U.S. Physical Therapy (NYSE:USPH) reported second-quarter 2026 revenue growth supported by higher patient volumes, improved reimbursement rates and the early rollout of hospital-affiliation agreements, while elevated employee healthcare claims and upfront staffing costs pressured physical therapy margins.
Total revenue rose 8.5% year over year to $214 million. Physical therapy revenue increased 8.4% to $182 million, while industrial injury prevention, or IIP, revenue grew 9.1% to $32 million. The company reaffirmed its full-year adjusted EBITDA guidance of $102 million to $106 million.
Hospital affiliations drive growth strategy
The company highlighted the transition of its Metro clinics into its long-term affiliation with NYU Langone. During the second quarter, U.S. Physical Therapy integrated 31 existing clinics into hospital affiliations, with the remaining 39 clinics expected to transition during the third quarter.
Jason Curtis, interim CFO and senior vice president of finance and accounting, said physical therapy revenue included $5.6 million from the initial phases of the hospital-affiliation rollout. That revenue reflects two sources: a per-visit fee paid by hospital systems and reimbursement for licensed clinical staff treating patients.
Under the agreements, licensed clinical staff costs are fully reimbursed by hospital systems and the reimbursement is recorded as revenue. Curtis said the model enables the company to add staffing without negatively affecting profitability once clinics are operating under the affiliation structure.
Reading said U.S. Physical Therapy hired approximately 50 clinicians in advance of anticipated referral growth from the NYU Langone relationship. Those hires created near-term expense pressure, but their costs will be supported once the associated clinics move into the hospital arrangement.
Eric Williams, president and chief operating officer for the East region, said Metro’s outpatient clinics in New York are averaging about 45 visits per day per clinic. Reading added that Metro had already increased year-over-year volume by roughly 120,000 visits before receiving support from the NYU Langone affiliation.
Looking ahead, Reading said the company expects the hospital relationships to have a greater effect in 2027. He said U.S. Physical Therapy’s larger partnerships in metropolitan markets could offer opportunities for additional affiliations, though the timing of announcements depends on hospital systems’ processes.
Rates and volumes rise, but healthcare costs pressure margins
Second-quarter physical therapy visits totaled 1.662 million, up 6.6% from a year earlier. Revenue per visit increased $2.26 year over year to $107.59, which Reading described as the company’s best-ever net rate.
- Medicare revenue per visit increased 3.7%.
- Commercial payer revenue per visit increased 1.2%.
- Workers’ compensation revenue per visit increased 2.0%.
- Mature-clinic physical therapy revenue increased 3.5%.
Williams said workers’ compensation represented about 10% of the company’s payer mix and generated revenue per visit of $155.32 in the second quarter. He said the company has added roughly 22 or 23 workers’ compensation agreements over the past three years and expects another four to five agreements to begin during the remainder of 2026.
Physical therapy gross margin declined to 19.9% from 21.4% a year earlier. Adjusted salaries and related costs were 57.5% of revenue, compared with 56.4% in the prior-year period.
Management attributed much of the pressure to higher self-insured employee medical costs. Reading said a small number of significant employee claims created an approximately $3.2 million year-to-date swing compared with 2025, when claims experience was lighter than normal. Curtis said about 80% of that difference occurred in the second quarter.
The company also cited upfront hiring associated with the hospital implementation. Reading said U.S. Physical Therapy expects continued rollout of its WelcomeWare initiative, which centralizes some front-desk functions and can reduce front-desk headcount, to help offset some pressure through year-end.
Profitability, liquidity and acquisitions
Adjusted EBITDA was $27 million, compared with $26.9 million in the second quarter of 2025. Adjusted operating results fell to $11.3 million from $12.4 million, while adjusted operating results per share declined to $0.75 from $0.81.
Net income attributable to U.S. Physical Therapy shareholders was $9.9 million, compared with $12.4 million a year earlier. Earnings per share were $0.25, compared with $0.58 in the prior-year quarter. The company recorded a $992,000 loss from changes in the fair value of contingent earn-out considerations; Curtis said such losses can reflect improving performance at acquired businesses because stronger results increase the earn-out liability.
Operating cash flow for the first half was $38 million, up from $30 million in the first half of 2025. Cash and cash equivalents were $25 million at quarter-end, while credit-facility borrowings were $221 million. The company said its upsized $450 million credit facility provided $229 million of revolver availability and includes a $125 million accordion feature.
During the quarter, U.S. Physical Therapy repurchased 306,000 shares for $19.2 million, or an average price of $62.80 per share. The company said it has materially completed repurchases under its current $25 million authorization.
Following the quarter, the company acquired a 12-clinic physical therapy practice for $16.4 million. The acquired practice generates approximately $12 million in annual revenue and 112,000 annual visits, according to management. Including two acquisitions announced in the first quarter, the company’s three announced 2026 acquisitions carried a combined purchase price of $38 million and annualized revenue of $27 million.
Management also said it is pursuing additional acquisition opportunities in both physical therapy and injury prevention, while working on digital and hybrid care initiatives for 2027.
About U.S. Physical Therapy (NYSE:USPH)
U.S. Physical Therapy, Inc (NYSE: USPH) is a leading owner and operator of outpatient physical therapy clinics across the United States. The company delivers rehabilitative care to patients recovering from orthopedic injuries, neurological disorders and chronic conditions. Its core services include one-on-one physical therapy sessions, aquatic therapy, occupational therapy, massage therapy and sports medicine programs designed to restore mobility and enhance quality of life.
In addition to traditional rehabilitation services, U.S.
