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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file numbers: 001-34465

SELECT MEDICAL HOLDINGS CORPORATION

(Exact name of Registrant as specified in its Charter)


Delaware						20-1764048
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification Number)

4714 Gettysburg Road, P.O. Box 2034

Mechanicsburg, PA 17055

(Address of Principal Executive Offices and Zip code)

(717) 972-1100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	SEM	New York Stock Exchange
		(NYSE)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods as such Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2025, Select Medical Holdings Corporation had outstanding 128,538,891 shares of common stock.

Unless the context indicates otherwise, any reference in this report to “Holdings” refers to Select Medical Holdings Corporation and any reference to “Select” refers to Select Medical Corporation, the wholly owned operating subsidiary of Holdings, and any of Select’s subsidiaries. References to the “Company,” “we,” “us,” and “our” refer collectively to Holdings and Select.

Table of Contents

TABLE OF CONTENTS


PART I	FINANCIAL INFORMATION	3

ITEM 1.	CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Condensed consolidated balance sheets	3

	Condensed consolidated statements of operations	4

	Condensed consolidated statements of comprehensive income	5

	Condensed consolidated statements of changes in equity and income	6

	Condensed consolidated statements of cash flows	7

	Notes to condensed consolidated financial statements	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34

ITEM 4.	CONTROLS AND PROCEDURES	34

PART II	OTHER INFORMATION	35

ITEM 1.	LEGAL PROCEEDINGS	35

ITEM 1A.	RISK FACTORS	35

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	35

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	35

ITEM 4.	MINE SAFETY DISCLOSURES	35

ITEM 5.	OTHER INFORMATION	35

ITEM 6.	EXHIBITS	37

SIGNATURES

Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Select Medical Holdings Corporation

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share amounts)


	December 31, 2024		March 31, 2025
ASSETS
Current Assets:
Cash and cash equivalents	$	59,694	$	53,213
Accounts receivable	821,385		908,185
Prepaid income taxes	26,601		6,566

Other current assets	112,097		124,328
Total Current Assets	1,019,777		1,092,292
Operating lease right-of-use assets	908,095		909,180
Property and equipment, net	872,185		894,920
Goodwill	2,331,898		2,331,898
Identifiable intangible assets, net	103,183		102,544
Other assets	372,813		365,169
Total Assets	$	5,607,951	$	5,696,003
LIABILITIES AND EQUITY
Current Liabilities:
Overdrafts	$	25,803	$	20,683
Current operating lease liabilities	179,601		181,605
Current portion of long-term debt and notes payable	20,269		28,353
Accounts payable	142,157		158,542
Accrued and other liabilities	609,821		555,616








Total Current Liabilities	977,651		944,799
Non-current operating lease liabilities	787,124		787,861
Long-term debt, net of current portion	1,691,546		1,767,409
Non-current deferred tax liability	81,497		75,245
Other non-current liabilities	73,038		74,652
Total Liabilities	3,610,856		3,649,966
Commitments and contingencies (Note 13)
Redeemable non-controlling interests	10,167		9,021
Stockholders’ Equity:
Common stock, $0.001 par value, 700,000,000 shares authorized, 128,962,850 and 128,314,033 shares issued and outstanding at 2024 and 2025, respectively	129		128
Capital in excess of par	911,080		908,868
Retained earnings	770,146		813,504
Accumulated other comprehensive loss	—		(3,106)
Total Stockholders’ Equity	1,681,355		1,719,394
Non-controlling interests	305,573		317,622
Total Equity	1,986,928		2,037,016
Total Liabilities and Equity	$	5,607,951	$	5,696,003

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Select Medical Holdings Corporation

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share amounts)


	For the Three Months Ended March 31,
		2024		2025
Revenue		$	1,321,211	$	1,353,172
Costs and expenses:
Cost of services, exclusive of depreciation and amortization		1,120,711		1,172,611
General and administrative		48,447		33,008
Depreciation and amortization		35,584		34,808
Total costs and expenses		1,204,742		1,240,427
Other operating income		2,000		—
Income from continuing operations before other income and expense		118,469		112,745
Other income and expense:

Equity in earnings of unconsolidated subsidiaries		10,421		12,512


Interest expense		(40,681)		(29,072)
Income from continuing operations before income taxes		88,209		96,185
Income tax expense from continuing operations		26,680		21,453
Income from continuing operations, net of tax		61,529		74,732
Discontinued operations:
Income from discontinued business		65,416		—
Income tax expense from discontinued business		9,778		—
Income from discontinued operations, net of tax		55,638		—
Net income		117,167		74,732
Less: Net income attributable to non-controlling interests		20,270		18,051
Net income attributable to Select Medical Holdings Corporation		$	96,897	$	56,681
Net income attributable to Select Medical Holdings Corporation’s common stockholders:
Income from continuing operations, net of tax		42,582		56,681
Income from discontinued operations, net of tax		54,315		—
Net income attributable to Select Medical Holdings Corporation’s common stockholders		$	96,897	$	56,681
Earnings per common share (Note 12):
Continuing operations - basic and diluted		$	0.33	$	0.44
Discontinued operations - basic and diluted		0.42		—
Total earnings per common share - basic and diluted		$	0.75	$	0.44

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Select Medical Holdings Corporation

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

(in thousands)


	For the Three Months Ended March 31,
		2024		2025
Net income		$	117,167	$	74,732
Other comprehensive loss, net of tax:
Gain (loss) on interest rate cap contract		4,370		(3,106)
Reclassification adjustment for gains included in net income		(16,347)		—
Net change, net of tax benefit of $3,782, and $981		(11,977)		(3,106)
Comprehensive income		105,190		71,626
Less: Comprehensive income attributable to non-controlling interests		20,270		18,051
Comprehensive income attributable to Select Medical Holdings Corporation		$	84,920	$	53,575

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Select Medical Holdings Corporation

Condensed Consolidated Statements of Changes in Equity and Income

(unaudited)

(in thousands)


	For the Three Months Ended March 31, 2025

		Total Stockholders’ Equity
	Common Stock Issued	Common Stock Par Value		Capital in Excess of Par		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Non-controlling Interests		Total Equity
Balance at December 31, 2024	128,963	$	129	$	911,080	$	770,146	$	—	$	1,681,355	$	305,573	$	1,986,928
Net income attributable to Select Medical Holdings Corporation						56,681				56,681				56,681
Net income attributable to non-controlling interests										—		16,288		16,288
Cash dividends declared for common stockholders ($0.0625 per share)						(8,060)				(8,060)				(8,060)
Issuance of restricted stock	1	0		0						—				—

Vesting of restricted stock				3,892						3,892				3,892
Repurchase of common shares	(650)	(1)		(6,104)		(5,284)				(11,389)				(11,389)
Issuance of non-controlling interests										—		7,944		7,944

Distributions to and purchases of non-controlling interests										—		(12,183)		(12,183)
Redemption value adjustment on non-controlling interests						21				21				21
Other comprehensive loss								(3,106)		(3,106)				(3,106)





























Balance at March 31, 2025	128,314	$	128	$	908,868	$	813,504	$	(3,106)	$	1,719,394	$	317,622	$	2,037,016


	For the Three Months Ended March 31, 2024

		Total Stockholders’ Equity
	Common Stock Issued	Common Stock Par Value		Capital in Excess of Par		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity		Non-controlling Interests		Total Equity
Balance at December 31, 2023	128,369	$	128	$	493,413	$	751,856	$	42,907	$	1,288,304	$	259,414	$	1,547,718
Net income attributable to Select Medical Holdings Corporation						96,897				96,897				96,897
Net income attributable to non-controlling interests										—		17,845		17,845
Cash dividends declared for common stockholders ($0.125 per share)						(16,045)				(16,045)				(16,045)
Issuance of restricted stock	1	0		0						—				—
Forfeitures of unvested restricted stock	(12)	0		0		14				14				14
Vesting of restricted stock				11,596						11,596				11,596

Issuance of non-controlling interests										—		4,002		4,002

Distributions to and purchases of non-controlling interests				394						394		(10,900)		(10,506)
Redemption value adjustment on non-controlling interests						(1,901)				(1,901)				(1,901)
Other comprehensive loss								(11,977)		(11,977)				(11,977)

Balance at March 31, 2024	128,358	$	128	$	505,403	$	830,821	$	30,930	$	1,367,282	$	270,361	$	1,637,643

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Select Medical Holdings Corporation

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


	For the Three Months Ended March 31,
	2024		2025
Operating activities
Net income	$	117,167	$	74,732
Adjustments to reconcile net income to net cash used in operating activities:
Distributions from unconsolidated subsidiaries	12,374		20,145
Depreciation and amortization	54,069		34,808
Provision for expected credit losses	854		2,283
Equity in earnings of unconsolidated subsidiaries	(10,421)		(12,512)

(Gain) loss on sale or disposal of assets	44		(23)
Stock compensation expense	11,610		3,892
Amortization of debt discount, premium, and issuance costs	750		783
Deferred income taxes	(6,891)		(5,655)
Changes in operating assets and liabilities, net of effects of business combinations:
Accounts receivable	(195,308)		(89,083)
Other current assets	(9,611)		(12,230)
Other assets	2,363		2,127
Accounts payable	(5,718)		13,462
Accrued expenses	(37,971)		(36,186)




Net cash used in operating activities	(66,689)		(3,457)
Investing activities
Business combinations, net of cash acquired	(5,405)		—
Purchases of property and equipment	(52,517)		(52,339)

Proceeds from sale of assets	265		24
Net cash used in investing activities	(57,657)		(52,315)
Financing activities
Borrowings on revolving facilities	495,000		405,000
Payments on revolving facilities	(265,000)		(330,000)

Payments on term loans	(79,085)		(2,625)



Borrowings of other debt	17,728		16,015
Principal payments on other debt	(9,061)		(7,729)
Dividends paid to common stockholders	(16,045)		(8,060)
Repurchases of common stock	—		(11,389)

Decrease in overdrafts	(1,740)		(5,120)
Proceeds from issuance of non-controlling interests	4,002		7,944
Distributions to and purchases of non-controlling interests	(12,839)		(14,745)

Net cash provided by financing activities	132,960		49,291
Net increase (decrease) in cash and cash equivalents	8,614		(6,481)
Cash and cash equivalents at beginning of period	84,006		59,694
Cash and cash equivalents at end of period	$	92,620	$	53,213
Supplemental information
Cash paid for interest, excluding amounts received of $22,515 under the interest rate cap contract during the three months ended March 31, 2024	$	88,834	$	23,772
Cash paid for taxes	604		1,472

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SELECT MEDICAL HOLDINGS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

The unaudited condensed consolidated financial statements of Select Medical Holdings Corporation (“Holdings”) include the accounts of its wholly owned subsidiary, Select Medical Corporation (“Select”). Holdings conducts substantially all of its business through Select and its subsidiaries. Holdings, Select, and Select’s subsidiaries are collectively referred to as the “Company.” The unaudited condensed consolidated financial statements of the Company as of March 31, 2025, and for the three month periods ended March 31, 2024 and 2025, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim reporting and the accounting principles generally accepted in the United States of America (“GAAP”). Accordingly, certain information and disclosures required by GAAP, which are normally included in the notes to the consolidated financial statements, have been condensed or omitted pursuant to those rules and regulations, although the Company believes the disclosure is adequate to make the information presented not misleading. In the opinion of management, such information contains all adjustments, which are normal and recurring in nature, necessary for a fair statement of the financial position, results of operations and cash flow for such periods. All significant intercompany transactions and balances have been eliminated.

