Genesis Healthcare, Inc. · OTC:GENNQ
Genesis Healthcare — UBS Healthcare Services Conference 2004
29 slides from Genesis Healthcare's conference presentation, Feb 2, 2004
Slide 1: Genesis HealthCare Corporation
Genesis HealthCare Corporation UBS Healthcare Services Conference February 2, 2004
Slide 2: Forward Looking Statements
Forward Looking Statements Certain statements made in this presentation which are not historical facts may be “forward- looking” statements (as defined in the private securities litigation reform act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-l
Slide 3: Today's Agenda
Today’s Agenda • Company Overview • Strategic Priorities • Industry Issues • Financial Overview 2 2
Slide 4: Company Overview
Company Overview
Slide 5: Genesis HealthCare Corporation
Genesis HealthCare Corporation • Leading provider of healthcare and support services to the elderly population − Inpatient facilities generate approximately 90% of GHC’s revenues − Focus on higher acuity and medically complex patients • Geographically concentrated inpatient facilities − Located prim
Slide 6: Company Highlights
Company Highlights • Valuable portfolio of high quality assets − Strong regional concentration − Significant facility ownership • Stable reimbursement outlook − Medicare: Administrative fix and therapy cap extension − Medicaid: Concentration in states with above average rate increases • Substantial
Slide 7: Strategic Priorities
Strategic Priorities
Slide 8: Strategic Priorities
Strategic Priorities • Focus on operational improvements − Improve clinical outcomes to enhance quality payor mix − Reduce labor costs Reduce agency utilization Minimize overtime Improve retention • Realize other operating efficiencies − Overhead − Medical supplies − Worker’s compensation • Re
Slide 9: Leveraging Regional Concentration
Leveraging Regional Concentration • GHC operates 215 facilities, consisting of 192 skilled nursing facilities and 23 assisted living facilities in 12 states Joint- Wholly Owned / Region Owned Leased Managed Beds Mid-Atlantic 49 19 12 11,077 Chesapeake / 35 12 20 7,833 Allegheny New England 37 6 25 7
Slide 10: Clinical Outcomes
Clinical Outcomes • Realignment of clinical support functions • Establishment of measurable clinical benchmarks • Alignment of incentives 9 9
Slide 11: Industry Leading Occupancy
Industry Leading Occupancy % Occupancy 94.0% 91.9% 91.9% 92.0% 92.1% 91.5% 92.0% 90.0% 88.4% 88.2% 88.0% 88.2% 88.0% na 86.0% 84.0% 82.0% FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 Industry Median (1) GHC (1) Source: American Health Care Association 10 10
Slide 12: ECC & Customer Flow
ECC & Customer Flow ElderCare Line • Customer Acquisition (strategic) Pre-Admission Pre-Admission − Build Referral Network Evaluation Evaluation − Manage relationships • Customer Assessment (tactical) External Care Coord − Initiate patient assessment during the Customer Customer Assessment Assessmen
Slide 13: Increasing Medicare Census
Increasing Medicare Census % of SNF Patient Days 18.0% 16.0% 16.8% 16.0% 14.0% 14.5% 12.0% 13.0% 11.2% 10.0% FY1999 FY 2000 FY 2001 FY 2002 FY 2003 Note: Excludes discontinued operations 12 12
Slide 14: Improving Nursing Labor Utilization
Improving Nursing Labor Utilization 13.0% 11.9% 12.0% 11.0% 10.0% 8.7% 9.0% 8.2% 8.0% 7.4% 7.4% 7.7% 7.1% 7.0% 7.1% 6.6% 7.0% 6.0% Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Agency Nursing Labor % of Total Labor Costs Overtime Hours % of Total Productive Hours 13 13
Slide 15: Other Operating Efficiencies
Other Operating Efficiencies • Implement spend management function • Centralize key business processes • Enhance existing workplace safety programs • Improve leverage of information technology 14 14
Slide 16: Experienced Management
