicated they've seen an increase in referral sources where smaller competitors have struggled.

And I understand your referrals had been down but have you started to see that as the states reopened?.

If I understand the question referrals are taking up, I don't have answer to that yet.

The ability to tell whether we're getting a lot of new referral sources and whether where those referrals are coming from and we do expect one thing and I guess this is a prediction or maybe an expectation, I think physicians who own physical therapy business who've had to go home and sit and furlough these therapists.

And I think some of those are going to look at that business and say it's really worth it because it's not their primary, they don't do it as well as they run their main business, the primary thing and so I think some of those are going to go away or will go into management agreements or other areas. But that's completely anecdotal.

You know, the rest of it, I expect again expect referrals to continue to pick up from a variety of different sources, one of the deals that we have on the sidelines right now focuses on hospital, management of physical therapy services, where we haven't had a background in that area and so we're anxious to get to the point where we can get that completed and focus a little bit more acutely on that.

And then in terms of the calls I have had some calls and in fact, I've been on -- been asked to speak on to national widely distributed conferences Zoom based kind of conferences and obviously a part of that is what things look like post-COVID and how that will affect them and I've gotten calls from people that we've been in touch with over the period and they know we're not writing now, but at some point we are and we will be.

And you know people I think are going to look at what they've been through. And a lot of them are going to want to be in a little bit of both, the ones that they've been in the storm sort. So yes we'll see..

A couple of things, one, our hospital deal where we're looking at is an outpatient deal not an on-site hospital management contract. And then I got a text from one of our team members sort of rehab agencies are 40% of the business, it's not 60%, PTPs are 60%, so 60% qualify for reimbursement from Medicare now..

Okay, got it. Thanks, Chris. Thanks, Larry..

Thank you. Thanks, Matt..

Our next question is from Mike Petusky with Barrington Research..

Good morning..

Good morning, guys. So, Chris, I was wondering just in terms of the, I guess, the patient experience and the PT experience in treating working with the patients whether its changes to physical building changes in the waiting room, changes in terms of PPE. Can you just speak to what's different today versus two and a half months ago..

It's a lot different. You know, some of it's different. Some of it is obviously we are laying out our facilities in way to continue to have distancing so that measure spread in terms of chairs and seating and glimpse in the gym area and pikes, where we have multiple pieces of equipment in close proximity.

So it's that, it's scheduling and making sure that we -- while particularly it's needed and while we can, we've got appropriate people spread through the day.

In terms of PPE, it's now plenty of sanitization solutions and equipments to make sure after every contact things are worked down that we have plenty of hand sanitizer that we have masks and we were able through Graham's previous hospital connections and is that work, we were able to when people were struggling to come up with meaningful quantities of that that will do us for the near term and may do us for the complete term of this.

We'll see how long it will last, monitors and other things. So, yes, there are differences.

We continue to be able to be hands on with patients, patients are wearing masks now in our facilities, our clinicians and our staff wear masks and then otherwise we're building about our business and we're getting people better and we're able to do hands-on work and exercise based work and movement re-education and the pain intervention, tech needs, it's just like we were before.

Just a little bit more involved in full preparation to pull it off the right plan..

And I guess, Larry, just to follow up on that, the cost of any of that, whether it's cleaning material, PPE that sort of thing.

I mean does that reached materiality in terms of sort of the incremental spend there on billing?.

I mean obviously you had some spend, but I don't, I mean it depends on what you consider material. I don't think we spent $1 million on it..

I mean masks or -- Graham, what do masks cost us now?.

It's about $0.46 Chris..

That's for masks. So despite there are some cost that's there but when we talk about materiality, there will be a point I think I hope when we get through this, that we don't have masks.

I think at that point, we'll know why volumes are right now, we're in this volume adjusted period where we have to do some other things and it's tough to predict exactly what that's going to look like over the next week or month or few months, but we're well positioned to get through it.

We just need to get through it, few people protected and we will get out the other side..

Just real quick on, are you guys allowing multiple people to sort of be in the waiting room or are you having people sit in their cars as they wait to be called or is that sort of up clinic by clinic decision?.

Yes, it depends on the size of clinic; we've got some big clinics, we've got some smaller clinics. Practically speaking, we're asking patients to come if they can by themselves, not with any entourage, obviously, right now.

Most of our clinics -- most of our patients don't have to wait even on a normal basis in the waiting room, they don't normally sit, sometimes the person that's in the waiting room is a driver or somebody else. So they come right back, they check-in, they go right back or and -- we're able to do intake over the phone and things like that.

So, there is not a big waiting room issue; some are larger than others, and if we needed to, could accommodate a few people with adequate spread, but most of the time our patients are able to check-in and come back, and -- you know, I'm sure if there was or and there might be a more dense arrangement; we would make an adjustment at that time and ask people to wait for five or come back early or whatever, keep some safe.

I'd tell you, our clinical team has done a really good job and looking out for our patients, first and foremost, and then, each other. And so we've seen our exposures go down, significantly; we've seen our volume go up significantly.