The results of operations for the three months ended March 31, 2025, are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2025. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2024, contained in the Company’s Annual Report on Form 10-K filed with the SEC on February 20, 2025.

See Note 3. Dispositions for discussion on the distribution of Concentra Group Holdings Parent, Inc. (“Concentra”) that occurred in the fourth quarter of 2024.

2. Accounting Policies

Recent Accounting Guidance Not Yet Adopted

Income Taxes

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to improve the transparency and decision usefulness of income tax disclosures. The ASU includes enhanced requirements on the rate reconciliation, including specific categories that must be disclosed, and provides a threshold over which reconciling items must be disclosed. The amendments in the update also require annual disclosure of income taxes paid, disaggregated by federal, state, and foreign taxes, as well as any individual jurisdictions in which income taxes paid is greater than 5% of total income taxes paid.

The Company will adopt ASU 2023-09 beginning with our annual reporting period ending December 31, 2025. The ASU can be applied either prospectively or retrospectively. The Company is currently reviewing ASU 2023-09, but does not expect it to have a significant impact on the disclosures in our consolidated financial statements.

Expense Disaggregation

In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which is intended to improve the disclosures of expenses by providing more detailed information about the types of expenses in commonly presented expense captions. The ASU requires entities to disclose the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included in each relevant expense caption; as well as a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The amendment also requires disclosure of the total amount of selling expense and, in annual reporting periods, an entity’s definition of selling expenses.

The ASU is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027; however early adoption is permitted. The ASU can be applied either prospectively or retrospectively. The Company is currently reviewing the impact that ASU 2024-03 will have on the disclosures in our consolidated financial statements.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates.

3. Dispositions

On July 26, 2024, Concentra, a then wholly-owned subsidiary of Select, completed an initial public offering (“IPO”) of 22,500,000 shares of its common stock, par value $0.01 per share, at an initial public offering price of $23.50 per share for net proceeds of $499.7 million after deducting underwriting discounts and commission of $29.1 million. In addition, the underwriters exercised the option to purchase an additional 750,000 shares of Concentra’s common stock for net proceeds of $16.7 million after deducting discounts and commission of $1.0 million. On November 25, 2024, Select completed a tax-free distribution of 104,093,503 shares of common stock of Concentra to its stockholders. Following the completion of the distribution, the Company no longer owns any shares of Concentra common stock.

In connection with the separation and distribution of Concentra’s common stock, the Company and Concentra also entered into several agreements to provide a framework of our ongoing relationship with Concentra, including a transition services agreement (“TSA”), a separation agreement, a tax matters agreement and an employee matters agreement. The services under the TSA generally are a continuation of the support services provided by Select to Concentra prior to the IPO. The fee for support services provided to Concentra was $3.7 million for the three months ended March 31, 2025. The income from the support services fees, as well as the cost to provide these services, are included within General and Administrative expense on the Consolidated Statements of Operations. The provision of services under the TSA will terminate no later than November 26, 2026.

The results of Concentra are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for the three months ended March 31, 2024.

Certain key selected financial information included in Income from discontinued operations, net of tax, for Concentra is as follows:


	For the Three Months Ended March 31,
	2024
Revenue	$	467,598
Costs and expenses:
Cost of services, exclusive of depreciation and amortization	373,899

Depreciation and amortization	18,485
Total costs and expenses	392,384
Other operating income	284
Income from operations	75,498
Other income and expense:




Interest expense(1)	(10,082)
Income from discontinued operations before income taxes	65,416
Income tax expense	9,778
Income from discontinued operations, net of tax	55,638
Less: Net income attributable to non-controlling interests	1,323
Income from discontinued operations, net of tax, attributable to Select Medical Holdings Corporation’s common stockholders	$	54,315

_______________________________________________________________________________

(1) For the three months ended March 31, 2024, interest expense includes allocated interest expense of $10.0 million. Interest was allocated in accordance with the terms of an intercompany promissory note in place between the Company and Concentra prior to the separation.

The following is selected financial information included on the Consolidated Statements of Cash Flows for Concentra:


	For the Three Months Ended March 31,
	2024
Depreciation and amortization	18,485
Cash flows from investing activities:
Purchases of property, equipment, and other assets	$	17,231

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4. Credit Risk Concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash balances and accounts receivable. The Company’s excess cash is held with large financial institutions. The Company grants unsecured credit to its patients, most of whom reside in the service area of the Company’s facilities and are insured under third-party payor agreements.

Because of the diversity in the Company’s non-governmental third-party payor base, as well as their geographic dispersion, accounts receivable due from the Medicare program represent the Company’s only significant concentration of credit risk. Approximately 21% and 22% of the Company’s accounts receivable is due from Medicare at December 31, 2024, and March 31, 2025, respectively.

5. Leases

The Company’s total lease cost is as follows:


	Three Months Ended March 31, 2024						Three Months Ended March 31, 2025
	Unrelated Parties		Related Parties		Total		Unrelated Parties		Related Parties		Total
	(in thousands)
Operating lease cost	$	54,265	$	1,834	$	56,099	$	58,983	$	1,834	$	60,817
Finance lease cost:
Amortization of right-of-use assets	143		—		143		143		—		143
Interest on lease liabilities	249		—		249		239		—		239

Variable lease cost	11,820		—		11,820		12,433		—		12,433
Sublease income	(1,760)		—		(1,760)		(1,631)		—		(1,631)
Total lease cost	$	64,717	$	1,834	$	66,551	$	70,167	$	1,834	$	72,001

6. Accrued and other liabilities

The following table sets forth the components of accrued and other liabilities on the Condensed Consolidated Balance Sheets:


	December 31, 2024		March 31, 2025

Accrued payroll	$	183,045	$	134,447
Accrued vacation	122,376		126,390
Accrued interest	9,075		14,184
Accrued other	288,681		268,350
Income taxes payable	6,644		12,245
Accrued and other liabilities	$	609,821	$	555,616

7. Interest Rate Cap

The Company is subject to market risk exposure arising from changes in interest rates on the Select term loan, which bears interest at a rate that is indexed to one-month Term SOFR. The Company’s objective in using an interest rate derivative is to mitigate its exposure to increases in interest rates. The Company had an interest rate cap which matured on September 30, 2024. During the three months ended March 31, 2025, the Company entered into a new interest rate cap with a scheduled maturity of March 31, 2028. The interest rate cap will limit the Company’s exposure to increases in the variable rate index to 4.5% on $1.0 billion of principal outstanding under the term loan, as the interest rate cap provides for payments from the counterparty when interest rates rise above 4.5%. The interest rate cap has a deferred premium that the Company will pay monthly over the term of the agreement. The annual premium is equal to 0.3300% of the notional amount, or approximately $3.3 million.

The interest rate cap has been designated as a cash flow hedge and is highly effective at offsetting the changes in cash outflows when the variable rate index exceeds 4.5%. Changes in the fair value of the interest rate cap, net of tax, are recognized in other comprehensive loss and reclassified out of accumulated other comprehensive loss and into interest expense when the hedged interest obligations affected earnings.

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The following table outlines the changes in accumulated other comprehensive income (loss), net of tax, during the periods presented:


	Three Months Ended March 31,
	2024		2025
	(in thousands)
Balance as of January 1	$	42,907	$	—
Gain (loss) on interest rate cap cash flow hedge	4,370		(3,106)
Amounts reclassified from accumulated other comprehensive income (loss)	(16,347)		—
Balance as of March 31	$	30,930	$	(3,106)

The effects on net income of amounts reclassified from accumulated other comprehensive income (loss) are as follows:


	Three Months Ended March 31,
Statement of Operations			2024		2025
		(in thousands)
Gains included in interest expense			$	21,509	$	—
Income tax expense			(5,162)		—
Amounts reclassified from accumulated other comprehensive income (loss)			$	16,347	$	—

The Company expects that approximately $0.4 million of estimated pre-tax losses will be reclassified from accumulated other comprehensive loss into interest expense within the next twelve months.

Refer to Note 8 – Fair Value of Financial Instruments for information on the fair value of the Company’s interest rate cap contract and its balance sheet classification.

8. Fair Value of Financial Instruments

Financial instruments which are measured at fair value, or for which a fair value is disclosed, are classified in the fair value hierarchy, as outlined below, on the basis of the observability of the inputs used in the fair value measurement:

•Level 1 – inputs are based upon quoted prices for identical instruments in active markets.

•Level 2 – inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data.

•Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the instrument.

The Company’s interest rate cap contract is recorded at its fair value in the condensed consolidated balance sheets on a recurring basis. The fair value of the interest rate cap contract is based upon a model-derived valuation using observable market inputs, such as interest rates and interest rate volatility, and the strike price.

