U.S. Physical Therapy (NYSE:USPH) reported double-digit revenue and EBITDA growth for the third quarter of 2026 as higher patient volumes and reimbursement rates from hospital affiliations helped offset rising employee health costs.
The company reaffirmed its full-year EBITDA guidance of $102 million to $106 million. Chairman and CEO Chris Reading said the fourth quarter will be the first full quarter with both of the company’s initial hospital partnerships fully in place, though he cautioned that elevated employee health expenses could continue.
Third-quarter revenue rose 13% from a year earlier to $223 million, while EBITDA increased to $28 million from $24 million, according to Chief Financial Officer Nchacha Etta. Adjusted earnings per share rose to $0.80 from $0.66.
Hospital partnerships lift rates
Physical therapy revenue increased 13% to $190 million as patient visits rose 8% to 1.68 million. Visits per clinic per day averaged 33, up from 32 a year earlier, while revenue per visit increased by $5 to $111. Reading said September’s rate reached a company-record $112 per visit.
Reading attributed most of the rate increase to higher reimbursement at hospital-affiliated clinics. Revenue from those affiliations exceeded $25 million in the quarter and represented more than 13% of company revenue, compared with less than 5% in the second quarter.
The company had converted 72 clinics across its first two affiliations: 62 in the Metro New York partnership and 10 in the Gulf Coast partnership. Most of the Metro conversion occurred during the third quarter, while the Gulf Coast facilities joined in September.
Reading declined to provide a fourth-quarter revenue estimate for the affiliations. He said the Metro partnership was trending ahead of the company’s earlier expectations, while the Gulf Coast conversion occurred later than initially modeled because of a regulatory issue. The company did not disclose how much EBITDA the partnerships generated in the quarter.
Management said it plans to pursue additional tuck-in acquisitions and new clinics, as well as add staff and capacity at existing facilities. Reading said the company is discussing potential partnerships with numerous hospital systems but did not provide a timetable for new deals.
Medical costs pressure margins
Adjusted physical therapy margin rose 60 basis points year over year to 19%, even as employee health benefit costs reduced the margin by approximately 150 basis points, Etta said. Reading said year-to-date employee insurance claims expense was $7 million higher than a year earlier, and third-quarter costs were $2 million over budget.
The company made targeted labor reductions and cut discretionary spending to help offset those costs. President and COO East Eric Williams said the staffing review focused primarily on administrative roles and removed several million dollars in labor costs. Some savings appeared in September, with a larger benefit expected in the fourth quarter.
Reading cautioned that the company cannot control the timing or size of medical claims. “That may continue into the fourth quarter,” he said of the elevated expenses.
Industrial injury prevention revenue rose 14% to $33 million, or 8% excluding January acquisitions. Its margin increased 230 basis points to 22%. Reading noted that the fourth quarter is usually seasonally softer for that business because some industrial customers shut down operations toward year-end.
Reimbursement outlook and balance sheet
Reading said an initial review of the newly issued Medicare Physician Fee Schedule suggested a roughly 0.7% positive change in the base portion for the following year, although the company had not finished analyzing geographic variations.
He also said a two-year phaseout beginning in 2027 of the Indirect Practice Cost Index modifier could benefit the company over several years. Reading said the company needed more time to quantify the effect and expected the largest impact after the phaseout.
On a GAAP basis, net income attributable to shareholders fell to $11 million from $13 million, while the company reported a loss per share of $1.04, compared with earnings per share of $0.48 a year earlier. Etta said changes in the value of redeemable non-controlling interests are excluded from net income but included in the GAAP earnings-per-share calculation.
U.S. Physical Therapy ended the quarter with $38 million in cash and $247 million in credit facility borrowings, compared with $162 million in borrowings at the end of 2025. Year-to-date operating cash flow increased to $64 million from $50 million.
About U.S. Physical Therapy (NYSE:USPH)
U.S. Physical Therapy, Inc (NYSE: USPH) operates outpatient physical therapy clinics throughout the United States. The company provides treatment and rehabilitation services for patients recovering from injuries, surgeries, illnesses and other conditions that affect movement, strength and physical function.
In addition to company-operated clinics, U.S. Physical Therapy develops and manages physical therapy practices in partnership with local physical therapists. Its services generally include orthopedic and sports rehabilitation, post-operative therapy, treatment for musculoskeletal conditions and other forms of outpatient rehabilitation.