And I think just as the week ago, we only had one person that was working out; short-term quarantine and that was down from much higher number the weeks before. So we're definitely headed in the right direction, doing the right thing..

Yes, we've had a lot fewer confirmed cases than we'd ever imagined..

Great. Now just a question just on the Telehealth.

In terms of sort of the volumes in April and May, I mean can you give any sense even a ballpark range of what percentages of revenue in April and May was associated with Telehealth?.

Yes, I don't know that I can give you Mike, a percentage of revenue. Graham, may be able to give us kind of -- an overview or a snapshot on the visits, and if we took a minute to do the math, or we do after the call; we can probably figure out; it's going to be a small percentage of revenue.

But Graham, what we were doing few thousand a week?.

Yes. That's correct, Chris..

So about 3,000 a week. I expect Mike that number actually to begin to go down a little bit as volume picks up in the facility and people are more readily able and capable of coming out or feeling comfortable coming out. I expect that number to wane [ph] a little bit.

And again, I don't have good predictive ability to tell you what it should look like but in the peaks -- in the peak period we were seeing about 3,000 visitors a week I think..

And payers were paying sort of -- the visit was $100 a visit, payers were paying -- essentially, that was the rate?.

It varied among payers. There were some unit exclusions, for instance, obviously there is something you can't do in Telehealth, you can't do dry needling, you have to physically be there; can't do manual therapy, you have to physically be there.

So I wouldn't say that I would look at a Telehealth visit as being absolutely equivalent to an in-clinic visit because there are few things that we do with our hands, that you obviously can't do through the following of the TV or the computer.

But generally speaking, I think codes -- with probably some small exceptions, codes were reimbursed at the same relative level, same from Medicare. But not across the board, not completely homogenous among or across payers..

And then just last one, and you may have touched on this earlier, I possibly could have missed it but I just wanted to ask. In terms of the industry and CMS and communications in terms of '21 pricing; has all this wait on that issue? And if -- is there any incremental -- even anecdotal information you can share there? Thanks..

Yes. I know there is a bill right now, I talk with [indiscernible], they've done a great job. Our -- Select has us APTA QI or Alliance APPA, the American Hospital Association, the long-term care associations; all have rather acutely banded together to press on CMS not to enact some of the reductions that we're scheduled to come into play in 2021.

We have a bill right now, we have -- we have a number of sponsors, but don't yet know and along predict what happens with that.

But given the amount of relief and assistance, given how important the healthcare system is and how important we are to the system, and the fact that we've been deemed ahead of a lot of other types of healthcare and allied health professionals to be absolutely necessary; I think we have a shot but it's not done yet..

Thank you..

Okay. Going back to the Telehealth volume question; if it were to -- let's say we run at 2,500 a week forever, which -- as Chris said it, I think a number of those patients would come in and seeing seen us; so that's probably aggressive.

And we should have done at least 750,000 visits in the quarter, it would be like 3%, max 4% of your business; so it's not going to be a material percentage of your PT visits..

The nice part is, it should help to reduce our cancellation rate a little bit and we should lose less of it by having that flexibility..

Got you. Sounds good. Thanks..

Thanks, Mike..

Your next question is from Kevin Gade [ph] with BAHL Gainer Investments..

Hi, good morning everybody. And really cheers to the swift action from management, and really the deliberate delivery of information for the 8-Ks; really appreciate it. Kind of the comments about you've been a stronger financially positioned player versus the other; I'd like to open it up a question, maybe more on capital allocation.

Where you all stand in terms of your priority? I know you mentioned pushing off M&A a little bit. And what -- and also seeing that dividend may be suspended for the upcoming quarter. If you can just expand on these two points; if you intend to suspend the dividend? If you intend to pay it? And how long you tend to hold up on M&A? Thank you, everyone..

So we've always said this, been very consistent; if you look at rates of return, the highest return is on a de novo clinic when we've opened ourselves. Second would be on acquired clinics, which in turn spin-off de novo.

And then third, we said we were -- it was hard to judge whether it was better to do share buybacks or pay dividends, we initiated the dividend a number years ago, we've increased it every year sense; in this situation where there is so much uncertainty, we like hundreds and hundreds of other companies have suspended the dividend.

Will we resume it at some point? I would expect. Will we pay one this year? We've already stated that we doubt that we would pay any dividends this year. And we've paid our first quarter dividend, we doubt we'll pay any subsequent dividends this year..

I think there is a good appetite by the board and certainly, the management team to get us in a position where we can re-institute that at a point where we feel comfortable that our capital structure is good and stable, and we can do everything we need to do..

Great, thank you..

Thank you..

And there are no further questions in queue at this time..

All right. Listen, thank you everybody. And it was a long call, I know you had a lot of questions. So, Larry and I are around, if you want to have some follow-up, we're available. We thank you for your time and your interest and your support. Take care. Have a great day. Bye..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..