Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Investor Presentation (February 2012)
92 slides from Encompass Health's investor presentation, Feb 28, 2012
Slide 1: Investor Reference Book – Post Q4 2011 Earnings Release
Post Q4 2011 Earnings Release – Last updated February 28, 2012 I N V E S T O R R E F E R E N C E B O O K
Slide 2: Forward-Looking Statements
The information contained in this presentation includes certain estimates, projections and other forward- looking information that reflect our current outlook, views and plans with respect to future events, including legislative and regulatory developments, strategy, capital expenditures, developmen
Slide 3: Table of Contents
Table of Contents 4-16 17-27 28-36 37-40 41-45 46-51 52-56 57-68 69-81 82-85 Reconciliat ions to GAAP………………………………………………………………………………………………………………………………………………………..86-92 Our Company…………………………………………………………………………………………………………………………… Industry Structure………………………………………………………………………………………………………………………………………………………
Slide 4: Our Company: Portfolio as of Dec. 31, 2011
Portfolio – As of Dec. 31, 2011 99 Inpatient Rehabilitation Hospitals (“IRF”) • 29 operate as JV’s with Acute Care Hospitals 26 Outpatient Rehabilitation Satellite Clinics 25 Hospital-Based Home Health Agencies 27 + Puerto Rico Number of States Key Statistics ~ 22,000 Employees ~ $2.0 Billion Revenu
Slide 5: Our Hospitals
Our Hospitals Major Services • Rehabilitation Physicians: manage and treat medical needs of patients • Rehabilitation Nurses: oversee treatment programs of patients • Physical Therapists: address physical function, mobility, safety • Occupational Therapists: promote independence and re-integration •
Slide 6: Our Patients
Our Patients 6 Most Common Conditions (Q4 2011) 1. Neurological 17.5% 2. Stroke 16.4% 3. Debility 10.8% 4. Fracture of the lower extremity 10.5% 5. Other orthopedic conditions 10.0% 6. Knee/Hip replacement 8.6% 7. Brain injury 7.7% 8. Cardiac conditions 4.0% 9. Spinal cord injury 3.7% 10. All other
Slide 7: Our Quality: FIM Gain
24 26 28 30 32 34 36 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Our Quality FIM Gain Change in Functional Independence Measurement (based on an 18 point assessment) from admission to discharge HealthSouth UDS Average (1) 7 (1) Average = Expected, Risk-adjusted fo
Slide 8: Total Inpatient Rehabilitation Facilities: CMS Rate Setting Data
(1) The 96 for HLS does not include HealthSouth Sugar Land Rehabilitation Hospital, purchased in September 2010; it was included in the 136 non-HLS freestanding. Also, does not include HealthSouth Rehabilitation Hospital of Cypress, TX, which opened in October 2011, or HealthSouth Rehabilitation Hos
Slide 9: CMS Fiscal Year 2012 IRF Rate Setting File Analysis
CMS Fiscal Year 2012 IRF Rate Setting File Analysis Notes: (1) All data provided was filtered and compiled from the Centers for Medicare and Medicaid Services (CMS) Fiscal Year 2012 IRF rate setting Correction Notice file found at http://www.cms.gov/InpatientRehabFacPPS/07_DataFiles.asp#. The data p
Slide 10: Our Payors (Q4 2011)
Our Payors (Q4 2011) Prospective Payment System (“PPS”) • Payments based on Case Mix Groups (“CMGs”) – Diagnosis of patient’s illness • Fixed payment per CMG adjusted for: – Acuity/severity – Regional wage differential – Patient outcomes • Per diems for “short stays” Per Diem or CMG • Negotiated rat
Slide 11: Our Historic Discharge Growth vs. Industry
HealthSouth’s volume growth has outpaced competitors’ (1) Data provided by UDSMR, a data gathering and analysis organization for the rehabilitation industry; represents ~ 65-70% of industry, including HealthSouth sites. (2) Includes consolidated HealthSouth inpatient rehabilitation hospitals classif
Slide 12: Our Track Record