Experienced Management Years of Healthcare Title Experience Background George V. Hager, Jr. Chief Executive 25+ Joined GHVI in 1992 and was most recently CFO. Officer Spent 20 years at KPMG, LLC in their healthcare practice James V. McKeon Chief Financial 15+ Joined GHVI in 1994 as Director of Finan
Slide 17: Industry Issues
Industry Issues
Slide 18: Reimbursement Outlook
Reimbursement Outlook • Stable reimbursement environment − Upward adjustment of Medicare market basket to 3.0% for 2004 − 3.26% Medicare Administrative Fix ($10 per day, $10 million in revenue and EBITDA) • Rehabilitation therapy caps − In November 2003, the Congress passed the Medicare Prescription
Slide 19: Medicaid Rate Environment
Medicaid Rate Environment • Medicaid revenues approximate 50% of inpatient revenues • Top 5 states represent 79% of Medicaid revenues Est. Annualized Contribution Date of Rate FY ’04 vs. State to Medicaid Revenue Increase FY ’03 PA $153.2 million 7/1 5.3% NJ $135.2 million 7/1; 4/1 6.4% MD $83.7 mil
Slide 20: Proactive Liability Management
Proactive Liability Management • Limited exposure to high risk states and significant claims experience − Sold 10 SNFs and 5 ALFs for $34.8 million to exit Florida • Fully-funded program through captive insurance subsidiary • Fully insured, per occurrence and aggregate • No prospective cash versus a
Slide 21: Liability Insurance Program
Liability Insurance Program Program Structure June ’03 – ‘04 XL Insurance Co. $50 million per occurrence aggregate in excess of $50 million XL Insurance Co. $40 million per occurrence aggregate in excess of $10 million MaxRe $4 million per occurrence aggregate in excess of $6 million CNA Insurance C
Slide 22: GL/PL Premium Expense
GL/PL Premium Expense LHC Excess Owned $8,140,000 $4,863,176 Managed $2,525,304 $1,140,302 NeighborCare $ 534,196 $ 362,250 Total $11,200,000 $6,363,728 21 21
Slide 23: Financial Review
Financial Review
Slide 24: Free Cash Flow – Pro Forma 9/30/03
Free Cash Flow – Pro Forma 9/30/03 ($ in millions) Pro Forma FY 2003 EBITDAR $130.8 Cash lease expense (24.7) Capital expenditures (33.1) Cash interest (32.4) Cash taxes (1) 0.0 Increase in working capital (estimated) (5.0) Total free operating cash flow $35.6 3.26% Administrative Fix $10.0 Total $4
Slide 25: Significant Asset Value
Significant Asset Value ($ in thousands, except per bed) Pro Forma September 30, 2003 Book Value Market Value Accounts Receivable, net $188,123 $188,123 Advance Rate 100.0% 75.0% A/R Value $188,123 $141,092 Number of Owned Beds 15,444 15,444 (1) Value per Bed $40,445 $50,935 Facility-Level PP&E Valu
Slide 26: Accounts Receivable
Accounts Receivable ($ in millions) Days Sales Outstanding Inpatient Services Aging Categories Change 60 Sept-02 Sept-03 $ % 55 48.2 47.4 Current $90.5 $84.1 -$6.4 -7.1% 50 46.0 43.3 Over 30 26.2 29.0 2.8 10.7% 45 42.5 42.6 Over 60 12.4 11.7 -0.7 -5.6% 40 Over 90 53.4 48.7 -4.7 -8.8% 35 Total $182.5
Slide 27: Pro Forma Capitalization – 9/30/03
Pro Forma Capitalization – 9/30/03 ($ in millions) Pro Forma as Adjusted % of Cap Cash and Cash Equivalents $65.0 - Senior Debt: New Revolver(1) - 0.0% Term Loan B 185.0 19.0% Mortgages and Other Debt 53.1 5.5% Total Senior Debt 238.1 24.5% Senior Sub Notes due 2013 225.0 23.1% Total Debt 463.1 47.6
Slide 28: Pro Forma Credit Statistics – 9/30/03
Pro Forma Credit Statistics – 9/30/03 ($ in millions) Pro Forma As Adjusted (1) Net Debt/EBITDA 3.9x Adjusted Net Debt/EBITDAR(1) 4.7x Total Debt/Book Capitalization 47.6% EBITDA/Interest 3.3x (EBITDA-Capex)/Interest(2) 2.2x Note: EBITDA and EBITDAR, from continuing operations only, adjusted for the
Slide 29: Company Highlights
Company Highlights • Valuable portfolio of high quality assets − Strong regional concentration − Significant facility ownership • Stable reimbursement outlook − Medicare: Administrative fix and therapy cap extension − Medicaid: Concentration in states with above average rate increases • Substantial
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