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Paul Martin

Good afternoon, and welcome to another episode of Paul Martin's crucial conversations. Today we are really excited and it is very timely for us to have with us. David Van Name. David is the founder and senior adviser at Upstream Rehabilitation. Currently, Upstream is a private equity backed company backed by Revelstoke and having over 1000 clinics in 28 states and is based out of Birmingham, Alabama. David, welcome. It's great to have you with us today.

David Van Name

Thanks, Paul. It's great to see you again.

Paul Martin

So David, I'm going to take you back a little bit and I'm sure you're aware of this. But there was an announcement made back on August second. And here it is directly from PR Newswire. Upstream announced today it completed the acquisition of Results Physiotherapy. With this acquisition, Upstream becomes the largest pure play outpatient physical therapy provider in the United States. The results clinics expand upstream portfolio to over 1000 owned and managed clinics across 28 states. Upstream is approximately 30 500. Providers perform over 5 million patient visits annually. Does that still give you chills, David?

David Van Name

It does. It does.

Paul Martin

Very exciting, really exciting news. So, David, walk us through how this deal. Big deal, right? Over 200 clinics, how this deal fits with upstream future strategy and long term strategy.

David Van Name

Sure. You know, our strategy has remained fairly. Consistent over the past 18 years. We look to continue to expand. Our presence in appropriate markets. Striving to. Establish brands with a reputation for high quality. Patient care, leveraging that quality with size, scale and market density to become. Increasingly relevant. To. Payers. While at the same time becoming the. Provider. Of choice to clinicians, patients. And referral sources. As a result of our focused programs. That include training, continuing education, leadership, development and many others, results is a fantastic. Opportunity for Upstream, a provider that is well recognized for. Orthopedic manual. Therapy. A multitude. Of regional. Clinical. Leaders with strong operational. Skills, community relationships. And. Regional density in many of the same. Markets as upstream. But also many new. Markets. That allow. Us to enter into. two new places. The hallmarks. Of that. Entire. Thing is the culture that is being of high quality care and a significant investment in their clinical staff, giving back to the communities that they and we. Serve. While Upstream. Has a strong. Position in central. And eastern Tennessee. We now. Have strength in. Almost. Every market in that. State. And while upstream had a strong. Foothold in Dallas, we now. Have a strong presence. In Texas in. Almost every market. And that theme is consistent. Across the. Entire portfolio.

Paul Martin

Yeah, it seemed to give where you are. It gave you, you know, let's call it further density and further coverage and further market coverage and areas where you weren't, it was seemed to be a perfect complement, especially. I agree in Texas some really nice compliment in Texas. So for the privately held company or the privately held business owner out there that is looking to transition over the next one to two years, how does this change their opportunity with upstream post this large transaction of results?

David Van Name

It's really the same opportunity. We continue to look. For strong local and regional providers that have a great brand reputation, relationships with payers and referral sources. And. Strong clinical leaders. Aside from the results, transaction upstream is completed for transactions. So far this year. We have five others under a letter of. Intent, and I hope we can. We can complete two in addition to those that'll. Probably bring us about 40 partners. In clinics this year. And you know, that's a lot when you add to that the. 200. Results clinics, but it's not about. Numbers, it's about opportunity. And we expect to do the same. Number of regional. Acquisitions and transactions next year.

Paul Martin

Yeah, really exciting. Really exciting. So results, as you know as well Results Group primarily with new start up clinics. That approach, you know, is is unique from upstream approach. So how will you and if so, how will you meld these strategies together in the future? Kind of the start ups? The acquisitions result seems to bring that start up. Engine, how were you worked out all in the future with these different and unique strategies?

David Van Name

Yeah, I love that question. Because we really look at. Ourselves as a company. That really thrives on. New. Start ups. And start ups of new clients, which we call de novos. And you know, we opened. 100. New clinics in 2019. We opened. 53 start up. Locations, ten of us in 2020. During the pandemic. And this year will open. Over 135 new. Locations this year. In addition to the the. Partnership transactions. That we put. Together that are. Akin to acquisitions, so. The strategy is really. Consistent either way. While results didn't do. A whole lot of acquisitions and I know. Upstream appears in the press after doing. Acquisitions. The reality is the strategy is very similar in that. We continue to expand into new. Markets, usually through a foothold transaction. And then from that, we develop. Brand. New de novo. Clinics around that. To give us. Greater density within the market. And enable us to have true. Equity partners as we continue to grow.

Paul Martin

So as we look at transactions and acquisition opportunities, what type of opportunities is upstream seeking right now?

David Van Name

So I mentioned earlier, we continue. To look for strong. Local. And regional providers. We find the best opportunities are ones where we. Can partner with practices. In which the. Owners are looking for the resources to accelerate their own growth going forward. I'm sure the. Expectation of most sellers is to take something off the table. Securing part of their own. Financial. Future. But we look to. Give our partners the tools and resources to be able to realize another bite at. The apple. Later on down the road. And we work with our partners, both acquired. And developed. To grow their markets and realize true. Equity in that growth.