$1,608 $1,701 $1,785 $1,878 $2,027 2007 2008 2009 2010 2011 Revenue Our Track Record ($ in millions) (1) Reconciliation to GAAP provided on slides 48 and 87 - 92. (2) 2010 includes an income tax benefit of ~$741 million primarily due to the reversal of a substantial portion of the valuation allowanc
Slide 13: Our Track Record: Debt, Leverage and Free Cash Flow
$2.04 $1.81 $1.66 $1.51 $1.25 0 1 2 3 4 5 6 7 $1.00 $1.25 $1.50 $1.75 $2.00 $2.25 YE 2007 YE 2008 YE 2009 YE 2010 YE 2011 Total Debt 6.7x 2.7x Our Track Record 13 Leverage Ratio (1) (billions) ($79) $9 $155 $181 $243 $11 ($70) ($20) $30 $80 $130 $180 $230 2007 2008 2009 2010 2011 Adjusted Free Cash
Slide 14: Managing Through Medicare Cuts and Recession
MMSEA (Final settlement of 60% rule) Medicare Price Rollback & 18 Month Freeze 1st Medicare IRF Price Increase Since 2007 CMS Implements New Coverage Criteria for IRF Admissions PPACA Signed Into Law; Price Adjustment Minus 25 bps Price Increase With PPACA Adjustment RECESSION 25,000 25,500 26,000 2
Slide 15: Our Assets
15 3,169 Licensed Beds in CON States Our Assets 99 (1) Inpatient Rehabilitation Hospitals; 6,461 Licensed Beds (2) 3,292 Licensed Beds in Non-CON States 24 Own Hospital Building Only 40 Own Building and Land 35 Lease Building and Land A Certificate of Need (CON) is a legal document required in many
Slide 16: Strong and Sustainable Business Fundamentals
Strong and Sustainable Business Fundamentals • Located in Medicare growth markets • Flexible, accelerated de novo strategy • Hospital acquisitions and unit consolidations Growth Opportunities • Strong balance sheet; ample liquidity, no near-term maturities • Minimal cash taxes ($7 - $10 million / ye
Slide 17: Industry Structure
Industry Structure 17
Slide 18: National Healthcare Spending
P e rs o n a l H e a lthc a re : $ 2 ,1 8 6 .0 Source: Center for Medicare & Medicaid Services, National Health Expenditure Data for year ended December 2010 – Table 2 Overall Healthcare Spending Hospital Care Includes Inpatient Rehabilitation, Long-Term Care Hospitals $814.0 $143.1 $688.6 $128.5 $7
Slide 19: Medicare 2010 Spending
Medicare 2010 Spending = $509.7 Billion (1) (1) Percentages are based upon total Medicare spending of $520.3 billion, before $10.6 billion of recoveries for 2010 (CBO Medicare March 2011 Medicare Baseline – Page 2). (2) Inpatient Hospital includes spending for acute care hospitals along with, inpati
Slide 20: Continuum of Healthcare Services
Preventive Routine health care that includes screenings, check-ups, and patient counseling to prevent illnesses, disease, or other health problems Acute Medical treatment of diseases for which a patient is treated for a brief but severe episode of illness Ambulatory Medical care delivered on an outp
Slide 21: Medicare Spending on Post-Acute Services
$0 $10 $20 $30 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total Medicare Spending on Post-Acute Services $58.5 billion in 2010 Note: These numbers are program spending only and do not include beneficiary copayments. Sources: Center for Medicare & Medicaid Services, Medicare Trustees Report Ma
Slide 22: Geographic Distribution of IRFs, 2009
Geographic Distribution of IRFs, 2009 22 Source: Medpac Report to Congress, Medicare Payment Policy, March 2011 – page 205
Slide 23: Supply of IRFs remained stable in 2009
Supply of IRFs remained stable in 2009 23 Source: Medpac Report to Congress, Medicare Payment Policy, March 2011 – page 208
Slide 24: Total Inpatient Rehabilitation Facilities: CMS Rate Setting Data
(1) The 96 for HLS does not include HealthSouth Sugar Land Rehabilitation Hospital, purchased in September 2010; it was included in the 136 non-HLS freestanding. Also, does not include HealthSouth Rehabilitation Hospital of Cypress, TX, which opened in October 2011, or HealthSouth Rehabilitation Hos
Slide 25: Post-Acute Care Settings and Readmission Rates
