Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Stifel Nicolaus / Johns Hopkins Health Policy Symposium (September 2009)
33 slides from Encompass Health's conference presentation, Sep 14, 2009
Slide 1: HealthSouth Corporation
HealthSouth Corporation Stifel Nicolaus / Johns Hopkins Health Policy Symposium Handout Baltimore September 15, 2009 Exhibit 99.1
Slide 2: Table of contents
Cautionary Statements. Company Summary .. Q2 2009 Recap..... HealthSouth Strategy Operational Excellence Deleveraging..... Disciplined Growth Q3 2009 Initial Observation: 2009 Guidance Investment Considers Appendix and Reconciliations Strong Discharge Growth... Continued Market Share Gains. Revenues
Slide 3: Note Regarding Forward-Looking Statements
Note Regarding Forward-Looking Statements The information contained in this presentation includes certain estimates, projections and other forward-looking information that reflect our current views with respect to future events and financial performance. These estimates, projections and other forwar
Slide 4: Largest Provider of Inpatient Rehabilitative Healthcare Services in the U.S.
Operational Components Major Services Largest Provider of Inpatient Rehabilitative Healthcare Services in the U.S. Provider of Additional Post-Acute Services HealthSouth IRH LTCH 94 Rehabilitation Hospitals 44 Outpatient Satellites 6 Long-Term Acute Care Hospitals 25 Hospital-Based Home Health Agenc
Slide 5: Q2 2009 Recap
+ 5.6% Discharge Volume Consolidated Net Operating Revenues ($ Millions) + 5.9% + 9.4% Adjusted Consolidated EBITDA (1) ($ Millions) + 129.4% Adjusted Income from Continuing Operations per Diluted Share (1)
Slide 6: Q2 2009 Recap (cont'd)
Q2 2009 Recap (cont’d) (1) Includes capital expenditures for the hospital refresh program.
Slide 7: HealthSouth Strategy
to HealthSouth Near term To create shareholder value as the preeminent provider of rehabilitative care in the U.S. by: – Driving organic growth through operational excellence ; – Creating a strong balance sheet through deleveraging ; and – Pursuing disciplined, opportunistic growth . Longer Term We
Slide 8: Operational Excellence = High-Quality Care
FIM Gain LOS Efficiency LOS Efficiency = Functional gain divided by length of stay Source: UDSmr Database - On Demand Reports 2008 Year End Report FIM Gain = Change in Functional Independent Measurement (based on an 18 point assessment) from Admission to Discharge ** Benchmark = Expected, Risk Adjus
Slide 9: Operational Excellence = Cost-Effective Care
Freestanding (2) Units (2) Total HealthSouth Hospitals (2) Number of IRFs 228 953 1,181 94 Average # of Discharges per IRF 649 237 316 822 Outlier Payments as % of Total Payments 1.32% 4.08% 3.00% 0.43% Average Estimated Total Payment per Discharge for FY 2010 $16,452 $16,741 $16,626 $15,996 Average
Slide 10: Deleveraging
Goal: 3.5x to 4.0x - No later than YE 2012 • No Near-Term Financing • S & P from B “Stable” to B “Positive” • Moody’s Upgrade to B2 “Stable” ($ Billions) Deleveraging Debt to EBITDA Current undrawn revolver matures in 2012 $400.0 Debt Maturities (3) (Millions) (1)
Slide 11: Disciplined Growth
Disciplined Growth (1) Pending state license survey. (2) CON is being appealed; operational date may change. Bed expansions : • Approximately 100 beds being added in 2009 and a similar amount in 2010. • Average investment per bed: – Internal renovation = $15 - 45K – New construction = $100 - 250K •
Slide 12: Q309 Initial Observations
Q309 Initial Observations Volume : ü Through August, continued positive discharge growth trend. ü Remain on track for 4+% growth in second half of 2009. Pricing : ü Comparable quarter over quarter. Expenses : ü Continued focus on high-quality, cost-effective patient care. ü Continue to monitor pendi
Slide 13: 2009 Guidance
2009 Guidance (1) Reconciliation to GAAP provided on slides 30 through 33. (2) Adjusted income from continuing operations per diluted share. Adjusted Consolidated EBITDA (1) • 2009 Range: $354 million to $362 million • 6 Month 2009 actual (1) : $192.7 million Adjusted Earnings per Share (1)(2) • 200
Slide 14: Investment Considerations
Investment Considerations ü Industry Leader : Attractive industry with good demographics. ü Strong Cash Flows : Flexibility in use of FCF. ü Continued Deleveraging : Reduce leverage to between 3.5x and 4.0x no later than YE 2012. ü Solid Organic Growth : Volume growth + expense management. ü Opportu
Slide 15: Appendix and Reconciliations
Appendix and Reconciliations
Slide 16: Strong Discharge Growth
(1) Includes 90 consolidated HealthSouth inpatient rehab hospitals and six long-term acute-care hospitals. (1)
Slide 17: Continued Market Share Gains
Projected sustainable discharge growth: 4+% annual (1) Data provided by UDS MR , a data gathering and analysis organization for the rehabilitation industry; represents ~ 65-70% of industry, including 90 HealthSouth sites. (2) Includes all 90 HealthSouth inpatient rehab hospitals and six long-term ac
Slide 18: Revenues (Q2 2009 vs. Q2 2008)
Revenues (Q2 2009 vs. Q2 2008) • Inpatient revenue growth was driven by strong discharge volumes. – Volume growth was driven by the sustained TeamWorks effort and disciplined development. – Same store discharge growth was 4.7%. • Net patient revenue / discharge was higher in Q209 due to an increasin
Slide 19: Expenses (Q2 2009 vs. Q2 2008)
Expenses (Q2 2009 vs. Q2 2008) – Comparison for Q2 affected by a reduction of self-insurance costs resulting from revised actuarial estimates in Q208. – Increased provision for doubtful accounts to reflect aging of pending Medicare appeals.