Financial Instrument

Balance Sheet Classification

Level

March 31, 2025

Liability:

(in thousands)

Interest rate cap contract, current portion

Accrued other

Level 2

2,919

Interest rate cap contract, non-current portion

Other non-current liabilities

Level 2

1,168

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The Company does not measure its indebtedness at fair value in its condensed consolidated balance sheets. The fair value of the credit facilities are based on quoted market prices for this debt in the syndicated loan market. The fair values of the senior notes are based on quoted market prices. The carrying value of the Company’s other debt, as disclosed in Note 9 – Long-Term Debt and Notes Payable, approximates fair value.


		December 31, 2024				March 31, 2025
Financial Instrument	Level	Carrying Value		Fair Value		Carrying Value		Fair Value
		(in thousands)
6.250% senior notes	Level 2	$	539,363	$	528,000	$	539,696	$	535,453
Credit facilities:
Revolving facility	Level 2	105,000		102,900		180,000		177,300
Term loan	Level 2	1,041,661		1,051,313		1,039,346		1,044,757

The Company’s other financial instruments, which primarily consist of cash and cash equivalents, accounts receivable, and accounts payable, approximate fair value because of the short-term maturities of these instruments.

9. Long-Term Debt and Notes Payable

As of March 31, 2025, the Company’s long-term debt and notes payable are as follows:


	Principal Outstanding		Unamortized Premium (Discount)		Unamortized Issuance Costs		Carrying Value		Fair Value
	(in thousands)
6.250% senior notes	$	550,000	$	—	$	(10,304)	$	539,696	$	535,453
Credit facilities:
Revolving facility	180,000		—		—		180,000		177,300
Term loan	1,047,375		(2,593)		(5,436)		1,039,346		1,044,757
Other debt, including finance leases	37,192		—		(472)		36,720		36,720
Total debt	$	1,814,567	$	(2,593)	$	(16,212)	$	1,795,762	$	1,794,230

Principal maturities of the Company’s long-term debt and notes payable are approximately as follows:


	2025		2026		2027		2028		2029		Thereafter		Total
	(in thousands)
6.250% senior notes	$	—	$	—	$	—	$	—	$	—	$	550,000	$	550,000
Credit facilities:
Revolving facility	—		—		—		—		180,000		—		180,000
Term loan	7,875		10,500		10,500		10,500		10,500		997,500		1,047,375
Other debt, including finance leases	16,931		2,842		1,637		54		58		15,670		37,192
Total debt	$	24,806	$	13,342	$	12,137	$	10,554	$	190,558	$	1,563,170	$	1,814,567

As of December 31, 2024, the Company’s long-term debt and notes payable are as follows:


	Principal Outstanding		Unamortized Premium (Discount)		Unamortized Issuance Costs		Carrying Value		Fair Value
	(in thousands)
6.250% senior notes	$	550,000	$	—	$	(10,637)	$	539,363	$	528,000
Credit facilities:
Revolving facility	105,000		—		—		105,000		102,900
Term loan	1,050,000		(2,693)		(5,646)		1,041,661		1,051,313
Other debt, including finance leases	26,282		—		(491)		25,791		25,791
Total debt	$	1,731,282	$	(2,693)	$	(16,774)	$	1,711,815	$	1,708,004

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10. Segment Information

The Company identifies its segments according to how the chief operating decision maker evaluates financial performance and allocates resources. The Company’s reportable segments consist of the critical illness recovery hospital segment, rehabilitation hospital segment, and outpatient rehabilitation segment. Other activities include the Company’s corporate shared services, certain investments, and employee leasing services with non-consolidating subsidiaries.

The Company’s chief operating decision maker is its Executive Chairman. The chief operating decision maker uses Adjusted EBITDA in the annual budgeting and forecasting process. The chief operating decision maker considers budget-to-actual variances when making decisions about the allocation of operating and capital resources to each segment. The chief operating decision maker also uses segment Adjusted EBITDA to assess the performance of each segment by comparing the results of each segment to one another and to each segment’s budget. Adjusted EBITDA is defined as earnings from continuing operations excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, transaction costs associated with the Concentra separation, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries. The Company has provided additional information regarding its reportable segments, such as total assets, which contributes to the understanding of the Company and provides useful information to the users of the consolidated financial statements.

The following tables summarize selected financial data for the Company’s reportable segments.


	Three Months Ended March 31, 2024
	Critical Illness Recovery Hospital		Rehabilitation Hospital		Outpatient Rehabilitation		Other		Total
	(in thousands)
Revenue	$	655,880	$	265,700	$	303,158	$	96,473	$	1,321,211
Personnel expense	349,294		147,650		215,417
Other segment items (1)	190,646		56,650		62,813
Adjusted EBITDA	115,940		61,400		24,928
Total assets	2,608,979		1,233,828		1,423,740		228,868		5,495,415
Capital expenditures	15,941		7,101		9,500		2,744		35,286


	Three Months Ended March 31, 2025
	Critical Illness Recovery Hospital		Rehabilitation Hospital		Outpatient Rehabilitation		Other		Total
	(in thousands)
Revenue	$	637,030	$	307,388	$	307,342	$	101,412	$	1,353,172
Personnel expense	348,548		170,810		219,438
Other segment items (1)	201,833		66,154		63,631
Adjusted EBITDA	86,649		70,424		24,273
Total assets	2,696,663		1,405,911		1,415,655		177,774		5,696,003
Capital expenditures	16,671		25,925		9,047		696		52,339

(1) Other segment items consist of facilities expense, other operating expenses, and other operating income.

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A reconciliation of Adjusted EBITDA to income from continuing operations before income taxes is as follows:


	For the Year Ended	Three Months Ended March 31,
				2024		2025
			(in thousands)
Adjusted EBITDA - Critical Illness Recovery Hospital Segment				$	115,940	$	86,649
Adjusted EBITDA - Rehabilitation Hospital Segment				61,400		70,424
Adjusted EBITDA - Outpatient Rehabilitation Segment				24,928		24,273
Other revenue				96,473		101,412
Other cost of services (1)				(96,473)		(101,412)
Other general and administrative expenses (1)				(36,493)		(29,901)

Depreciation and amortization				(35,584)		(34,808)
Stock compensation expense				(11,444)		(3,892)
Concentra separation transaction costs				(278)		—

Equity in earnings of unconsolidated subsidiaries				10,421		12,512


Interest expense				(40,681)		(29,072)
Income from continuing operations before income taxes				$	88,209	$	96,185

_______________________________________________________________________________

(1) Exclusive of depreciation, amortization and stock compensation expense.

11. Revenue from Contracts with Customers

The following tables disaggregate the Company’s revenue for the three months ended March 31, 2024 and 2025:


	Three Months Ended March 31, 2024
	Critical Illness Recovery Hospital		Rehabilitation Hospital		Outpatient Rehabilitation		Other		Total
	(in thousands)
Patient service revenue:
Medicare	$	226,261	$	126,386	$	45,841	$	—	$	398,488
Non-Medicare	428,666		126,577		239,613		—		794,856
Total patient services revenues	654,927		252,963		285,454		—		1,193,344
Other revenue	953		12,737		17,704		96,473		127,867
Total revenue	$	655,880	$	265,700	$	303,158	$	96,473	$	1,321,211


	Three Months Ended March 31, 2025
	Critical Illness Recovery Hospital		Rehabilitation Hospital		Outpatient Rehabilitation		Other		Total
	(in thousands)
Patient service revenue:
Medicare	$	203,864	$	141,341	$	45,100	$	—	$	390,305
Non-Medicare	432,185		153,040		244,444		—		829,669
Total patient services revenues	636,049		294,381		289,544		—		1,219,974
Other revenue	981		13,007		17,798		101,412		133,198
Total revenue	$	637,030	$	307,388	$	307,342	$	101,412	$	1,353,172

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12. Earnings per Share

The Company’s capital structure includes common stock and unvested restricted stock awards. To compute earnings per share (“EPS”), the Company applies the two-class method because the Company’s unvested restricted stock awards are participating securities which are entitled to participate equally with the Company’s common stock in undistributed earnings. Application of the Company’s two-class method is as follows:

(i)Income attributable to the Company from continuing operations, net of tax, is reduced by the amount of dividends declared and by the contractual amount of dividends that must be paid for the current period for each class of stock. There were no contractual dividends paid for the three months ended March 31, 2024 and 2025.

(ii)The remaining undistributed income of the Company from continuing operations, net of tax, is then equally allocated to its common stock and unvested restricted stock awards, as if all of the earnings for the period had been distributed. The total net income allocated to each security is determined by adding both distributed and undistributed net income for the period.

(iii)The income from continuing operations, net of tax, allocated to each security is then divided by the weighted average number of outstanding shares for the period to determine the EPS for each security considered in the two-class method.

The following table sets forth the income attributable to the Company from continuing operations, net of tax, and the Company’s common shares outstanding, and its participating securities outstanding.


		Basic and Diluted EPS
	Three Months Ended March 31,
			2024		2025
		(in thousands)
Income from continuing operations, net of tax			$	61,529	$	74,732
Less: net income attributable to non-controlling interests			18,947		18,051
Income from continuing operations, net of tax, attributable to Select Medical’s common stockholders			42,582		56,681
Less: distributed and undistributed net income attributable to participating securities			1,493		1,145
Distributed and undistributed income from continuing operations, net of tax, attributable to common shares			$	41,089	$	55,536

The following tables set forth the computation of EPS under the two-class method:


	Three Months Ended March 31,
	2024					2025
	Income from Continuing Operations, Net of Tax, Allocation		Shares(1)	Basic and Diluted EPS		Income from Continuing Operations, Net of Tax, Allocation		Shares(1)	Basic and Diluted EPS
	(in thousands, except for per share amounts)
Common shares	$	41,089	123,859	$	0.33	$	55,536	126,205	$	0.44
Participating securities	1,493		4,501	$	0.33	1,145		2,602	$	0.44
Total Company	$	42,582				$	56,681

_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

(1) Represents the weighted average share count outstanding during the period.

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13. Commitments and Contingencies

Litigation

The Company is a party to various legal actions, proceedings, and claims (some of which are not insured), and regulatory and other governmental audits and investigations in the ordinary course of its business. The Company cannot predict the ultimate outcome of pending litigation, proceedings, and regulatory and other governmental audits and investigations. These matters could potentially subject the Company to sanctions, damages, recoupments, fines, and other penalties. The Department of Justice, Centers for Medicare & Medicaid Services (“CMS”), or other federal and state enforcement and regulatory agencies may conduct additional investigations related to the Company’s businesses in the future that may, either individually or in the aggregate, have a material adverse effect on the Company’s business, financial position, results of operations, and liquidity.