Post-Acute Care ("PAC") Setting Percent Discharged from Hospital to PAC Setting Percent Rehospitalized after Using PAC Setting Percent Died in PAC Setting Skilled Nursing Facility 17.3% 22.0% 5.4% Home Health 16.0% 18.1% 0.8% Long-Term Care Hospital 1.0% 10.0% 15.5% Inpatient Rehabilitation 3.2% 9.4
Slide 26: CMS: Inpatient Rehabilitation vs. Skilled Nursing
26 CMS: Inpatient Rehabilitation vs. Skilled Nursing “… MedPAC’s analysis of recent quality measure data related to rehospitalizations suggests that quality of care within SNFs has not been improving … Since 2000, one outcome measure (the risk-adjusted rate of rehospitalization for any of five care-
Slide 27: Future Regulatory Risk
Future Regulatory Risk Inpatient Rehabilitation Facility Skilled Nursing Facility Long-Term Acute Care Hospital Home Health Hospice 1. Re-basing payment system No Yes; RUGS IV and MDS 3.0 parity adjustment for FY 2012 (-12.6%) No Yes; CY re-weighting re-distributes payment from high therapy to low o
Slide 28: Historical Perspective
Historical Perspective 28
Slide 29: Historical Perspective: 2007
Historical Perspective 29 2007 • Divested surgery centers, outpatient and diagnostic divisions • Used proceeds plus tax refund to repay $1.4 billion of debt • Reduced G&A to match residual business size • Piloted TeamWorks sales and marketing • 75% rule frozen at 60% (MMSEA) • Completed all settleme
Slide 30: Historical Perspective: 2008
$50 $90 $130 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Historical Perspective 30 2008 • Established 2008-2010 business model • 4% discharge growth; 5-8% Adjusted EBITDA growth;15-20% adjusted EPS growth • Balanced delevering and growth/development strategies • C
Slide 31: Historical Perspective: 2009
$50 $90 $130 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Historical Perspective 31 2009 • Continued focus on delevering (approx. $151 million in debt repaid) • Focused on organic growth; TeamWorks sustainability module rolled out • Issued 5 million shares for secu
Slide 32: Historical Perspective: 2010
$50 $90 $130 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Historical Perspective 32 2010 • Healthcare reform passed; reduced future market basket updates • Weak acute care referral volumes • Adjusted annual volume growth target to 2.5-3.5% • Development efforts pay
Slide 33: Historical Perspective: 2011
$50 $90 $130 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 2011 Adjusted EBITDA (2) = $466.2 Historical Perspective 33 2011 • Grew volumes 5.2% • Sold 5 long-term acute care hospitals (LTCHs); closed remaining LTCH • Raised $122 million by reopening 2018 and 2022 se
Slide 34: Revenues & Expenses
Revenues & Expenses 34 (1) Employees per occupied bed, or “EPOB,” is calculated by dividing the number of full-time equivalents, including an estimate of full- time equivalents from the utilization of contract labor, by the number of occupied beds during each period. The number of occupied beds is d
Slide 35: Adjusted EBITDA
Adjusted EBITDA (1) 35 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year (Millions) 2011 2011 2011 2011 2010 2010 2010 2010 2009 2009 2009 2009 2011 2010 2009 Net operating revenues 518.1$ 497.7$ 505.1$ 506.0$ 490.9$ 460.8$ 467.3$ 458.6$ 455.1$ 440.2$ 449.0$ 440.6$ 2,026.9$ 1,877.6$ 1,784.9$ Operating e
Slide 36: Outstanding Share Summary and Warrant Information
Outstanding Share Summary and Warrant Information (Millions) Notes: (1) 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 shares of ou
Slide 37: Business Outlook 2012 to 2014
Business Outlook 2012 to 2014 (as of February 28, 2012) 37
Slide 38: Business Outlook: 2012 to 2014
Business Outlook: 2012 to 2014 Business Model • Adjusted EBITDA CAGR: 5-8% (1) (2) • Adjusted Free Cash Flow CAGR: 12-17% (1) (2) Strategy 2011 2012 2013 2014 Delevering (3) Achieved < 3.0x debt to EBITDA < 3.0x debt to EBITDA (subject to operating environment) Growth Same-store growth (Includes bed