Slide 20: Revenues (6 months)
Favorable 6 Months 6 Months (Unfavorable) (Millions) 2009 2008 Change Inpatient $ 872.1 $ 829.6 5.1% Outpatient and other 86.7 91.2 (4.9%) Consolidated net operating $ 958.8 $ 920.8 41% (Actual Amounts) Discharges 56,301 53,299 5.6% Net patient revenue / discharge $ 15,490 $ 15,565 (0.5%)
Slide 21: Expenses (6 months)
(Millions, except percent) Salaries and benefits Percent of net operating revenues EPOB (employees per occupied bed) Hospital related expenses (other operating, supplies, occupancy, bad debts) Percent of net operating revenues General and administrative (excludes 123(R) compensation) Percent of net
Slide 22: Operational and Labor Metrics
Operational and Labor Metrics (1) Includes all 90 HealthSouth inpatient rehab hospitals and six long-term acute care hospitals. (2) Excludes 388 and 399 full-time equivalents for the three months ended June 30, 2009 and 2008, respectively, and 392 and 422 full-time equivalents for the six months end
Slide 23: Payment Sources
Payment Sources (1) Managed Medicare revenues are included in “Managed care and other discount plans.”
Slide 24: Interest Rate Swaps
Interest Rate Swaps (Millions) (1) We have the flexibility to peg 1,2,3 or 6 month Libor, or Prime. (2) Lower interest rate on term loan as a result of the Moody’s upgrade. (3) In June 2009, we entered into a received-fixed rate swap as a mirror offset to $100.0 million of the $1,056 million interes
Slide 25: Debt Schedule
Debt Schedule (Millions) (1) The Company had $49.8 million in cash and cash equivalents as of June 30, 2009. (2) Credit Agreement limits debt pay down on non-term loan balances. We have the ability to buy back non-term loan debt with the discretionary cash available to the Company.
Slide 26: Non-Operating Cash/Tax Position
Non-Operating Cash/Tax Position Cash Refunds as of June 30, 2009 • Federal tax recoveries virtually complete. – Approx. $42 million received. • State tax refunds in progress. – Approx. $11 million received. – Approx. $10.5 million net receivable on the balance sheet. Future Cash Tax Payments • Expec
Slide 27: "Bundling"
“Bundling” Policy Objective: Reduce Readmission Rates Note: Use of home healthcare and hospice is based on care that starts within three days of discharge. Other PAC care starts within one day of discharge. Home health use includes episodes that overlap an inpatient stay. Source: Medicare Payment Ad
Slide 28: "Bundling" - Can it Work?
“Bundling” - Can it Work? 1. Physicians must remain ultimately responsible for deciding patients’ post-acute needs. 2. Patients must maintain their right to choose where they receive care. 3. Payments for post-acute care must be appropriate to ensure quality. 4. Payments for post-acute care must “fl
Slide 29: Outstanding Share Summary
Notes: (1) Completed an equity offering for 8.8 million shares on June 27, 2008. (2) Does not include 2.0 million warrants issued in connection with a January 2004 loan repaid to Credit Suisse First Boston. In connection with this transaction, we issued warrants to the lender to purchase two million
Slide 30: Three & Six Months Reconciliations of Net Income to Adjusted Income
Three & Six Months Reconciliations of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA (1) (3)
Slide 31: 2008 Year-End Reconciliation of Net Income to Adjusted Income
2008 Year-End Reconciliation of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA") () ‘Year Ended December 34 (tn Miions, Except Per Share Data) 2008 Per Share™ Net income a we § 3a0 Income tram discontinued operations, net of tax, attributable to HealthSouth
Slide 32: YTD Reconciliation of Adjusted Consolidated EBITDA to Net Cash
YTD Reconciliation of Adjusted Consolidated EBITDA (1) to Net Cash Provided by Operating Activities
Slide 33: Reconciliation Notes
Reconciliation Notes 1. Adjusted income from continuing operations and Adjusted Consolidated EBITDA are non- GAAP financial measures. The Company’s leverage ratio (Total Consolidated Debt to Adjusted Consolidated EBITDA for the trailing four quarters) is, likewise, a non-GAAP financial measure. Mana
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