To address claims arising out of the Company’s operations, the Company maintains professional malpractice liability insurance and general liability insurance coverages through a number of different programs that are dependent upon such factors as the state where the Company is operating and whether the operations are wholly owned or are operated through a joint venture. For the Company’s wholly owned hospital and outpatient clinic operations, the Company currently maintains insurance coverages under a combination of policies with a total annual aggregate limit of up to $42.0 million for professional malpractice liability insurance and $45.0 million for general liability insurance. The Company’s insurance for the professional liability coverage is written on a “claims-made” basis, and its commercial general liability coverage is maintained on an “occurrence” basis. These coverages apply after a self-insured retention limit is exceeded. For the Company’s joint venture operations, the Company has designed a separate insurance program that responds to the risks of specific joint ventures. Most of the Company’s joint ventures are insured under a master program with an annual aggregate limit of up to $80.0 million, subject to a sublimit aggregate ranging from $23.0 million to $33.0 million for most joint ventures. The policies are generally written on a “claims-made” basis. Each of these programs has either a deductible or self-insured retention limit. The Company also maintains additional types of liability insurance covering claims which, due to their nature or amount, are not covered by or not fully covered by the applicable professional malpractice and general liability insurance policies, including workers compensation, property and casualty, directors and officers, cyber liability insurance, and employment practices liability insurance coverages. Our insurance policies generally are silent with respect to punitive damages so coverage is available to the extent insurable under the law of any applicable jurisdiction, and are subject to various deductibles and policy limits. The Company reviews its insurance program annually and may make adjustments to the amount of insurance coverage and self-insured retentions in future years. Significant legal actions, as well as the cost and possible lack of available insurance, could subject the Company to substantial uninsured liabilities. In the Company’s opinion, the outcome of these actions, individually or in the aggregate, will not have a material adverse effect on its financial position, results of operations, or cash flows.

Healthcare providers are subject to lawsuits under the qui tam provisions of the federal False Claims Act. Qui tam lawsuits typically remain under seal (hence, usually unknown to the defendant) for some time while the government decides whether or not to intervene on behalf of a private qui tam plaintiff (known as a relator) and take the lead in the litigation. These lawsuits can involve significant monetary damages and penalties and award bounties to private plaintiffs who successfully bring the suits. The Company is and has been a defendant in these cases in the past, and may be named as a defendant in similar cases from time to time in the future.

Oklahoma City Investigation. On August 24, 2020, the Company and Select Specialty Hospital – Oklahoma City, Inc. (“SSH–Oklahoma City”) received civil investigative demands (“CIDs”) from the U.S. Attorney’s Office for the Western District of Oklahoma seeking responses to interrogatories and the production of various documents principally relating to the documentation, billing and reviews of medical services furnished to patients at SSH-Oklahoma City. The Company understands that the investigation arose from a qui tam lawsuit alleging billing fraud related to charges for respiratory therapy services at SSH–Oklahoma City and Select Specialty Hospital – Wichita, Inc. The Company has produced documents in response to the CIDs and is fully cooperating with this investigation. At this time, the Company is unable to predict the timing and outcome of this matter.

Physical Therapy Billing. On October 7, 2021, the Company received a letter from a Trial Attorney at the U.S. Department of Justice, Civil Division, Commercial Litigation Branch, Fraud Section (“DOJ”) stating that the DOJ, in conjunction with the U.S. Department of Health and Human Services (“HHS”), is investigating the Company in connection with potential violations of the False Claims Act, 31 U.S.C. § 3729, et seq. The letter specified that the investigation relates to the Company’s billing for physical therapy services, and indicated that the DOJ would be requesting certain records from the Company. In October and December 2021, the DOJ requested, and the Company furnished, records relating to six of the Company’s outpatient therapy clinics in Florida. In 2022 and 2023, the DOJ requested certain data relating to all of the Company’s outpatient therapy clinics nationwide, and sought information about the Company’s ability to produce additional data relating to the physical therapy services furnished by the Company’s outpatient therapy clinics and Concentra. The Company has produced data and other documents requested by the DOJ and is fully cooperating on this investigation. In May

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2024, by order of the U.S. District Court for the Middle District of Florida, a qui tam lawsuit that is related to the DOJ’s investigation was unsealed after the U.S. filed a notice declining to intervene in the case, but stating that its investigation is continuing and reserving its right to intervene at a later date. The lawsuit, filed in May 2021 and amended in October 2021 and July 2024, was brought by Kathleen Kane, a physical therapist formerly employed in the Company’s outpatient division, against Select Medical Corporation, Select Physical Therapy Holdings, Inc. and Select Employment Services, Inc. The amended complaint alleges that the defendants billed Federally funded health programs for one-on-one therapy services when group therapy was performed or overbilled for one-on-one therapy services, and billed for unreimbursable unskilled physical therapy services. In September 2024, the Company filed a motion to dismiss the amended complaint on multiple grounds. At this time, the Company is unable to predict the timing and outcome of this matter.

14. Subsequent Events

On April 30, 2025, the Company’s Board of Directors declared a cash dividend of $0.0625 per share. The dividend will be payable on or about May 29, 2025, to stockholders of record as of the close of business on May 15, 2025.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read this discussion together with our unaudited condensed consolidated financial statements and accompanying notes.

Forward-Looking Statements

This report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “target,” “estimate,” “project,” “intend,” and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, including our business strategy and means to implement our strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs, and sources of liquidity.

Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding our services, the expansion of our services, competitive conditions, and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

•changes in government reimbursement for our services and/or new payment policies may result in a reduction in revenue, an increase in costs, and a reduction in profitability;

•adverse economic conditions including an inflationary environment could cause us to continue to experience increases in the prices of labor and other costs of doing business resulting in a negative impact on our business, operating results, cash flows, and financial condition;

•changes to United States tariff and import/export regulations and the impact on global economic conditions may have a negative effect on our business, financial condition, and results of operations;

•shortages in qualified nurses, therapists, physicians, or other licensed providers, and/or the inability to attract or retain qualified healthcare professionals could limit our ability to staff our facilities;

•shortages in qualified health professionals could cause us to increase our dependence on contract labor, increase our efforts to recruit and train new employees, and expand upon our initiatives to retain existing staff, which could increase our operating costs significantly;

•the negative impact of public threats such as a global pandemic or widespread outbreak of an infectious disease similar to the COVID-19 pandemic;

•the failure of our Medicare-certified long term care hospitals or inpatient rehabilitation facilities to maintain their Medicare certifications may cause our revenue and profitability to decline;

•the failure of our Medicare-certified long term care hospitals and inpatient rehabilitation facilities operated as “hospitals within hospitals” to qualify as hospitals separate from their host hospitals may cause our revenue and profitability to decline;

•a government investigation or assertion that we have violated applicable regulations may result in sanctions or reputational harm and increased costs;

•acquisitions or joint ventures may prove difficult or unsuccessful, use significant resources, or expose us to unforeseen liabilities;

•our plans and expectations related to our acquisitions and our ability to realize anticipated synergies;

•failure to complete or achieve some or all the expected benefits of the separation of Concentra;

•private third-party payors for our services may adopt payment policies that could limit our future revenue and profitability;

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•the failure to maintain established relationships with the physicians in the areas we serve could reduce our revenue and profitability;

•competition may limit our ability to grow and result in a decrease in our revenue and profitability;

•the loss of key members of our management team could significantly disrupt our operations;

•the effect of claims asserted against us could subject us to substantial uninsured liabilities;

•a security breach of our or our third-party vendors’ information technology systems may subject us to potential legal and reputational harm and may result in a violation of the Health Insurance Portability and Accountability Act of 1996 or the Health Information Technology for Economic and Clinical Health Act; and

•other factors discussed from time to time in our filings with the SEC, including factors discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 and in our Quarterly Report on Form 10-Q.

Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events, or otherwise. You should not place undue reliance on our forward-looking statements. Although we believe that the expectations reflected in forward-looking statements are reasonable, we cannot guarantee future results or performance.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to securities analysts any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any securities analyst irrespective of the content of the statement or report. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of the Company.

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Overview

We began operations in 1997 and, based on number of facilities, are one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics in the United States. As of March 31, 2025, we had operations in 40 states and the District of Columbia. We operated 104 critical illness recovery hospitals in 29 states, 35 rehabilitation hospitals in 14 states, and 1,911 outpatient rehabilitation clinics in 39 states and the District of Columbia.

Our reportable segments include the critical illness recovery hospital segment, the rehabilitation hospital segment, and the outpatient rehabilitation segment. We had revenue of $1,353.2 million for the three months ended March 31, 2025. Of this total, we earned approximately 47% of our revenue from our critical illness recovery hospital segment, approximately 23% from our rehabilitation hospital segment, and approximately 23% from our outpatient rehabilitation segment. Our critical illness recovery hospital segment consists of hospitals designed to serve the needs of patients recovering from critical illnesses, often with complex medical needs, and our rehabilitation hospital segment consists of hospitals designed to serve patients that require intensive physical rehabilitation care. Patients are typically admitted to our critical illness recovery hospitals and rehabilitation hospitals from general acute care hospitals. Our outpatient rehabilitation segment consists of clinics that provide physical, occupational, and speech rehabilitation services.

On July 26, 2024, Concentra Group Holdings Parent, Inc. (“Concentra”), a then wholly-owned subsidiary of Select, completed an initial public offering (“IPO”) of 22,500,000 shares of its common stock, par value $0.01 per share, at an initial public offering price of $23.50 per share for net proceeds of $499.7 million after deducting underwriting discounts and commission of $29.1 million. In addition, the underwriters exercised the option to purchase an additional 750,000 shares of Concentra’s common stock for net proceeds of $16.7 million after deducting discounts and commission of $1.0 million. On November 25, 2024, Select completed a tax-free distribution of 104,093,503 shares of common stock of Concentra to its stockholders. Following the completion of the distribution, the Company no longer owns any shares of Concentra common stock. The results of Concentra are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for the three months ended March 31, 2024.