Slide 39: Business Outlook: Revenue Assumptions
Business Outlook: Revenue Assumptions Revenue Volume • 2.5% to 3.5% annual growth (excludes acquisitions) • Includes bed expansions, de novos and unit consolidations Pricing 72% 8% 20% FY 2012 (1) FY 2013 FY 2014 Q4 11 - Q3 12 Q4 12 - Q3 13 Q4 13 - Q3 14 Mark t basket update (2) 2.9% 2.8% 2.9% Healt
Slide 40: Business Outlook: Expense Assumptions
Business Outlook: Expense Assumptions Expense Salaries & Benefits (1) Hospital Expenses • Other operating expenses and supply costs tracking with inflation • Occupancy costs relatively constant as percent of revenue • Bad debt expense of approx. 1.3% to1.5% of revenue 2012 2013 2014 Merit increases
Slide 41: Guidance
Guidance (as of February 28, 2012) 41
Slide 42: 2012 Guidance – Adjusted EBITDA
2012 Guidance – Adjusted EBITDA (1) (as of February 28, 2012) 2012 Adjusted EBITDA $475 million to $485 million (1) Reconciliation to GAAP provided on slides 48, 87, 88, and 92. Considerations: Revenue growth of 3.8% to 5.2% ― Discharge growth between 2.5% and 3.5% ― Revenue per discharge growth b
Slide 43: 2012 Guidance – EPS
2012 Guidance – EPS (as of February 28, 2012) Earnings per Share from Continuing Operations Attributable to HealthSouth (1) $1.32 to $1.39 Considerations: Assumes provision for income tax of approx. 40% in 2012 vs. approx. 19% (2) in 2011 Cash taxes expected to be $7 to $10 million Basic share
Slide 44: Income Tax Considerations
Income Tax Considerations GAAP Considerations: •As of 12/31/11, the Company had an ending balance of approx. $1.3 billion in federal NOLs and a remaining valuation allowance of approx. $50 million, primarily related to state NOLs. • 2011 effective tax rate was approx. 19% (1)(2) • Expect effective t
Slide 45: Adjusted Free Cash Flow Considerations
Adjusted Free Cash Flow (1) (2) Considerations (1) Reconciliation to GAAP provided on slide 47. (2) Definition of adjusted free cash flow is net cash provided by operating activities of continuing operations minus capital expenditures for maintenance, net settlements on interest rate swaps, dividend
Slide 46: Free Cash Flow
Free Cash Flow 46
Slide 47: Adjusted Free Cash Flow
Adjusted Free Cash Flow (1) Maintenance capital expenditures are expected to be $75 million to $85 million in 2012. (2) Final swap payment of $10.9 million was made in March 2011. 47 (Millions) 2011 2010 2011 2010 2009 2008 2007 129.6$ 67.1$ 342.7$ 331.0$ 406.1$ 227.2$ 230.6$ 0.3 (2.8) (9.1) (13.2)
Slide 48: Reconciliation of Net Cash from Operating Activities to Adjusted EBITDA
Reconciliation of Net Cash Provided by Operating Activities to Adjusted EBITDA 48 (Millions) 2011 2010 2011 2010 2009 2008 2007 Net cash provided by operating activities 129.6$ 67.1$ 342.7$ 331.0$ 406.1$ 227.2$ 230.6$ Provision for doubtful accounts (6.1) (1.6) (21.0) (16.4) (30.7) (23.0) (28.5) Pro
Slide 49: Priorities for Reinvesting Free Cash Flows
Priorities for Reinvesting HealthSouth’s Free Cash Flows 49 Debt Reduction • Debt prepayment • Purchase leased properties (limited opportunities) • Growth in core business Bed expansions De novo hospitals Acquisitions − Free standing IRFs − Hospital unit IRFs Growth Prioritie s Shareholder Dis
Slide 50: Priorities for Reinvesting Free Cash Flows: Growth
Priorities for Reinvesting HealthSouth’s Free Cash Flows (cont.) 50 •Growth in core business 2012 Assumptions (millions) Bed expansions $20 to $25 (80-100 beds) De novo hospitals $50 to $70 (complete Ocala; start 4 others) Acquisitions (target 2/year) TBD − Free standing IRFs − Hospital unit $
Slide 51: Priorities for Reinvesting Free Cash Flows: Alternatives
