Sure. Yeah. You know, Ben, we feel very good about the momentum in our business, you know, but we do want to be disciplined in our guide. So the raise reflects the continued strength we saw across all of our cohorts in the first half, including occupancy, skilled mix, quality, and cash flow. So, you know, we do have the second half includes integration activity related to the DURAL transaction. Our guidance only includes a modest contribution from those 20 Texas facilities that we closed on August 1st. It doesn't include, as I mentioned, the remaining DURAL facilities that we've yet to close or any other future acquisitions. So, you know, we feel good about that guidance range, and we're just accounting for normal execution and integration considerations in that guidance.

Got it. I guess just want to spend some time then on the ramping cohort in particular during It looked like ramping occupancy and skill mix stood out versus my modeling. I saw some noticeable rate growth on the Medicaid side too within ramping that stood out compared to the rest of the group. Can you just walk through what's changed operationally across this cohort for things like facility mix, clinical programs, staffing, and improvements to your referrals or rate design, and then maybe what's expected in the go forward for this segment for the remainder of the year?

Yeah, I'll take that one. This is Josh. Thanks for the question, Ben. Appreciate you recognizing that. This is a cohort we're incredibly proud of. Obviously, the numbers have increased in this cohort. And as we would expect, as facilities mature along those cohorts, they're set up that particular way because we expect as these facilities enter ramping that they have solid facility leadership, that that leadership has started to build a reputation in the community of consistent care outcomes. of quality, of customer service. And that reputation, as we often talk about, leads to an increased confidence in the consumers, in our partners, in our payers. And so, you do see increased activity around executed managed care agreements. And we have those in place in those ramping facilities. We've proven that we can be good partners and they can rely upon us for excellent outcomes. And so, you see, again, not only occupancy increase, but skilled mix increase. As those facilities also stabilize, you see stabilization and labor and, you know, overtime, double time, agency usage. And so, not only do you see the expansion in revenue, but you also see expanded margin, particularly there in ramping. And so, as we've seen the progress in that cohort, we're excited for that to continue as those mature even inside of that cohort, but as they move towards maturity metrics, we still see there to be substantial upside because we've seen these facilities as they get even more established in our portfolio and in their communities, that they're still upside for them to capitalize on. And we would anticipate those ramping facilities as they move towards maturity to continue along those same metrics.

Great. Appreciate it. There's no caller here.

Thank you.

Our next question is from David mcdonald with truest securities please proceed with your question yeah good morning guys um a couple of quick questions one jason can you just talk a little bit more about you know when you have conversations with payers and your referral um sources you know just how critical the quality metrics that you guys are posting right now is in terms of um you know either working on contracting or just, you know, kind of securing referral sources? And then I got one or two quick follow-ups.

Sure, yeah, Dave. Thanks for the question. Yeah, it is incredibly important. I think the way that we talk about quality is that it is the fundamental basis behind, you know, our entire business thesis, right? Like we need to make sure that we are very good at providing high-quality care and high-quality outcomes. And the reason that's important is not only for the outcome of the patient, but also it allows us to be more competitive in the way that we negotiate our managed care contracts and other payer contracts. What we have found is there are many of these different payers who have thresholds of when they will allow providers to participate in their plans, quality thresholds, that is. And so if you are performing below those thresholds, then you typically are excluded from conversations around those new contracts. And so that's why it's very important for us to make sure that we're executing well on that front is because we want to have a seat at the table when we are looking at different payer contracts. And we want to make sure that we're in the best seat available when we are negotiating. And the best way that you have, you know, the ability to negotiate with our payers is number one, quality. And then I would point to number two being density in the different markets where we operate. And so it all starts and ends with quality, though.

And then, guys, just a couple of other ones. One, just on kind of automation slash AI, can you give us any sense in terms of, you know, how you guys are thinking about that? Maybe not in the context of direct care, but more in the context of providing more efficiency so you free up your clinical people to spend more time just on direct care.

Dave, I think that's exactly it. There are certainly really good use cases for AI. We have to be mindful of, obviously, the compliance element, as everyone is aware, that AI being integrated into healthcare, there's a number of questions around that and how it works. And so, you know, fortunately, with the additional resources we've added to our compliance team, people with specific experience around privacy and other sorts of things that matter as it relates to AI are able to help ensure that the tools that we are exploring and some of them now using and have integrated into our systems, you know, are, you know, keeping the organization away from any of those potential risks. But we have seen some good use cases where it's doing exactly what you mentioned. It's allowing us to identify what patients need, what level of care they need based on their history and physical that comes from a hospital to be able to scan that information and ensure not only save time for the clinicians, but ensure that we're capturing every element of care that that patient needs when they come into our facility. And as you do that, and as you provide the care and have the clinicians that are capable to do it at a high level, your quality measures increase. You know, the return rates to the hospitals decrease. All of the metrics that, as Jason mentioned, these payer sources are looking for, we're able to actually make improvements. We envision there to be additional ways for us to implement AI as it looks to, you know, scrubbing documentation to ensure we're documenting things correctly. And so there's just a number of opportunities and use cases, and I think you'd see consistent with PAX, and one of the things that differentiates us is that we lean fully into technology and the uses. We've built integrated dashboards, as we've talked about historically, and so there's been a full lean-in where historically our space hasn't seen people do that, and we would anticipate with what we've seen so far and what we continue to see into the future, an ability for us to layer these things on and make us more efficient in the way that we operate, hopefully leading to margin expansion as well and to free up clinicians so they can do what they should be doing, which is have as much touch and interaction with the patient as possible.