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Non-GAAP Measure

We believe that the presentation of Adjusted EBITDA, as defined below, is important to investors because Adjusted EBITDA is commonly used as an analytical indicator of performance by investors within the healthcare industry. Adjusted EBITDA is used by management to evaluate financial performance and determine resource allocation for each of our segments. Adjusted EBITDA is not a measure of financial performance under GAAP. Items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Adjusted EBITDA should not be considered in isolation, or as an alternative to, or substitute for, income from continuing operations, income from continuing operations before other income and expense, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying definitions, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies.

We define Adjusted EBITDA as earnings from continuing operations excluding interest, income taxes, depreciation and amortization, gain (loss) on early retirement of debt, stock compensation expense, transaction costs associated with the Concentra separation, gain (loss) on sale of businesses, and equity in earnings (losses) of unconsolidated subsidiaries. We will refer to Adjusted EBITDA throughout the remainder of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following table reconciles income from continuing operations, net of tax, to Adjusted EBITDA and should be referenced when we discuss Adjusted EBITDA:


	Three Months Ended March 31,
			2024		2025
		(in thousands)
Income from continuing operations, net of tax			$	61,529	$	74,732
Income tax expense from continuing operations			26,680		21,453
Interest expense			40,681		29,072


Equity in earnings of unconsolidated subsidiaries			(10,421)		(12,512)

Income from continuing operations before other income and expense			118,469		112,745
Stock compensation expense:
Included in general and administrative			9,682		3,108
Included in cost of services			1,762		784
Depreciation and amortization			35,584		34,808
Concentra separation transaction costs			278		—
Adjusted EBITDA			$	165,775	$	151,445

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Summary Financial Results

Three Months Ended March 31, 2025

The following tables reconcile our segment performance measures to our consolidated operating results:


	Three Months Ended March 31, 2025
	Critical Illness Recovery Hospital			Rehabilitation Hospital			Outpatient Rehabilitation			Other		Total
	(in thousands)
Revenue	$	637,030		$	307,388		$	307,342		$	101,412	$	1,353,172
Operating expenses	(550,381)			(236,964)			(283,069)			(135,205)		(1,205,619)
Depreciation and amortization	(16,648)			(7,378)			(9,052)			(1,730)		(34,808)

Income (loss) from continuing operations before other income and expense	$	70,001		$	63,046		$	15,221		$	(35,523)	$	112,745
Depreciation and amortization	16,648			7,378			9,052			1,730		34,808

Stock compensation expense	—			—			—			3,892		3,892
Adjusted EBITDA	$	86,649		$	70,424		$	24,273		$	(29,901)	$	151,445
Adjusted EBITDA margin	13.6		%	22.9		%	7.9		%	N/M		11.2		%


	Three Months Ended March 31, 2024
	Critical Illness Recovery Hospital			Rehabilitation Hospital			Outpatient Rehabilitation			Other		Total
	(in thousands)
Revenue	$	655,880		$	265,700		$	303,158		$	96,473	$	1,321,211
Operating expenses	(541,940)			(204,300)			(278,230)			(144,688)		(1,169,158)
Depreciation and amortization	(17,157)			(7,135)			(9,181)			(2,111)		(35,584)
Other operating income	2,000			—			—			—		2,000
Income (loss) from continuing operations before other income and expense	$	98,783		$	54,265		$	15,747		$	(50,326)	$	118,469
Depreciation and amortization	17,157			7,135			9,181			2,111		35,584
Concentra separation transaction costs	—			—			—			278		278
Stock compensation expense	—			—			—			11,444		11,444
Adjusted EBITDA	$	115,940		$	61,400		$	24,928		$	(36,493)	$	165,775
Adjusted EBITDA margin	17.7		%	23.1		%	8.2		%	N/M		12.5		%

Income from continuing operations, net of tax, was $74.7 million for the three months ended March 31, 2025, compared to $61.5 million for the three months ended March 31, 2024.

The following table summarizes the changes in our segment performance measures for the three months ended March 31, 2025, compared to the three months ended March 31, 2024:


	Critical Illness Recovery Hospital		Rehabilitation Hospital		Outpatient Rehabilitation		Other		Total
Change in revenue	(2.9)	%	15.7	%	1.4	%	5.1	%	2.4	%
Change in income from continuing operations before other income and expense	(29.1)	%	16.2	%	(3.3)	%	N/M		(4.8)	%
Change in Adjusted EBITDA	(25.3)	%	14.7	%	(2.6)	%	N/M		(8.6)	%

_______________________________________________________________________________

N/M — Not meaningful.

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Regulatory Changes

Our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025, contains a detailed discussion of the regulations that affect our business in Part I — Business — Government Regulations. The following is a discussion of some of the more significant healthcare regulatory changes that have affected our financial performance in the periods covered by this report, or are likely to affect our financial performance and financial condition in the future. The information below should be read in conjunction with the more detailed discussion of regulations contained in our Form 10-K.

Medicare Reimbursement

The Medicare program reimburses healthcare providers for services furnished to Medicare beneficiaries, which are generally persons age 65 and older, those who are chronically disabled, and those suffering from end stage renal disease. The program is governed by the Social Security Act of 1965 and is administered primarily by the Department of Health and Human Services (“HHS”) and CMS. Revenue generated directly from the Medicare program represented approximately 29% of our revenue for both the three months ended March 31, 2025, and for the year ended December 31, 2024.

Federal Health Care Program Changes in Response to the COVID-19 Pandemic

On January 31, 2020, HHS declared a public health emergency under section 319 of the Public Health Service Act, 42 U.S.C. § 247d, in response to the COVID-19 outbreak in the United States. The HHS Secretary subsequently renewed the public health emergency determination for 90-day periods through May 11, 2023, the end of the public health emergency.

On March 13, 2020, President Trump declared a national emergency due to the COVID-19 pandemic and the HHS Secretary authorized the waiver or modification of certain requirements under Medicare, Medicaid, and the CHIP program pursuant to section 1135 of the Social Security Act. Under this authority, CMS issued a number of blanket waivers that excused health care providers and suppliers from specific program requirements. Our Annual Report on Form 10-K for the year ended December 31, 2023 contains a detailed discussion of blanket waivers and other actions by CMS in response to the COVID-19 pandemic that affected our operations in Part II — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Regulatory Changes.

The American Relief Act, 2025 and Full-Year Continuing Appropriations and Extensions Act, 2025, further extended certain telehealth waivers to March 31, 2025 and September 30, 2025, respectively. CMS issued additional waivers to permit more than 150 additional services to be furnished by telehealth, allow physicians to monitor patient services remotely, and fulfill face-to-face requirements in IRFs. In the calendar year 2025 Medicare physician fee schedule (“MPFS”) final rule, CMS extended some of the telehealth flexibilities through December 31, 2025.

Medicare Reimbursement of LTCH Services

The following is a summary of significant regulatory changes to the Medicare prospective payment system for our critical illness recovery hospitals, which are certified by Medicare as LTCHs, which have affected our results of operations, as well as the policies and payment rates that may affect our future results of operations. Medicare payments to our critical illness recovery hospitals are made in accordance with the long-term care hospital prospective payment system (“LTCH-PPS”).

Fiscal Year 2024. On August 28, 2023, CMS published the final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2024 (affecting discharges and cost reporting periods beginning on or after October 1, 2023, through September 30, 2024). Certain errors in the final rule were corrected in documents published October 4, 2023 and November 9, 2023. The standard federal rate for fiscal year 2024 was set at $48,117, an increase from the standard federal rate applicable during fiscal year 2023 of $46,433. The update to the standard federal rate for fiscal year 2024 included a market basket increase of 3.5%, less a productivity adjustment of 0.2%. The standard federal rate also included an area wage budget neutrality factor of 1.0031599. The fixed-loss amount for high cost outlier cases paid under LTCH-PPS was set at $59,873, an increase from the fixed-loss amount in the 2023 fiscal year of $38,518. The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate was set at $42,750, an increase from the fixed-loss amount in the 2023 fiscal year of $38,788.

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Fiscal Year 2025. On August 28, 2024, CMS published a final rule updating policies and payment rates for the LTCH-PPS for fiscal year 2025 (affecting discharges and cost reporting periods beginning on or after October 1, 2024, through September 30, 2025). Certain errors in the final rule were corrected in a document published on October 2, 2024. In an interim final action document published on October 3, 2024, CMS also made modifications to the fiscal year 2025 policies and payment rates as a result of a recent decision issued by the United States Court of Appeals for the District of Columbia Circuit. The standard federal rate for fiscal year 2025 is $49,383, an increase from the standard federal rate applicable during fiscal year 2024 of $48,117. The update to the standard federal rate for fiscal year 2025 includes a market basket increase of 3.5%, less a productivity adjustment of 0.5%. The standard federal rate also includes an area wage budget neutrality factor of 0.9964315. The fixed-loss amount for high cost outlier cases paid under LTCH-PPS is $77,048, an increase from the fixed-loss amount in the 2024 fiscal year of $59,873. The fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate is $46,217, an increase from the fixed-loss amount in the 2024 fiscal year of $42,750.

Fiscal Year 2026. On April 11, 2025, CMS released a display copy of the proposed rule to update policies and payment rates for the LTCH-PPS for fiscal year 2026 (affecting discharges and cost reporting periods beginning on or after October 1, 2025, through September 30, 2026). CMS is expected to issue the final rule in August or shortly thereafter. The proposed standard federal rate for fiscal year 2026 is $50,729, an increase from the standard federal rate applicable during fiscal year 2025 of $49,383. The proposed update to the standard federal rate for fiscal year 2026 includes a market basket increase of 3.4%, less a productivity adjustment of 0.8%. The proposed standard federal rate also includes an area wage budget neutrality factor of 1.0012146. The proposed fixed-loss amount for high cost outlier cases paid under LTCH-PPS is $91,247, an increase from the fixed-loss amount in the 2025 fiscal year of $77,048. The proposed fixed-loss amount for high cost outlier cases paid under the site-neutral payment rate is $44,305, a decrease from the fixed-loss amount in the 2025 fiscal year of $46,217.