Priorities for Reinvesting HealthSouth’s Free Cash Flows (cont.) 51 Debt Reduction • Debt prepayment • Purchase leased properties (limited opportunities) Shareholder Distribution • Share repurchase ($125 million authorization) • Cash dividends (one time or regular) Alternate Opportunitie s Capital A
Slide 52: Refinancing and Delevering
Refinancing and Delevering 52
Slide 53: Debt Schedule
Debt Schedule (1) Based on 2011 and 2010 Adjusted EBITDA of $466.2 million and $409.6 million, respectively; reconciliation to GAAP provided on slides 48, 87, 88, and 92. 53 Change S&P Moody Dec. 31, Dec. 31, in Debt (Millions) Corporate B+ B1 2011 2010 vs. YE 2010 Advances under $500 million revolv
Slide 54: Debt and Liquidity
($ Billions) Year-End 2010 Goal: 3.75x to 4.00x (1) Based on 2008 and 2011 Adjusted EBITDA of $322.6 million and $466.2 million, respectively; reconciliation to GAAP provided on slides 48, 87 – 90, and 92. Debt and Liquidity Dec. 31, Dec. 31, 2011 2010 Cash Available 30.1$ 48.3$ Revolver Total Line
Slide 55: Lower-Cost, Flexible Capital Structure
HealthSouth is now positioned with a lower-cost, flexible capital structure… 55 2012 2013 2014 2015 2016 2016 2017 2018 2019 2020 2021 2022 $337 Senior Notes 7.25% $286 Senior Notes 8.125% $312 Senior Notes 7.75% $98 Term Loan L +225 ($ in millions) $110 Drawn + $45 LC $500 Revolver L+225 December 3
Slide 56: Credit Agreement Key Covenants
Credit Agreement Key Covenants (1) Terms Acquisitions Limited by compliance with leverage and interest coverage covenants currently requiring 4.75x and 2.5x, respectively Restricted payments: Share repurchase (2) $200 million (shared with other restricted payment basket) Other debt repurchase (2) $2
Slide 57: Growth
Growth 57
Slide 58: Organic Growth: A Strategic Framework
Demographics + population growth and changes (weighted by age) = Rehab CAGR Growth goals for the market and/or hospital Sales and Marketing Strategies • Defining “upstream” opportunities • Identifying CMS-13 discharges • “Converting” CMS-13 patients to rehab Market Dynamics • Existing IRF beds • Man
Slide 59: Organic Growth: Compounded Annual Growth Rate
Organic Growth: Compounded Annual Growth Rate (CAGR) (1) (1) Numbers in map are for illustrative purposes only and do not represent actual results. (2)“Weighted for Rehab Services” - methodology weights growth in rehab age groups higher. % CAGR Rehab by Zip Code Weighted for Rehab Services (1) (2) O
Slide 60: De Novo Market Selection Process
De Novo Market Selection Process 60 Active Development List Corporate Assessment Strategic Approach • Build • Buy • JV Regional President Priority Assessment “Deep Dive” Market Assessments Potential Opportunity List (160 opportunities identified) National Market Assessment (3,141 counties in 48 stat
Slide 61: De Novo Evaluation Process
• No guarantee on timeframe or ultimate success • Input from design, operations and real estate • ~ Six acres with expansion capability • Proximity to acute-care providers • Permitting • Land • IRR • NPV • Cash payback ..... CON Approval Site Selection Cost Assessment Pro forma Financials Execution
Slide 62: Illustrative De Novo Timeline
Illustrative De Novo Timeline 62 Day 1 CON Process Construction With CON Design Planning & Zoning Groundbreaking Opening Construction Design Planning & Zoning Groundbreaking Month 20 Opening Day 1 Without CON 6 months to 3 years 20 months
Slide 63: Illustrative De Novo Pro forma (40 bed)
Illustrative De Novo Pro forma (40 bed) 63 Capital Cost $ Range (millions) Low High Construction, design, permitting, etc. $11.0 $14.5 Land 1.5 3.5 Equipment 2.5 3.0 $15.0 $21.0 Pre-opening Expenses (thousands) Low High Operating $200 $300 Salaries, wages and benefits 150 200 $350 $500
Slide 64: De Novo Occupancy and EBITDA Trends
