Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Bank of America Merrill Lynch 2014 Health Care Conference
29 slides from Select Medical's conference presentation, May 14, 2014
Slide 1: Bank of America Merrill Lynch 2014 Health Care Conference
Bank of America Merrill Lynch 2014 Health Care Conference May 14, 2014
Slide 2: Forward-Looking Statements
This presentation may contain forward-looking statements based on current management expectations. Numerous factors, including those related to market conditions and those detailed from time-to-time in the Company’s filings with the Securities and Exchange Commission, may cause results to differ mat
Slide 3: Select Medical Overview
110 LTAC Hospitals 1,017 Outpatient Rehab Clinics Founded – 1996 125 specialty hospitals, 1,017 outpatient clinics, operations in 44 states plus D.C. $3.0 Billion Net Revenue LTM Q1 2014 $370 Million Adjusted EBITDA LTM Q1 2014(1) 31,400 Employees 15 Inpatient Rehab Hospitals 471 Contract Therapy No
Slide 4: Strategy
Strategy Be the “preferred” provider of post acute services in our markets Structured partnerships Hospital in hospital model Outpatient critical mass
Slide 5: 2013 Highlights
2013 Highlights LTAC Hospitals patient criteria legislation Rehab Joint Ventures OhioHealth Scottsdale Health San Antonio UCLA/Cedar Sinai (executed) LTACH Joint Venture Emory Health System (executed)
Slide 6: 2014 Highlights
2014 Highlights Pricing/Amendment to Term Loans completed March 4, 2014 Series D $284.6M down 50bps to L+275 Series E $495.6M down 25bps to L+275 w/1.00% floor Extended maturity on Series D to December 2016 Increased Leverage covenant from 4.5x to 5.0x Dividend Payments $.10/share on March 10, 2014
Slide 7: Specialty Hospitals Long Term Acute Care
Specialty Hospitals Long Term Acute Care
Slide 8: LTACH Overview
LTACH Overview Major provider of LTACH services in U.S. 110 hospitals 80 are hospital-in-hospital (3,044 beds); average size 38 beds 29 are freestanding (1,601 beds); average size 55 beds 1 managed freestanding hospital Ownership of freestanding LTACHs 17 owned 12 leased
Slide 9: LTACH Legislation
LTACH Legislation Passed in late December 2013 as part of Budget bill and SGR Bill provides Full LTACH DRG rates for patients 3 day prior short term hospital ICU stay or Ventilation patients for > 96 hours in the LTACH Other patients receive “site neutral” rate which is lesser IPPS per diem (capped
Slide 10: LTACH Legislation (con't)
LTACH Legislation (con’t) Effective Date – cost report period beginning on or after October 1, 2015 Site Neutral Payments Phased in over three years. Patients paid under this rate excluded from 25 ALOS After FY 2020, those hospitals with 50% or less of their discharges at LTACH DRG will convert to I
Slide 11: LTACH Legislation – Select Impact
LTACH Legislation – Select Impact Positives: Degree of segment certainty with phase-in 25% Rule extension Select high CMI HiH Strategy Neutral: Moratorium Negatives: Loss of some volume Reduced rates for IPPS patients
Slide 12: Patient Criteria Opportunity
Patient Criteria Opportunity 2012 LTACH Discharges 2012 STACH Eligible Patients Major Diagnostic Categories (MDC) % of LTACH Discharges to Eligible Patients 2,400,000 145,000 Respiratory System 12.3% Infectious and Parasitic DDS 7.2% Musculoskeletal System & Connective Tissue 11.8% Non-healing Wou
Slide 13: Specialty Hospitals Inpatient Rehabilitation
Specialty Hospitals Inpatient Rehabilitation
Slide 14: Rehabilitation Hospitals
