Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Jefferies 3rd Annual Healthcare Conference (June 2009)
30 slides from Encompass Health's conference presentation, Jun 17, 2009
Slide 1: HealthSouth Corporation
Exhibit 99.1 HealthSouth Corporation Jefferies 3rd Annual Healthcare Conference New York June 18, 2009 1
Slide 2: Cautionary Statements
Cautionary 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, projec
Slide 3: HealthSouth
HealthSouth Largest Provider of Inpatient Rehabilitative Healthcare Services in the U.S. Provider of Additional Post-Acute Services Operational Components 93 Rehabilitation Hospitals 48 Outpatient Satellites 6 Long-Term Acute Care Hospitals 25 Hospital-Based Home Health Agencies Major Services IRH L
Slide 4: Q1 2009 Recap
Q1 2009 Recap Discharge Volume Consolidated Net Operating Revenues ($ Millions) + 2.3% + 5.7% Q1 08 Q1 09 Q1 08 Q1 09 Adjusted Consolidated EBITDA(1) Adjusted Income from Continuing Operations ($ Millions) per Diluted Share(1) + 10.7% + 116.7% Q1 08 Q1 09 Q1 08 Q1 09 (1) Reconciliation to GAAP provi
Slide 5: Q1 2009 Recap (cont'd)
Q1 2009 Recap (cont’d) Adjusted Free Cash Flow Three Months Ended March 31, Year Ended (Millions) 2009 2008 2008 Net cash provided by operating activities $ 183.1 $ 41.8 $ 227.2 Incremental income tax expense (0.3) (1.4) (5.0) Capital expenditures for maintenance (1) (7.5) (8.7) (37.3) Net settlemen
Slide 6: Strategy
Strategy: 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 will pursue ac
Slide 7: Operational Excellence = "High-Quality" Care
Operational Excellence = “High-Quality” Care FIM Gain LOS Efficiency *Benchmark = Expected Risk Adjusted FIM Change Avg. ** Benchmark = Expected, Risk Adjusted LOS Efficiency Source: UDSmr Database – On Demand Reports 2008 Year End Report 7
Slide 8: Operational Excellence = "Cost-Effective" Care
Operational Excellence = “Cost-Effective” Care CMS Fiscal Year 2010 IRF Rate Setting File Analysis(1) HealthSouth Total Hospitals (2) Freestanding (2) Units (2) Number of IRFs 227 978 1,205 93 Average # of Discharges per IRF 616 242 312 747 Outlier Payments as % of Total Payments 1.72% 3.76% 3.00% 0
Slide 9: Deleveraging
Deleveraging Debt Maturities as of 3/31/09 (3) ($ Billions) ($ Millions) $910.7 $737.5 Undrawn revolver $400.0 goes away in 2012 $16.2 $21.9 $21.2 $20.6 Debt to EBITDA 6.3x 6.3x 5.3x 4.9x (2) No Near-Term Financing Year-End 2012 Goal: 3.5x to 4.0x S & P from B “Stable” to B “Positive” Moody’s Upgrad
Slide 10: Disciplined Growth
Disciplined Growth 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 Cash pay-back: 2 – 3 years New hospitals: Operational Location Announced Type of Investment Installed
Slide 11: "Bundling"
“Bundling” Policy Objective: Reduce Readmission Rates Percent Discharged Percent Percent Died Post-Acute Care from Hospital to Rehospitalized after in PAC ("PAC") Setting PAC Setting Using PAC Setting Setting Skilled Nursing Facility 17.3% 22.0% 5.4% Home Health 16.0% 18.1% 0.8% Long-Term Care Hospi
Slide 12: "Bundling" – Can it Work?