Criteria for Reconciliation of Outlier Payments

Under the LTCH PPS, CMS makes two types of outlier payments to LTCHs. First, CMS makes additional payments to LTCHs for high cost outlier cases that have extraordinarily high costs relative to the costs of most discharges. For these cases, CMS sets a fixed loss amount each year that represents the maximum loss an LTCH will incur for a case before qualifying for a high cost outlier payment. A high cost outlier threshold equal to the LTCH PPS adjusted Federal payment for the case plus the fixed loss amount determines when Medicare pays a high cost outlier payment. Such payments are based on 80% of the estimated cost of the case above the high cost outlier threshold. Second, CMS reduces payments to LTCHs for patients with a relatively short stay, which is defined as a length of stay less than or equal to five-sixths of the geometric average length of stay for that particular MS-LTC-DRG. Short stay outlier cases are paid using a per diem rate based on 120% of the MS-LTC-DRG specific per diem amount and an IPPS per diem amount.

Outlier payments made to LTCHs during the cost reporting year may be reconciled at cost report settlement by the Medicare Administrative Contractor (“MAC”) if certain criteria are met. According to CMS, the reconciliation of outlier payments is intended to account for the fact that the LTCH’s cost-to-charge ratio (“CCR”) used to pay Medicare claims during the cost reporting year may differ from the LTCH’s final CCR for the year calculated by the MAC at cost report settlement. The outlier reconciliation criteria were: (1) a change in the LTCH’s CCR of 10 percentage points or more when comparing the actual CCR to the CCR used during the cost reporting period to make outlier payments; and (2) the LTCH received at least $500,000 in outlier payments during the cost reporting period. If the criteria for outlier reconciliation are met, the MAC will conduct an outlier reconciliation to determine whether the LTCH was overpaid or underpaid for outlier cases. If the LTCH was overpaid, the LTCH must repay Medicare in the amount of the overpayment plus the time value of money (i.e., interest). If the LTCH was underpaid, Medicare must pay the LTCH in the amount of the underpayment plus the time value of money.

On April 26, 2024, CMS issued new guidance in Transmittal 12594 changing the criteria for LTCH outlier reconciliations. CMS modified the first criterion to a change in the LTCH’s CCR of 20 percent or more from the CCR used to make outlier payments during the cost reporting period. CMS did not change the second criterion for reconciliation that the LTCH must have received at least $500,000 in outlier payments during the cost reporting period. The revised policy is effective for cost reporting periods beginning on or after October 1, 2024. However, CMS notes that MACs would receive the first cost reports subject to the revised policy in March 2026.

Setting the threshold at 20 percent for changes in the hospital’s CCR will result in more outlier reconciliations. This increases the likelihood that LTCHs will have a portion of their outlier payments recouped by the MAC at cost report settlement. Because outlier reconciliations often delay the final settlement of cost reports, and providers cannot appeal disputed reimbursement amounts until the cost report is settled, this new policy will likely result in additional delays of reimbursement appeals related to LTCH cost reports.

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Medicare Reimbursement of IRF Services

The following is a summary of significant regulatory changes to the Medicare prospective payment system for our rehabilitation hospitals, which are certified by Medicare as IRFs, which have affected our results of operations, as well as the policies and payment rates that may affect our future results of operations. Medicare payments to our rehabilitation hospitals are made in accordance with the inpatient rehabilitation facility prospective payment system (“IRF-PPS”).

Fiscal Year 2024. On August 2, 2023, CMS published the final rule updating policies and payment rates for the IRF-PPS for fiscal year 2024 (affecting discharges and cost reporting periods beginning on or after October 1, 2023, through September 30, 2024). Certain errors in the final rule were corrected in a document published on October 4, 2023. The standard payment conversion factor for discharges for fiscal year 2024 was set at $18,541, an increase from the standard payment conversion factor applicable during fiscal year 2023 of $17,878. The update to the standard payment conversion factor for fiscal year 2024 included a market basket increase of 3.6%, less a productivity adjustment of 0.2%. CMS decreased the outlier threshold amount for fiscal year 2024 to $10,423 from $12,526 established in the final rule for fiscal year 2023.

Fiscal Year 2025. On August 6, 2024, CMS published the final rule to update policies and payment rates for the IRF-PPS for fiscal year 2025 (affecting discharges and cost reporting periods beginning on or after October 1, 2024, through September 30, 2025). Certain errors in the final rule were corrected in a document published on October 2, 2024. The standard payment conversion factor for discharges for fiscal year 2025 was set at $18,907, an increase from the standard payment conversion factor applicable during fiscal year 2024 of $18,541. The update to the standard payment conversion factor for fiscal year 2025 included a market basket increase of 3.5%, less a productivity adjustment of 0.5%. CMS increased the outlier threshold amount for fiscal year 2025 to $12,043 from $10,423 established in the final rule for fiscal year 2024.

Fiscal Year 2026. On April 11, 2025, CMS published a display copy of the proposed rule to update policies and payment rates for the IRF-PPS for fiscal year 2026 (affecting discharges and cost reporting periods beginning on or after October 1, 2025, through September 30, 2026). The standard payment conversion factor for discharges for fiscal year 2026 would be set at $19,364, an increase from the standard payment conversion factor applicable during fiscal year 2025 of $18,907. The update to the standard payment conversion factor for fiscal year 2026, if adopted, would include a market basket increase of 3.4%, less a productivity adjustment of 0.8%. CMS proposed to decrease the outlier threshold amount for fiscal year 2026 to $11,971 from $12,043 established in the final rule for fiscal year 2025.

Medicare Reimbursement of Outpatient Rehabilitation Clinic Services

Our Annual Report on Form 10-K for the year ended December 31, 2024 contains a detailed discussion of Medicare reimbursement that affects our outpatient rehabilitation clinic operations in Part I — Business — Government Regulations. Outpatient rehabilitation providers enroll in Medicare as a rehabilitation agency, a clinic, or a public health agency. The Medicare program reimburses outpatient rehabilitation providers based on the Medicare physician fee schedule.

For calendar years 2021 and 2022, CMS’s expected decreases in Medicare reimbursement were mostly offset by one-time increases in payments as a result of other legislation passed by Congress. Payments under the 2023 MPFS physician fee schedule decreased by 2%, and for calendar year 2024, CMS expected that its final policies for 2024 would result in a 3% decrease in Medicare payments for the therapy specialty. In the calendar year 2025 MPFS final rule, CMS calculated the payment rates without the one-time increases provided for in legislation. CMS expects that its policies for 2025 will not result in any increase or decrease in Medicare payments for the therapy specialty. However, the policies CMS announced in the calendar year 2025 MPFS final rule will reduce Medicare payments for the physical and occupational therapy services we provide by approximately 3%.

Modifiers to Identify Services of Physical Therapy Assistants or Occupational Therapy Assistants

Our Annual Report on Form 10-K for the year ended December 31, 2024, contains a detailed discussion of Medicare regulations concerning services provided by physical therapy assistants and occupational therapy assistants in Part I — Business — Government Regulations and in Part II — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Regulatory Changes. There have been no significant updates to these regulations subsequently.

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Operating Statistics

The following table sets forth operating statistics for each of our segments for the periods presented. The operating statistics reflect data for the period of time we managed these operations. Our operating statistics include metrics we believe provide relevant insight about the number of facilities we operate, volume of services we provide to our patients, and average payment rates for services we provide. These metrics are utilized by management to monitor trends and performance in our businesses and therefore may be important to investors because management may assess our performance based in part on such metrics. Other healthcare providers may present similar statistics, and these statistics are susceptible to varying definitions. Our statistics as presented may not be comparable to other similarly titled statistics of other companies.


	Three Months Ended March 31,
		2024			2025
Critical illness recovery hospital data:
Number of consolidated hospitals—start of period(1)		107			104
Number of hospitals acquired		—			—
Number of hospital start-ups		—			—
Number of hospitals closed/sold		—			—
Number of consolidated hospitals—end of period(1)		107			104


Available licensed beds(3)		4,534			4,432
Admissions(3)(4)		9,529			9,351
Patient days(3)(5)		294,622			291,324
Average length of stay (days)(3)(6)		31			32
Revenue per patient day(3)(7)		$	2,219		$	2,179
Occupancy rate(3)(8)		71		%	73		%
Percent patient days—Medicare(3)(9)		36		%	35		%
Rehabilitation hospital data:
Number of consolidated hospitals—start of period(1)(3)		21			23
Number of hospitals acquired		—			—
Number of hospital start-ups		—			—
Number of hospitals closed/sold		—			—
Number of consolidated hospitals—end of period(1)(3)		21			23
Number of unconsolidated hospitals managed—end of period(2)(3)		12			12
Total number of hospitals (all)—end of period(3)		33			35
Available licensed beds(3)		1,479			1,657
Admissions(3)(4)		8,275			8,848
Patient days(3)(5)		116,844			122,822
Average length of stay (days)(3)(6)		14			14
Revenue per patient day(3)(7)		$	2,096		$	2,234
Occupancy rate(3)(8)		87		%	82		%
Percent patient days—Medicare(3)(9)		49		%	50		%


Outpatient rehabilitation data:
Number of consolidated clinics—start of period		1,633			1,617
Number of clinics acquired		1			—
Number of clinic start-ups		3			9
Number of clinics closed/sold		(13)			(12)
Number of consolidated clinics—end of period		1,624			1,614
Number of unconsolidated clinics managed—end of period		298			297
Total number of clinics (all)—end of period		1,922			1,911
Number of visits(3)(10)		2,735,126			2,709,964
Revenue per visit(3)(11)		$	99		$	102

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_______________________________________________________________________________

(1)Represents the number of hospitals included in our consolidated financial results at the end of each period presented.

(2)Represents the number of hospitals which are managed by us at the end of each period presented. We have minority ownership interests in these businesses.

(3)Data excludes locations managed by the Company.

(4)Represents the number of patients admitted to our hospitals during the periods presented.

(5)Each patient day represents one patient occupying one bed for one day during the periods presented.

(6)Represents the average number of days in which patients were admitted to our hospitals. Average length of stay is calculated by dividing the number of patient days, as presented above, by the number of patients discharged from our hospitals during the periods presented.

(7)Represents the average amount of revenue recognized for each patient day. Revenue per patient day is calculated by dividing patient service revenues, excluding revenues from certain other ancillary and outpatient services provided at our hospitals, by the total number of patient days.