Paul Martin

Yeah. So so it's it's that long term growth with those partners is where they can really benefit from upstream. You bet. So Dave, we're seeing you are the perfect example, and I think we're going to continue to see this, which is these transactions among the larger companies, you know, the top 20 companies pooling together. What do you think is driving that?

David Van Name

You know, I think it's. Sort of. Inevitable having been in health. Care for over 30 years and being part of a sector that has such strong tailwinds for growth. And continues to consolidate. I expect to see. Several larger. Transactions by the end of the year. You know, in order to scale in, you know, to size and speed of. The larger firms, private equity. Investment has become a valuable. Resource to larger providers. This type of investment enables access to. Capital markets, better debt. Facilities. And relationships. With key. Leaders. In health care that contribute to those. Opportunities. Eventually, there's a time. To realize a return for the investors, and that. Ultimately. Means a transaction. That will. Either be with another financial buyer or a strategic buyer like upstream. COVID has delayed. Several of. These these. Processes for obvious reasons. And so. Now we're seeing. Both the. Natural progression of. Things, as well as a backlog. Of great. Companies that have been waiting to transact.

Paul Martin

Yeah, but I love to put you on the spot and ask you who those other large providers are that are going to merge together. But I would never do that to you, David. So no worries. So look, your leadership team, you know, thought leaders in our industry and as a leadership team, what do you think are the greatest threats and then some of the greatest opportunities for this rehab industry as we move forward into the end of this year and into 2022?

David Van Name

Yeah, great question. You know, we're at a very. Interesting time. For outpatient. Rehabilitation. Not only. Are. We at a moment where we can truly advance physical therapy. As a profession through better. Patient outcomes, as a positive, non-addictive. Alternative. To opioids and in many cases, a. Better alternative to surgery. But we're also a point. Where we can significantly improve the health care system as a low. Cost alternative to other. Avenues of care. We're already seeing. The US health care system move towards value based. Care in a way from simple fee for service. And we're really. Well-positioned as a as a. Sector in. Health care to take advantage. Of that transition. You know, however, when we. Look at threats, the primary threat that's. Impacting. The broader physical. Occupational and. Speech therapy. Communities. This year is the proposed. Additional cuts that. Medicare is. You know, that we see in the Medicare physician fee schedule for 2022. After years of reducing reimbursement for therapy services. Medicare. Again. Plans to levy. A 3.5% cut for therapy services. In 2022, eventually adding up to a steep nine. Percent. Cut by 2024. This is after we incurred other cuts like sequestration. NPR and the upcoming. Report Reduction Reimbursement Services for services provided. By assistance. When you combine that with the. Administrative burdens like modifiers. Plan of. Care signatures and. MIPS and all the other things. That are. Happening from an administrative standpoint in the midst of the COVID pandemic, four government agencies. Have really become the greatest threat to our industry.

Paul Martin

Yeah, I totally agree. And there are a lot of other folks in your positions out there with in similar positions to you with some of these other large companies that share that exact threat. And as we see, you know, if this industry ever truly gets value based care, our reimbursement per visit should double. You know, you know this as well as I do. Hospitals are getting three times what outpatient physical therapy? Clinics are receiving for the exact same and probably better care that we are providing than the hospital based program. So boy, if we can ever get CMS and we can ever get some of the payers to truly understand the value that we bring to these patients at the cost of our reimbursement has got to start going up.

David Van Name

Let's hope so. You know, there's there's a lot of grassroots opportunity. For individual. Providers to get involved with that really help that process. Both the APTA and APTC UI have. Grassroots. Initiatives, and when you see those communications, log on and take a moment to just do a letter to your congressman. Why that really matters is. It gives those. Organizations. The ability to pick up the phone and to call local. House of Representatives or senators. And say, I know you have constituents in your market that have called. You or written letters to. You about this issue. And so I really need you to pay attention to what's going on. It gives us that that ability to make a communication point in and sometimes. That's critical. And making changes. Or at least deferring. And defending against the continuing. Reductions. We see.

Paul Martin

Absolutely. And for our audience, if you were out there today, get on that app AQI website, go into where they have the letters already for you. It's all pre done and get to your local government agencies and get that out and get the word out because we need to. As as David just said, we need to work on the administrative side of what we do and then we need to work on the on the on the on the reimbursement side of what we do. And those two things coming together will equal true value based care, which is what we deserve. David, this has been awesome, really, really, really exciting. And I'm really excited for all of you guys it upstream. You guys have done a phenomenal job and you deserve to be the largest pure play outpatient physical therapy company in the country. You do great things at the clinic level. Your education programs are absolutely awesome and I can tell you from our perspective, we have really enjoyed working with you guys on a number of transactions out there with great fits for your company.

David Van Name

Well, thank you, Paul. We certainly value all the services. That you do. And what you bring to. That the smaller. Providers who are really looking for a great opportunity. And it's always. A pleasure to work with you. Over the. Over the years and. On into the future.

Paul Martin

Absolutely, absolutely. Thank you for your time today, David. I really appreciate it. And we hope to get you back again soon.

David Van Name

Any time.

Paul Martin

So for all of you out there today, if you have a question or want to have a conversation about anything in our discussion with David Van Name today, click below. I will reach out to you and we will have that discussion. I look forward to talking to you in the very near future. Thank you.