“Bundling” – Can it Work? Six core principals must serve as the foundation for any bundling payment system: 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 ca
Slide 13: Q209 Initial Observations
Q209 Initial Observations Volume: Through May, continued positive discharge growth trend. Pricing: Comparable quarter-over-quarter. Reminder: Q208 was first quarter of Medicare pricing roll-back. Expenses: Continued focus on cost-effective patient care. 13
Slide 14: 2009 Guidance
2009 Guidance Adjusted Consolidated EBITDA(1) 2009 Range: $342.0 million to $352.0 million Expect to be at the higher end of the range Will reassess after Q2 Adjusted Earnings per Share(1)(2) 2009 Range: $0.85 to $0.90 per share Expect to be at the higher end of the range Key Drivers: Sustainable di
Slide 15: Investment Considerations
Investment Considerations Industry Leader: Attractive industry with good demographics. Strong Cash Flows: Flexibility in use of FCF. Continued Deleveraging: Reduce leverage to between 3.5x and 4.0x by YE 2012. Solid Organic Growth: Volume growth + expense management. Opportunistic, Disciplined Expan
Slide 16: Appendix and Reconciliations
Appendix and Reconciliations 16
Slide 17: Strong Discharge Growth
(1) Strong Discharge Growth (1) Includes all 93 HLS inpatient rehab hospitals and six long-term acute care hospitals. 17
Slide 18: Continued Market Share Gains
Continued Market Share Gains (1) (2) % Discharges of HLS vs. UDS Industry Sites(1) Projected sustainable discharge growth: 4+% annual (1) Data provided by UDSMR , a data gathering and analysis organization for the rehabilitation industry; represents ~ 65-70% of industry, including 88 HLS sites. (2)
Slide 19: Revenues (Q1 2009 vs. Q1 2008)
Revenues (Q1 2009 vs. Q1 2008) Favorable/ (Unfavorable) (Millions) 1st Qtr. 2009 1st Qtr. 2008 Change Inpatient $ 433.1 $ 419.1 3.3% Outpatient and other 42.0 45.1 (6.9%) Consolidated net operating $ 475.1 $ 464.2 2.3% (Actual Amounts) Discharges 27,807 26,309 5.7% Net patient revenue / discharge $
Slide 20: Expenses (Q1 2009 vs. Q1 2008)
Expenses (Q1 2009 vs. Q1 2008) Favorable/ (Unfavorable) (Millions, except percent) 1st Qtr. 2009 1st Qtr. 2008 Change Salaries and benefits $ 234.7 $ 230.4 (1.9%) Percent of net operating revenues 49.4% 49.6% 20 bps EPOB (employees per occupied bed) 3.47 3.53 1.7% Hospital related expenses $ 114.6 $
Slide 21: Operational and Labor Metrics
Operational and Labor Metrics Three Months Ended March 31, 2009 2008 (In Millions) Net patient revenue-inpatient $ 433.1 $ 419.1 Net patient revenue-outpatient and other revenues 42.0 45.1 Net operating revenues $ 475.1 $ 464.2 (Actual Amounts) (1) Discharges 27,807 26,309 Outpatient visits 285,101
Slide 22: Payment Sources
Payment Sources Three Months Ended March 31, 2009 2008 Medicare 68.6% 68.2% Medicaid 2.1% 2.3% Workers' compensation 1.7% 2.2% Managed care and other discount plans (1) 22.2% 21.3% Other third-party payors 3.2% 3.5% Patients 0.8% 0.8% Other income 1.4% 1.7% Total 100.0% 100.0% (1) Medicare Advantage
Slide 23: Interest Rate Swaps
Interest Rate Swaps (Millions) (3) (1) We have the flexibility to peg 1,2,3 or 6 month Libor, or Prime. (2) Forward-starting interest rate swaps (designated as cash flow hedges). (3) Effective June 10, 2009, the term loan interest is Libor plus 225. 23
Slide 24: Debt Schedule
Debt Schedule Debt Balances March 31, December 31, Q109 Debt (1)(2) (Millions) 2009 2008 Reduction Advances under $400 million revolving credit facility, March 2012 $ - $ 40.0 $ (40.0) Term loan facility - March 2013 757.1 783.6 (26.5) Bonds Payable: 8.375% Senior Notes due 2011 0.3 0.3 - 7.625% Sen
Slide 25: Non-Operating Cash/Tax Position
Non-Operating Cash/Tax Position Cash Refunds Future Cash Tax Payments Federal tax recoveries virtually complete. Expect to pay about $5-7 million per year of Approx. $42 million received in Q109. income tax. State income tax Alternative Minimum Tax (AMT) State tax refunds in progress. With over $2.5
Slide 26: Outstanding Share Summary
Outstanding Share Summary 1st Qtr.(4) 1st Qtr. Year-End(4) Year-End (Millions) 2009 2008 2008 2007 Average for the Period Basic shares outstanding (2) (3) 87.5 78.9 83.0 78.7 (1) (2) (3) Diluted shares outstanding 100.9 92.3 96.4 92.0 End of Period Basic shares outstanding (2) (3) 88.3 79.1 88.0 78.
Slide 27: First Quarter Reconciliation of Net Income to Adjusted Income from Continuing Operations
First Quarter Reconciliation of Net Income to Adjusted Income from Continuing Operations and Adjusted Consolidated EBITDA (1)(3) 27
Slide 28: Full Year Reconciliation of Net Income to Adjusted Income from Continuing Operations
Full Year Reconciliation of Net Income to Adjusted Income (Loss) from Continuing Operations and Adjusted Consolidated EBITDA (1)(3) Year Ended December 31, (2) (2) (In Millions, Except Per Share Data) 2008 Per Share 2007 Per Share Net income $ 281.8 $ 3.40 $ 718.7 $ 9.13 Income from discontinued ope
Slide 29: First Quarter Reconciliation of Adjusted Consolidated EBITDA to Operating Cash Flow
First Quarter Reconciliation of Adjusted Consolidated EBITDA(1) to Net Cash Provided by Operating Activities 29
Slide 30: Reconciliation Notes
Reconciliation Notes 1. Adjusted income (loss) from continuing operations and Adjusted Consolidated EBITDA are non-GAAP financial measures. Management and some members of the investment community utilize adjusted income from continuing operations as a financial measure and Adjusted Consolidated EBIT
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