Okay. And guys, just last question. Look, obviously the operating environment broadly across healthcare has been fairly dynamic over the last couple of years. I'm just curious, when you look at your pipeline, can you just provide us a little bit more detail? Is the breadth of the pipeline bigger than it's kind of been historically? Any chunkier assets kind of coming into the pipeline, just any additional detail in terms of what you're seeing would be helpful.

Yeah, I think that I'll take that question. This is Jason. I think what we're seeing is just, again, another high level of activity with M&A. It's been very busy, especially since getting back in compliance with the SEC with our filings. We've seen more and more activity come our way. And I would characterize it, Dave, as being kind of a mixed bag of everything from smaller one-off deals to smaller kind of regional operators to large, chunky deals. We really are seeing pretty significant diversity in the types of deals that we're looking at. And so that's encouraging to us because it gives us the optionality that we would want when trying to be disciplined and strategic with when we're thinking about Okay.

Thanks very much, guys. Appreciate it.

Thank you. Our next question is from AJ Rice with UBS. Please proceed with your question.

Hi, everybody. Maybe just first to ask you about what you are seeing on the payer side. We know the Medicare rates that have been proposed. But any comment on what you're seeing on a go-forward basis in your discussions with your various states about Medicaid updates? I know in the quarter you were up 3%. Is that sort of the rate type of dynamic you're seeing? And then managed care, there's been some discussion about managed care contracting generally in the industry. You had a healthy rate increase in this quarter. What are you seeing in contracting there?

Yeah, I'll maybe start, AJ, this is Josh. I'll start with just the underwriting process that we go through as we evaluate, particularly to talk about the Medicaid. We specifically identify states that we think that we have an opportunity to make improvements on Medicaid rate reimbursement, and we've been fortunate to enter a number of those states where they incentivize quality, not just in quality payments, but there's an element of the rate that includes your ability to provide quality care to your long-term population, the Medicaid base, and we've seen those increases, and it's come because of the efforts of our clinical teams ensuring that we're capturing appropriate care, taking generally even on a long-term custodial basis a more clinically acute patient and being able to be reimbursed appropriately for the services being provided to them. And so it is not a surprise to us that we've seen increase in our Medicaid rates. We've also been very active, like many other operators, in ensuring that we get in front of the individuals at the state level making decisions on how they reimburse nursing homes. And we think we've positioned that narrative very well, that we are the lowest cost institutional setting for people to receive care. And they can receive that care in a very quality setting. And that's what I think PACS has done to differentiate. And so we're grateful for the recognition that those people at the state level have, you know, paid attention to and ensured that they've included appropriate rate reimbursement for the services being provided. And so that 3%, we anticipate continuing to see growth in that regard. And as we underwrite new deals, we look to ensure that on a Medicaid front, we continue to see that rate expansion. On the Medicare and managed care side, like you mentioned, you see the increase would continue to be increased. I think at the federal level, they're seeing that nursing homes can provide care to highly acute patients who are in need of those services and appropriately are, you know, giving us an increase yet again this year, which has been consistent for the sector. On the managed care front, Jason, I think, you know, nailed it when he said these managed care providers more than ever are paying attention to the people that they are contracting with, the providers they're contracting with. They're looking for a couple things. First and foremost, they're looking for quality outcomes. They're basing rate and the willingness to reimburse a certain provider in that contract based on your quality outcomes. They're also looking at density. And as we talk about growth and strategic growth in areas where we can have density, bed density, bed availability for these providers, they're very interested in ensuring that they have access for their patients with beds, and that's, again, another differentiator for PACs. We go into these contract negotiations that we're able to negotiate, you know, favorably for us when we give them bed density combined with the quality metrics that we've seen historically.

Okay, that was helpful. Maybe also just to ask you on your largest expense item what the dynamics are around labor, availability of supplies, need to rely on. temporary staff and other things, wage updates, any commentary around there and any initiatives you have underway related to labor?

Yeah, the general dynamics of the labor market are continuing to improve. And I know we referenced post-COVID. That was the most recent challenge that the industry have had. And since that point, not only across the nation for all providers, But for us specifically, we've actually seen that numerically have an impact. We don't have a major issue with job postings and responses to those job postings, which we had once upon a time. As we look at our labor, oftentimes we measure that as a percentage of revenue. And our contract labor in Q2 was the lowest it had been in any of the past two years. And so as we look at those trends, we're incredibly encouraged to see that, you know, Those labor dynamics are leading to increased margin expansion as our facilities continue to operate at the level that they are.

All right. Great. Thanks so much.