(8)Represents the portion of our hospitals being utilized for patient care during the periods presented. Occupancy rate is calculated using the number of patient days, as presented above, divided by the total number of bed days available during the period. Bed days available is derived by adding the daily number of available licensed beds for each of the periods presented.

(9)Represents the portion of our patient days which are paid by Medicare. The Medicare patient day percentage is calculated by dividing the total number of patient days which are paid by Medicare by the total number of patient days, as presented above.

(10)Represents the number of visits in which patients were treated at our outpatient rehabilitation clinics during the periods presented.

(11)Represents the average amount of revenue recognized for each patient visit. Revenue per visit is calculated by dividing patient service revenue, excluding revenues from certain other ancillary services, by the total number of visits.

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Results of Operations

The following table outlines selected operating data as a percentage of revenue for the periods indicated:


	Three Months Ended March 31,
		2024		2025
Revenue		100.0	%	100.0	%
Costs and expenses:
Cost of services, exclusive of depreciation and amortization(1)		84.8		86.7
General and administrative		3.7		2.4
Depreciation and amortization		2.7		2.6
Total costs and expenses		91.2		91.7
Other operating income		0.2		—
Income from continuing operations before other income and expense		9.0		8.3

Equity in earnings of unconsolidated subsidiaries		0.8		0.9


Interest expense		(3.1)		(2.1)
Income from continuing operations before income taxes		6.7		7.1
Income tax expense from continuing operations		2.0		1.6
Income from continuing operations, net of tax		4.7		5.5
Discontinued operations:
Income from discontinued business		5.0		—
Income tax expense from discontinued business		0.8		—
Income from discontinued operations, net of tax		4.2		—
Net income		8.9		5.5
Net income attributable to non-controlling interests		1.6		1.3
Net income attributable to Select Medical Holdings Corporation		7.3	%	4.2	%

_______________________________________________________________________________

(1)Cost of services includes personnel expense, facilities expense, and other operating costs.

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The following table summarizes selected financial data by segment for the periods indicated:


	Three Months Ended March 31,
			2024			2025			% Change
		(in thousands, except percentages)
Revenue:
Critical illness recovery hospital			$	655,880		$	637,030		(2.9)	%
Rehabilitation hospital			265,700			307,388			15.7
Outpatient rehabilitation			303,158			307,342			1.4
Other(1)			96,473			101,412			5.1
Total Company			$	1,321,211		$	1,353,172		2.4	%
Income (loss) from continuing operations before other income and expense:
Critical illness recovery hospital			$	98,783		$	70,001		(29.1)	%
Rehabilitation hospital			54,265			63,046			16.2
Outpatient rehabilitation			15,747			15,221			(3.3)
Other(1)			(50,326)			(35,523)			N/M
Total Company			$	118,469		$	112,745		(4.8)	%
Adjusted EBITDA:
Critical illness recovery hospital			$	115,940		$	86,649		(25.3)	%
Rehabilitation hospital			61,400			70,424			14.7
Outpatient rehabilitation			24,928			24,273			(2.6)
Other(1)			(36,493)			(29,901)			N/M
Total Company			$	165,775		$	151,445		(8.6)	%
Adjusted EBITDA margins:
Critical illness recovery hospital			17.7		%	13.6		%
Rehabilitation hospital			23.1			22.9
Outpatient rehabilitation			8.2			7.9
Other(1)			N/M			N/M
Total Company			12.5		%	11.2		%
Total assets:
Critical illness recovery hospital			$	2,608,979		$	2,696,663
Rehabilitation hospital			1,233,828			1,405,911
Outpatient rehabilitation			1,423,740			1,415,655
Other(1)			228,868			177,774
Total Company			$	5,495,415		$	5,696,003
Purchases of property and equipment:
Critical illness recovery hospital			$	15,941		$	16,671
Rehabilitation hospital			7,101			25,925
Outpatient rehabilitation			9,500			9,047
Other(1)			2,744			696
Total Company			$	35,286		$	52,339

_______________________________________________________________________________

(1) Other includes our corporate administration and shared services, as well as employee leasing services with our non-consolidating subsidiaries. Total assets include certain non-consolidating joint ventures and minority investments in other healthcare related businesses.

N/M — Not meaningful.

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Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024

For the three months ended March 31, 2025, we had revenue of $1,353.2 million and income from continuing operations before other income and expense of $112.7 million, as compared to revenue of $1,321.2 million and income from continuing operations before other income and expense of $118.5 million for the three months ended March 31, 2024. For the three months ended March 31, 2025, Adjusted EBITDA was $151.4 million, with an Adjusted EBITDA margin of 11.2%, as compared to Adjusted EBITDA of $165.8 million and an Adjusted EBITDA margin of 12.5% for the three months ended March 31, 2024, respectively.

Revenue

Critical Illness Recovery Hospital Segment. Revenue was $637.0 million for the three months ended March 31, 2025, compared to $655.9 million for the three months ended March 31, 2024. The decrease in revenue was principally attributable to revenue per patient day, which was $2,179 for the three months ended March 31, 2025, compared to $2,219 for the three months ended March 31, 2024. The decrease in revenue per patient day was driven by a decrease in our Medicare rate due to lower high cost outlier revenue. Our patient days were 291,324 for the three months ended March 31, 2025, compared to 294,622 days for the three months ended March 31, 2024. Occupancy in our critical illness recovery hospitals was 73% and 71% for the three months ended March 31, 2025 and 2024, respectively.

Rehabilitation Hospital Segment. Revenue increased 15.7% to $307.4 million for the three months ended March 31, 2025, compared to $265.7 million for the three months ended March 31, 2024. Revenue per patient day increased 6.6% to $2,234 for the three months ended March 31, 2025, compared to $2,096 for the three months ended March 31, 2024. Our patient days increased 5.1% to 122,822 days for the three months ended March 31, 2025, compared to 116,844 days for the three months ended March 31, 2024. Occupancy in our rehabilitation hospitals was 82% and 87% for the three months ended March 31, 2025 and 2024, respectively.

Outpatient Rehabilitation Segment. Revenue increased 1.4% to $307.3 million for the three months ended March 31, 2025, compared to $303.2 million for the three months ended March 31, 2024. The increase in revenue was attributable to revenue per visit, which increased 3.0% to $102 for the three months ended March 31, 2025, compared to $99 for the three months ended March 31, 2024. Patient visits were 2,709,964 visits for the three months ended March 31, 2025, compared to 2,735,126 visits for the three months ended March 31, 2024.

Operating Expenses

Our operating expenses consist principally of cost of services and general and administrative expenses. Our operating expenses were $1,205.6 million, or 89.1% of revenue, for the three months ended March 31, 2025, compared to $1,169.2 million, or 88.5% of revenue, for the three months ended March 31, 2024. Our cost of services, a major component of which is labor expense, was $1,172.6 million, or 86.7% of revenue, for the three months ended March 31, 2025, compared to $1,120.7 million, or 84.8% of revenue, for the three months ended March 31, 2024. The increase in our cost of services relative to our revenue was principally attributable to the decrease in revenue within our Critical Illness Recovery Hospital segment. General and administrative expenses were $33.0 million, or 2.4% of revenue, for the three months ended March 31, 2025, compared to $48.4 million, or 3.7% of revenue, for the three months ended March 31, 2024. The decrease in general and administrative expenses was principally attributable to lower stock compensation expense as a result of modifications to our restricted stock awards which occurred in November 2024 in connection with the Company’s spin-off of Concentra and a reduction in personnel expense related to bonuses.

Other Operating Income

For the three months ended March 31, 2024, we had other operating income of $2.0 million.

Adjusted EBITDA

Critical Illness Recovery Hospital Segment. Adjusted EBITDA was $86.6 million for the three months ended March 31, 2025, compared to $115.9 million for the three months ended March 31, 2024. Our Adjusted EBITDA margin for the critical illness recovery hospital segment was 13.6% for the three months ended March 31, 2025, compared to 17.7% for the three months ended March 31, 2024. The decreases in our Adjusted EBITDA and Adjusted EBITDA margin during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, were principally due to a decrease in revenue.

Rehabilitation Hospital Segment. Adjusted EBITDA increased 14.7% to $70.4 million for the three months ended March 31, 2025, compared to $61.4 million for the three months ended March 31, 2024. Our Adjusted EBITDA margin for the rehabilitation hospital segment was 22.9% for the three months ended March 31, 2025, compared to 23.1% for the three months ended March 31, 2024. The increase in our Adjusted EBITDA was principally attributable to an increase in revenue.

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Outpatient Rehabilitation Segment. Adjusted EBITDA was $24.3 million for the three months ended March 31, 2025, compared to $24.9 million for the three months ended March 31, 2024. Our Adjusted EBITDA margin for the outpatient rehabilitation segment was 7.9% for the three months ended March 31, 2025, compared to 8.2% for the three months ended March 31, 2024. The decreases in our Adjusted EBITDA and Adjusted EBITDA margin for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, were principally attributable due to higher labor costs, partially offset by an increase in revenue.

Depreciation and Amortization

Depreciation and amortization expense was $34.8 million for the three months ended March 31, 2025, compared to $35.6 million for the three months ended March 31, 2024.

Income from Continuing Operations before Other Income and Expense

For the three months ended March 31, 2025, we had income from continuing operations before other income and expense of $112.7 million, compared to $118.5 million for the three months ended March 31, 2024. The decrease in income from continuing operations before other income and expense is principally attributable to a decrease in revenue within our Critical Illness Recovery Hospital segment, as discussed above under “Revenue”.

Equity in Earnings of Unconsolidated Subsidiaries

For the three months ended March 31, 2025, we had equity in earnings of unconsolidated subsidiaries of $12.5 million, compared to $10.4 million for the three months ended March 31, 2024. The increase in equity in earnings is principally due to the improved operating performance of our rehabilitation businesses in which we are a minority owner.

Interest

Interest expense was $29.1 million for the three months ended March 31, 2025, compared to $40.7 million for the three months ended March 31, 2024. The decrease in interest expense was principally due to a reduction in total debt, partially offset by the $21.5 million gain on the interest rate cap recognized during the three months ended March 31, 2024.