Wholly Owned Hospitals (4) Kessler Institute (3 hospitals) – New Jersey West Gables Rehabilitation – Miami, FL Consolidated Joint Ventures (5) Penn State Hershey Rehabilitation – Hershey, PA SSM Rehabilitation Network (2 hospitals and 1 managed unit) – St. Louis, MO Select Rehabilitation – San Anton
Slide 15: Strategy
Strategy Partner in joint ventures with premier acute care hospitals and systems to build post acute networks c Scottsdale c UCLA/Cedar Sinai San Antonio Emory Baylor OhioHealth PSU SSM c c c c c c
Slide 16: Inpatient Rehab Regulatory Environment
Inpatient Rehab Regulatory Environment CMS Final Rule FY 2014 effective 10/1/13 - Standard Payment Conversion Factor increase 3.5% CMS Proposed Rule FY 2015 effective 10/1/14 Standard Payment Conversion Factor increase 2.1% Budget Sequestration cuts effective April 1, 2013
Slide 17: Outpatient Rehabilitation
Outpatient Rehabilitation Outpatient Rehab Clinics
Slide 18: Outpatient Rehabilitation – Industry Overview
Outpatient Rehabilitation – Industry Overview Source: Company public filings and websites as of March 31, 2014
Slide 19: 2014 Outpatient Initiatives
2014 Outpatient Initiatives Continued growth in workers’ comp business by illustrating historical ROI benefits of working with Select Payors Employers Expand hand therapy services to more clinics Expand concussion management program Continued development of start-up clinics
Slide 20: Outpatient Rehab Regulatory Environment
Outpatient Rehab Regulatory Environment Commercial - Stable Medicare MPPR changes to therapy payments (effective April 2013) 25% reductions increased to 50% reductions to practice expense component for 2nd and subsequent codes
Slide 21: Strategic Priorities
Strategic Priorities 3... |MEDICAL = Use of capital — opportunistic - Acquisitions - Dividends * Special dividend $1.50/share @ 12/2012 * Dividend payments totaling $.30/share in 2013 * Dividend payments (paid and declared) totaling $.20/share in 2014 - Stock buyback -$129.5M in 2011-13 (avg. price
Slide 22: Financial Overview
ah Select MEDICAL Financial Overview
Slide 23: Net Revenue and Adjusted EBITDA Trends
$2,390 $2,240 Note: In Millions CAGR 6.4% CAGR 6.2% $307 $330 Net Revenue Adjusted EBITDA $2,805 $386 Net Revenue and Adjusted EBITDA Trends $2,949 $406 $2,976 $373 $2,988 $370 $2,153 $270 2008 2009 2010 2011 2012 2013 LTM Q1 2014 Specialty Outpatient Other 2008 2009 2010 2011 2012 2013 LTM Q1 2014
Slide 24: Annual Capital Expenditures
Annual Capital Expenditures ($ in millions) 2008 2009 2010 2011 2012 2013 Maintenance Development $52 $ 46 $58 $ 68 $ 74 $57
Slide 25: Free Cash Flow
Free Cash Flow Free Cash Flow1 ($ in millions) Note: Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment 1 See Slide 29 for non-GAAP reconciliation Focus on Free Cash Flow Generation $51 $108 $171 $231 $119 $93 2008 2009 2010 2011 2012 2013
Slide 26: 2014 Operational Focus
2014 Operational Focus Improve LTACH education process to STACHs Reduce variations in physician practice patterns Tighter labor management efficiencies Accelerate procurement savings Speed up real time data delivery to line level operators
Slide 27: Appendix: Additional Materials
Appendix: Additional Materials
Slide 28: Non-GAAP Reconciliation
Non-GAAP Reconciliation 2008 2009 2010 2011 2012 2013 Q1 ‘13 Q1 ’14 LTM Q1 ’14 Net Income $ 25 $ 79 $ 82 $ 113 $ 154 $ 123 $ 37 $ 35 $ 121 (+) Income tax 26 37 42 71 90 75 22 22 75 (+/-) Equity in losses/(earnings) of unconsolidated subsidiaries - - 1 (3) (8) (2) (1) (1) (2) (+/-) Other expense / (i
Slide 29: Select
F | 4 Select MEDICAL
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