Thank you. Our next question is from Raj Kumar with Stevens. Please proceed with your question.

Hey, good morning. Maybe just trying to kind of parse out the 20 Dura facilities in Texas and kind of the embedded contribution into guidance. Maybe just any helpful color around, you know, revenue and earnings contribution here in 2020, and maybe just any qualitative commentary around how, you know, those facilities kind of compare to your kind of existing five facilities that you've had in Texas.

Thank you, Raj. This is Kerry. Thanks for the question. Yeah, our guidance, as I noted, it includes a modest contribution from the 20 Texas facilities that we've closed so far. And I'd say it's modest because there is some, you know, integration that has to occur in the first several months of an acquisition. Revenue is contributing more than EBITDA in our guide. But the adjural facilities still have a lot of upside, a lot of upside. And I'll let Josh actually talk about where they are now and where we think they can get to.

Yeah, this is an acquisition that we were underwriting for a while. And although there's a strong foundation in the Aduro team, maybe different than some of the acquisitions that we've done historically where you sense more distress when you walk into these facilities, the Aduro team worked hard on prioritizing care and outcomes and actually did have, you know, positive EBITDA margins. With that being said, we still recognize that as we underwrote this deal, we saw opportunities for the uniqueness of PAC's model to actually add, particularly in certain KPIs. On the quality measure front, we think there's room for improvement. And as we make those improvements in quality measures, we believe that we can see expansion in both occupancy and skilled mix, particularly in these 20 facilities. as example, they run in about the mid-60% occupancy and around 10% to 11% skilled mix. And so when you compare them to other new facilities that we've taken on, they have similar metrics in that regard, and we believe as they begin to progress with the PAC's specific attention to those areas, we're going to see them move from the new and the ramping into the mature cohorts. And so as each of you look at that and model it just like we have done, you can count on those facilities following a similar path to what you've seen historically from our acquisitions.

And then maybe as my follow-up, just kind of thinking about or tying the topics of quality and then reimbursement. I think Ohio had finalized the three calculations of some prior year quality incentive payments. So curious on any kind of sizing color you could kind of provide on that and whether there's kind of been baking in for those payments.

Yeah, thank you, Raj. Yeah, those payments haven't come yet, so we don't know exactly what they're going to be. We have not been accruing for them because of that very fact. We don't know how much they're going to be in there. We don't know when we're going to receive them. We've had some, you know, we thought we might have received them actually before now, and the amounts, you know, have varied from time to time. So that's why we have not accrued any for those. I would say we do expect to receive them in second half of the year, but we've not included any of that in our guidance. So I think that would be upside to where we are. I know it would be upside to where we are because we've not included any of it in our guidance. Great. Thank you.

Our next question is from Ben Hendricks with RBC Capital Markets. Please proceed with your question.

Great. Thank you very much. Just one more question on the new facilities and the guidance. You mentioned some integration costs, and I imagine there's more expense kind of coming on associated with those facilities. Just wanted to see if we could parse that out a little bit in terms of, Are we expecting a step up in agency utilization as we bring those on versus your legacy platform? Is there any kind of degree that we have additional overhead and administrative costs versus costs related to local leadership change? Do you expect to have to put a meaningful portion of or replace a meaningful portion of the local leaders with some of your leaders in training? Any kind of thoughts on the geography of those costs would be great.

Yeah, specifically, Ben, I don't see anything. You mentioned labor. I don't see any sort of increase in agency labor. You know, when we take on new acquisitions and this transaction, although slightly different, won't be different than how we handle these. We go in, we evaluate the teams in place. I think these teams generally have a little more strength than we've historically seen and some of the more distressed assets that we've taken on. And we are going to grow those platforms strategically to ensure that whatever we're doing that relates to census or additional labor that may be needed, that that's done very strategically, prioritizing care. So we're going to go and assess the teams. We're going to deploy our systems, policies, procedures, things that we would do in any acquisition, and then we will begin building responsibly on top of that. And so specific costs outside of what Kerry mentioned, just the integration of IT network and infrastructure and other things that come with any acquisition, especially large scale that you do, I would anticipate that the operational metrics aren't going to change on the cost side substantially. I think we're going to see over time consistent with what you've seen, new moving to ramping, ramping to mature, that these facilities are going to follow a similar track.

Great. Thank you. And Ben, as a follow-up to your question about the Ohio supplemental payments, just as a reminder, we do expect another, at least one more California WQIP payment in 2026. You know, we haven't accrued it again, same thing, because we don't know the amount and we don't know exactly we're going to receive it. We've started receiving some of that in the third quarter, so I think we will receive some in the third. And then the second payment related to that will be either late this year or early in 2027. But we, again, we're not accruing that. It's not in the guidance because we don't know what those amounts will be.

And to be sure, those will be reflected in your same store revenue growth?

Yes, they will, just like they were in the first quarter. Okay, thank you.

This now concludes our question and answer session. I would like to turn the floor back over to Jason Murray for closing comments.

Yeah, thank you, Operator. And, again, thanks, everyone, for joining us today. We appreciate your support of PACS. Have a nice rest of your day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.