Income Tax Expense from Continuing Operations

We recorded income tax expense of $21.5 million for the three months ended March 31, 2025, which represented an effective tax rate of 22.3%. We recorded income tax expense of $26.7 million for the three months ended March 31, 2024, which represented an effective tax rate of 30.2%. The decrease in our effective tax rate was primarily due to lower permanent differences associated with reduced executive compensation, including the impact on state and local taxes.

Income from Discontinued Operations, Net of Tax

For the three months ended March 31, 2024, we had income from discontinued operations, net of tax, of $55.6 million, which represents the operations of Concentra.

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Liquidity and Capital Resources

Cash Flows for the Three Months Ended March 31, 2025 and Three Months Ended March 31, 2024

In the following, we discuss cash flows from operating activities, investing activities, and financing activities.


	Three Months Ended March 31,
	2024		2025
	(in thousands)
Net cash used in operating activities	$	(66,689)	$	(3,457)
Net cash used in investing activities	(57,657)		(52,315)
Net cash provided by financing activities	132,960		49,291
Net increase (decrease) in cash and cash equivalents	8,614		(6,481)
Cash and cash equivalents at beginning of period	84,006		59,694
Cash and cash equivalents at end of period	$	92,620	$	53,213

Operating activities used $3.5 million of cash flows for the three months ended March 31, 2025, compared to $66.7 million of cash flows used by operating activities for the three months ended March 31, 2024. The decrease in cash flows used by operating activities year over year was principally driven by a normalization of accounts receivable following the disruption caused by the Change Healthcare cybersecurity matter, which occurred in the first quarter of 2024, partially offset by a decrease in net income. The decrease in net income is primarily driven by spin-off of Concentra that occurred in the fourth quarter of 2024.

Our days sales outstanding was 60 days at March 31, 2025, compared to 58 days at December 31, 2024. Our days sales outstanding was 62 days at March 31, 2024, compared to 55 days at December 31, 2023. Our days sales outstanding will fluctuate based upon variability in our collection cycles and patient volumes.

Investing activities used $52.3 million of cash flows for the three months ended March 31, 2025, principally for the purchase of property and equipment. Investing activities used $57.7 million of cash flows for the three months ended March 31, 2024. The principal uses of cash were $52.5 million for purchases of property and equipment, and $5.4 million for investments in and acquisitions of businesses.

Financing activities provided $49.3 million of cash flows for the three months ended March 31, 2025. The principal sources of cash were net borrowings under our revolving facility of $75.0 million and net borrowings on our other debt of $8.3 million. The principal uses of cash were $14.7 million for distributions to and purchases of non-controlling interests, $11.4 million for repurchases of common stock, and $8.1 million of dividend payments to common stockholders. Financing activities provided $133.0 million of cash flows for the three months ended March 31, 2024. The principal sources of cash were net borrowings under our revolving facility of $230.0 million and net borrowings on our other debt of $8.7 million. The principal uses of cash were payments of $79.1 million on our term loan, $16.0 million of dividend payments to common stockholders, and $12.8 million for distributions to and purchases of non-controlling interests.

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Capital Resources

Working capital. We had net working capital of $147.5 million at March 31, 2025, compared to $42.1 million at December 31, 2024. The increase in net working capital was principally due to an increase our accounts receivable.

Credit facilities. At March 31, 2025, Select had outstanding borrowings under its credit facilities consisting of a $1,047.4 million term loan (excluding unamortized original issue discounts and debt issuance costs of $8.0 million) and borrowings of $180.0 million under its revolving facility. At March 31, 2025, Select had $377.5 million of availability under its revolving facility after giving effect to $42.5 million of outstanding letters of credit.

Stock Repurchase Program. Holdings’ Board of Directors has authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock. The common stock repurchase program will remain in effect until December 31, 2025, unless further extended or earlier terminated by the Board of Directors. Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate. Holdings funds this program with cash on hand and borrowings under its revolving facility. During the three months ended March 31, 2025, Holdings repurchased 649,804 shares at a cost of approximately $11.4 million, or $17.52 per share, which includes transaction costs. Since the inception of the program through March 31, 2025, Holdings has repurchased 48,884,627 shares at a cost of approximately $611.7 million, or $12.51 per share, which includes transaction costs.

Use of Capital Resources. We may from time to time pursue opportunities to develop new joint venture relationships with large, regional health systems and other healthcare providers. We also intend to open new outpatient rehabilitation clinics in local areas that we currently serve where we can benefit from existing referral relationships and brand awareness to produce incremental growth. In addition to our development activities, we may grow through opportunistic acquisitions.

Liquidity

We believe our internally generated cash flows and borrowing capacity under our revolving facility will allow us to finance our operations in both the short and long term. As of March 31, 2025, we had cash and cash equivalents of $53.2 million and $377.5 million of availability under our revolving facilities after giving effect to $180.0 million of outstanding borrowings and $42.5 million of outstanding letters of credit.

We may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions, tender offers or otherwise. Such repurchases or exchanges, if any, may be funded from operating cash flows or other sources and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Dividend

On April 30, 2025, our Board of Directors declared a cash dividend of $0.0625 per share. The dividend will be payable on or about May 29, 2025 to stockholders of record as of the close of business on May 15, 2025.

There is no assurance that future dividends will be declared. The declaration and payment of dividends in the future are at the discretion of our Board of Directors after taking into account various factors, including, but not limited to, our financial condition, operating results, available cash and current and anticipated cash needs, the terms of our indebtedness, and other factors our Board of Directors may deem to be relevant.

Effects of Inflation

The healthcare industry is labor intensive and our largest expenses are labor related costs. Wage and other expenses increase during periods of inflation and when labor shortages occur in the marketplace. We have recently experienced higher labor costs related to an inflationary environment and competitive labor market. In addition, suppliers have passed along rising costs to us in the form of higher prices. Higher prices could also result from the impact of proposed tariffs. We cannot predict our ability to pass along cost increases to our customers.

Recent Accounting Pronouncements

Refer to Note 2 – Accounting Policies of the notes to our condensed consolidated financial statements included herein for information regarding recent accounting pronouncements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to interest rate risk in connection with our variable rate long-term indebtedness. Our principal interest rate exposure relates to the loans outstanding under our credit facilities, which bear interest rates that are indexed against Term SOFR.

At March 31, 2025, Select had outstanding borrowings under its Credit Facilities consisting of a $1,047.4 million term loan (excluding unamortized original issue discounts and debt issuance costs of $8.0 million) and $180.0 million of borrowings under its revolving facility, which bear interest at variable rates.

In order to mitigate our exposure to rising interest rates, we entered into an interest rate cap effective on March 31, 2025, which limits the Term SOFR rate to 4.5% on $1.0 billion of principal outstanding under our term loan. The agreement applies to interest payments through March 31, 2028. As of March 31, 2025, the Term SOFR rate was 4.32%. As of March 31, 2025, we had $47.4 million of term loan borrowings which would be subject to variable interest rates if the Term SOFR rate were to exceed 4.5%.

As of March 31, 2025, a 0.25% increase in market interest rates will impact the annual interest expense on our variable rate debt by $2.4 million per year. Each subsequent 0.25% increase in market interest rates will impact the annual interest expense on our variable rate debt by $0.6 million per year.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered in this report. Based on this evaluation, as of March 31, 2025, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures, including the accumulation and communication of disclosure to our principal executive officer and principal financial officer as appropriate to allow timely decisions regarding disclosure, are effective to provide reasonable assurance that material information required to be included in our periodic SEC reports is recorded, processed, summarized, and reported within the time periods specified in the relevant SEC rules and forms.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(d) of the Securities Exchange Act of 1934 that occurred during the first quarter ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only reasonable assurance that our controls will succeed in achieving their goals under all potential future conditions.

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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to the “Litigation” section contained within Note 13 – Commitments and Contingencies of the notes to our condensed consolidated financial statements included herein.

ITEM 1A. RISK FACTORS

The risk factor set forth in this report updates, and should be read together with, the risk factors discussed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

Risks Related to Our Business

Changes to United States tariff and import/export regulations and macroeconomic conditions may have a negative effect on our business, financial condition and results of operations.

The United States has recently enacted and proposed to enact significant new tariffs. Additionally, President Trump has directed various federal agencies to further evaluate key aspects of U.S. trade policy and there has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. There continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs (including retaliatory tariffs in response to tariffs imposed by the United States). These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the U.S. Any of these factors and uncertain and volatile macroeconomic conditions, including low productivity growth, declining business investment, inflationary pressures, fluctuating interests rates, concerns regarding the level of U.S. debt, shifts in monetary and fiscal policy, strained international trade relations, and heightened geopolitical pressures could depress economic activity and have a material adverse effect on our business, financial condition and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

Holdings’ Board of Directors authorized a common stock repurchase program to repurchase up to $1.0 billion worth of shares of its common stock. The program will remain in effect until December 31, 2025, unless further extended or earlier terminated by the Board of Directors. Stock repurchases under this program may be made in the open market or through privately negotiated transactions, and at times and in such amounts as Holdings deems appropriate.

The following table provides information regarding repurchases of our common stock during the three months ended March 31, 2025.


	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs
January 1 - January 31, 2025	—	$	—	—	$	399,677,961
February 1 - February 28, 2025	—	—		—	399,677,961
March 1 - March 31, 2025	649,804	17.52		649,804	388,290,962
Total	649,804	$	17.52	649,804	$	388,290,962

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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ITEM 5. OTHER INFORMATION

Rule 10b5-1 Trading Plans

On February 28, 2025, Brian Rusignuolo, the Company’s Chief Information Officer, entered into a trading plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. The plan provides for the sale, subject to certain price limits, of up to 40,000 shares of common stock for Brian Rusignuolo. The plan will expire on March 1, 2026, subject to early termination in accordance with the terms of the plan.

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ITEM 6. EXHIBITS


Number						Description
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2						Certification of Executive Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1						Certification of Chief Executive Officer, and Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document.
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101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


			SELECT MEDICAL HOLDINGS CORPORATION


			By:			/s/ Michael F. Malatesta
						Michael F. Malatesta
						Executive Vice President and Chief Financial Officer
						(Duly Authorized Officer)

			By:			/s/ Christopher S. Weigl
						Christopher S. Weigl
						Senior Vice President, Controller & Chief Accounting Officer
						(Principal Accounting Officer)

Dated: May 1, 2025

SELECT MEDICAL HOLDINGS CORP 10-Q