(1) Hospital EBITDA = earnings before interest, taxes, depreciation and amortization directly attributable to the related hospital. De Novo Occupancy and EBITDA(1) Trends 64 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1 2 3 4 5 6 7 8 9 10 11 12 Petersburg Fredericksburg Mesa Loudoun Bristol Cypress
Slide 65: IRF Acquisition Performance
IRF Acquisition Performance 65 Date Acquired Acquired Census Q4 2011 Census Vineland Q3 2008 26 35 Desert Canyon Q2 2010 16 37 Sugar Land Q3 2010 26 37 Ft. Smith Q3 2010 15 39 Value added by HealthSouth • TeamWorks approach to sales/marketing • Labor management tools and “best practices” • Clinical
Slide 66: Portfolio Growth
Portfolio Growth 66 • All projects have minimum IRR of 15% (pre-tax). De novos Acquisitions • Cash Payback (1) = 5 to 7 years • Target: 4/Year • Longer payback period due to: − Design and construction period − Initial ramp-up of operations • Cash Payback (1) = 4 to 6 years • Target: 2/Year Location
Slide 67: Future Growth: Complementary Post-Acute Care Services
67 Acute Care Hospital Discharge Long-Term Acute Care Hospital (1) Hospice Inpatient Rehabilitation Facility (1) Skilled Nursing Facility Home Health (1) (Highest Acuity) (Lowest Acuity) Future Growth: Complementary Post-Acute Care Services Medicare Spending (billions) $5.2 $13.0 $6.3 $28.0 $19.0 #
Slide 68: Growth: Summary
• The Company has adequate cash to fund growth. • The Company continues to have excellent organic growth opportunities. Located in Medicare growth markets Non-discretionary nature of many conditions served Track record of consistent market share gains • De novos and targeted IRF acquisitions w
Slide 69: Operational Initiatives
Operational Initiatives 69
Slide 70: Key Operational Initiatives: Summary
Key Operational Initiatives: Summary • Strong track record of providing high-quality, cost-effective care – Patient functional gains exceed industry norms – Consistent market share gains – Disciplined expense management • Targeted operational strategies to achieve excellence in: – Clinical care (Car
Slide 71: Operational Strategy
Operational Strategy Excellence in … 71 • Care Management TeamWorks project • Identify trends and establish “best practices” for the prevention of acute care transfers • Provide a robust rehabilitation specific clinical education program for nurses and therapists • Electronic clinical information sy
Slide 72: TeamWorks: Care Management
TeamWorks: Care Management 72 Goals • Improve overall operational, patient care and satisfaction outcomes • Streamline delivery of care • Engage interdisciplinary teams • Reduce: ― Complication rate ― Cost per case ― Payor denials • Increase: ― Patient outcomes ― Patient involvement in care decision
Slide 73: TeamWorks: Care Management Initial Observations
TeamWorks: Care Management Initial Observations 73 • Lower transfers (readmissions) back to acute care providers • More clinical resources needed to enable process (added approx. one per hospital) • Higher patient satisfaction scores Clinical Care Operations Service •Care Management implementation c
Slide 74: CPR: Comfort, Professionalism, Respect
CPR: Comfort, Professionalism, Respect • All employees trained in the CPR campaign. • Hospital-based trained facilitators will work directly with employees. • A series of short videos is used to depict common scenarios of patient/staff situations. • Facilitator training is highly interactive, encour
Slide 75: HealthSouth Management Reporting
HEALTHSOUTH MANAGEMENT REPORTING ome —_ e& oi = _ co
Slide 76: BEACON: Hospital-Specific
76 BEACON: Hospital-Specific (1) (1) Numbers in screen shot have been modified for presentation and do not represent actual results.
Slide 77: BEACON: Regional Roll-up
77 BEACON: Regional Roll-up (1) (1) Numbers in screen shot have been modified for presentation and do not represent actual results.
Slide 78: HealthSouth Clinical Information System (CIS)
78 HealthSouth Clinical Information System (CIS)
Slide 79: CIS Benefits and Value Proposition
CIS Benefits and Value Proposition • Streamline sales and marketing process • Clinical charge capture efficiency • Real time awareness of therapy intensity (higher intensity associated with better outcomes) • Enterprise standardized clinical documentation and coding processes • Workflow management,
Slide 80: CIS Timeline
• HealthSouth Rehabilitation Hospital of Northern, VA hospital opened with ACE IT installed • Pilot project kickoff • Signed contract with Cerner for Company-wide implementation starting in 2012 • Piloted installation of CIS in existing hospital (Valley of the Sun) • HealthSouth Rehabilitation Hospi
Slide 81: CIS Installation Cost
CIS Installation Cost 81 • No incentive payments (i.e. “HITECH”) for inpatient rehabilitation hospitals – Only acute care hospitals are eligible (1) • Installation cost will vary by hospital depending on items such as size and physical plan. – Installation cost expected to be in a range of $1 millio
Slide 82: Operational Metrics
Operational Metrics 82
Slide 83: Operational Metrics: Expense Efficiencies
50.8% 23.7% 5.5% 49.7% 23.5% 5.1% 49.1% 22.9% 4.8% 48.4% 22.5% 4.5% Salaries, Wages & Benefits Hospital-related Expenses General & Administrative Operational Metrics: Expense Efficiencies (% of Net Operating Revenues) 2008 2009 2010 2011 2008 2009 2010 2011 2008 2009 2010 2011 3.59 3.52 3.49 3.47 EP
Slide 84: Operational and Labor Metrics
Operational and Labor Metrics (1) (1) All metrics have been reclassified to reflect current continuing operations. (2) Represents discharges from HealthSouth’s 96 consolidated hospitals in Q4 2011, 94 consolidated hospitals in Q3 2011, Q2 2011, Q1 2011, Q4 2010 and Q3 2010, 92 consolidated hospitals
Slide 85: Payment Sources (Percent of Revenues)
Payment Sources (Percent of Revenues) 2011 2010 2011 2010 Medicare 72.8% 71.6% 72.0% 70.5% Medicaid 1.4% 1.6% 1.6% 1.8% Workers' compensation 1.5% 1.5% 1.6% 1.6% Managed care and other discount plans (1) 19.5% 20.6% 19.8% 21.3% Other third-party payors 2.0% 2.2% 2.0% 2.3% Patients 1.2% 1.3% 1.2% 1.3
Slide 86: Reconciliations to GAAP
Reconciliations to GAAP 86
Slide 87: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA (1)(3) (1) (2) (3) – Notes on page 92. 87 (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income 91.5$ 32.3$ 68.3$ 62.5$ 254.6$ (Income) loss from disc ops, net of tax, attributab
Slide 88: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA (1)(3) (1) (2) (3) – Notes on page 92. (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income 50.5$ 57.5$ 41.9$ 789.9$ 939.8$ Income from disc ops, net of tax, attributable to Hea
Slide 89: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA (1) (3) (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income 53.5$ 3.6$ 24.8$ 46.9$ 128.8$ (Income) loss from disc ops, net of tax, attributable to HealthSouth (1.8) (5.2) 5.6 (
Slide 90: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA (1) (3) (in millions, except per share data) Total Per Share Total Per Share Total Per Share Total Per Share Total Per Share Net income 26.4$ 52.4$ 12.8$ 190.2$ 281.8$ Income from disc ops, net of tax, attributable to HealthSouth (18.9) (0.1) (2.5) (11
Slide 91: Reconciliation of Net Income to Adjusted EBITDA
Reconciliation of Net Income to Adjusted EBITDA (1) (3) (in millions, except per share data) Total Per Share Net income 718.7$ Income from disc ops, net of tax, attributable to HealthSouth (462.4) Net income attributable to noncontrolling interests (65.3) Income from continuing operations attributab
Slide 92: Reconciliation Notes for Slides 87-91
Reconciliation Notes for Slides 87-91 1. Adjusted EBITDA is a non-GAAP financial measure. The Company’s leverage ratio (total consolidated debt to Adjusted EBITDA for the trailing four quarters) is, likewise, a non- GAAP financial measure. Management and some members of the investment community util