Encompass Health Corporation · NYSE:EHC
Encompass Health — Investor Day (September 2023)
85 slides from Encompass Health's investor day presentation, Sep 27, 2023
Slide 1: Encompass Health 2023 Investor Day
Encompass Health 2023 Investor Day
Slide 2: Forward-looking statements
Forward-looking statements The information contained in this presentation includes certain estimates, projections and other forward-looking information that reflect Encompass Health’s current outlook, views and plans with respect to future events, including the business outlook and guidance, labor a
Slide 3: Encompass Health 2023 Investor Day
Encompass Health 2023 Investor Day
Slide 4: 2023 YTD Performance
Growth – first half of 2023 2023 YTD Performance 9.6% 10.6% 22.3% Discharge Revenue Adjusted EBITDA Guidance as of August 1, 2023 Net operating revenue $4,750 to $4,810 Adjusted EBITDA $920 to $950 Adjusted EPS $3.31 to $3.53 $ in millions, except per share data 4
Slide 5: Investments since 2009
Investments since 2009 Clinical and information technology • Large data sets • Predictive modeling $250+ • Industry leading clinical million outcomes • High-quality care at a lower cost compared to peers De novo and bed expansions • Opened 51 de novo hospitals $1.8+ • Added more than 1,200 beds bill
Slide 6: Culture of continuous improvement
Culture of continuous improvement Managing shift to Medicare Advantage Enhanced recruiting and retention Strong culture of compliance 6
Slide 7: Growing demand for inpatient rehabilitation services
Growing demand for inpatient rehabilitation services Number of IRFs 65+ Population added from 2010 to 2022 50 73 18 million Industry Encompass Health inclusive of EHC 55 Sources: MedPAC March 2018 Report to Congress, page 277. CMS ‘Inpatient Rehabilitation Facility – General Information’ dataset. 39
Slide 8: The central tenets of our strategy remain to:
The central tenets of our strategy remain to: Add capacity via de novos and bed expansions to address an underserved and growing demand for inpatient rehabilitation services Continue to provide high quality outcomes for medically complex patients and to do so in a cost-effective manner Generate stro
Slide 9: De novos
De novos Speakers Doug Coltharp EVP, Chief Financial Officer Melanie Lewis SVP, Chief Business Development Officer Tom Boyle SVP, Chief Design & Construction Officer
Slide 10: A Brief History & ROIC Discussion
A Brief History & ROIC Discussion Doug Coltharp EVP, Chief Financial Officer
Slide 11: De novos opened by year
De novos opened by year 10 9 8 7 6 5 4 3 2 1 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (P) 11
Slide 12: De novo growth acceleration
De novo growth acceleration 2009 to 2020 2021 to 2023 2024 to 2027 Opened Projected to open Plan to open 28 24 24 to 40 de novos de novos de novos in 12 years in 3 years in 4 years 12
Slide 13: Market Selection
Market Selection Melanie Lewis SVP, Chief Business Development Officer
Slide 14: Custom-built, data-driven market ranking model
Encompass Health uses a custom-built, data-driven, metrics-based model and ranking system incorporating metrics highly correlated to successful extant Encompass Health hospitals. 14
Slide 15: Factors in identifying attractive markets for IRF capacity
Factors to consider in identifying potentially attractive markets for incremental IRF capacity Market analytics: • Demographics • Acute care discharges • Competition Real estate considerations: Potential for tax • Growth potential • Size and/or economic • Proprietary metrics • Typography incentives
Slide 16: Data Driven Market Analysis
CMS claims •Multiple sources of data utilized EHC CMS cost •Data is combined hospitals reports to calculate meaningful metrics Data Driven Market Analysis •Metric-based model and rank developed to score markets Market CMS intel enrollment •Markets sortable based on metrics Population and model scori
Slide 17: Target Market Identification Process
Target Market Identification Process The top ranked Extant The most Algorithm service areas Encompass Attributes promising Prioritized was are reviewed Health most highly CBSAs are projects enter developed with Regional markets were correlated to refined to internal and is applied operating analyzed
Slide 18: Market (geography) Initially Defined as a CBSA
Market (geography) Initially Defined as a CBSA CBSA (Core Based Statistical Area) Includes one or Metropolitan Micropolitan more urbanized area is one with area is one with counties (a a population of a population of county within a 50,000 or more 10,000 or more metropolitan but less than area that
Slide 19: CBSA (Atlanta Metropolitan) Service Area Metrics Considered
CBSA (Atlanta Metropolitan) Service Area Metrics Considered Demographics Acute Care Discharges Competition Growth Potential Proprietary Metrics 19
Slide 20: Design & Construction Strategy
Design & Construction Strategy Tom Boyle SVP, Chief Design & Construction Officer
Slide 21: Design & Construction overview
Design & Construction overview 6-10 De novos 6-10 Hospital bed addition projects ~50 4-8 Major renovations projects/year Many Infrastructure programs 21
Slide 22: Designing & Constructing for patient care
Designing & Constructing for patient care 22 22
Slide 23: Design & Construction process
Design & Construction Process Design & Construction process Operations Nursing Therapy Collaboration/ Construction Operate Design Pharmacy Innovation ITG SCO Feedback / Research & Development 23 23
Slide 24: Encompass Health prototype layout
Encompass Health prototype layout future bed expansion 24
Slide 25: Proactive Maintenance Approach
Proactive Maintenance Approach Initial cost • Focused asset replacement • Yearly evaluation/prioritization Disposal cost Service cost Life Cycle • Establish preventative maintenance plans Cost Analysis • Involvement from hospital, region, & Home Office Preventative Operating maintenance cost cost 25
Slide 26: Average Cost Per Bed
Average Cost Per Bed* $1,400,000 $1,200,000 $1,200,000 $1,000,000 $800,000 $850,000 $725,000 $600,000 $400,000 $200,000 $0 2020-2021 2022-2023 2024-2025 First Patient Date * Average cost per bed inclusive of land, construction and related costs, equipment, and pre-opening expenses. 26
Slide 27: 99- 29- 77. aaminites
99- 29- 77. 26 25 23 aaminites
Slide 28: Prefabrication utilization location map
Prefabrication utilization location map Waco, TX 2021 Montgomery, AL 45 patient rooms Shiloh, IL Libertyville, IL St Augustine, FL Lakeland, FL Cape Coral, FL Katy, TX Jacksonville, FL Moline, IL Naples, FL Dothan, AL 2022 Edgewood, KY 425 patient rooms Knoxville, TN Bowie, MD Parkersburg, WV Owasso
Slide 29: Prefabricated patient wing project completed
Prefabricated UBER Completedpatient wing project Project Katy, Texas - completed 20 bed expansion 29
Slide 30: BLOX prefabrication process
BLOX prefabrication process 30
Slide 31: De novo project process
De novo project process Full prefabrication time to completion benefits first patient Conventional construction - total project duration: 24 months 6 months 3 months 1 month 14 months construction design permitting turn-over Conventional w/prefabricated elements - total project duration: 22 months 6
Slide 32: Advantages of Prefabrication of Buildings
Advantages of Prefabrication of Buildings Safety Stable work environment in manufacturing Speed to Reduction of market waste Factory labor Materials procured reduces time on site exactly as needed, not in stock lengths Standardization Quality control Reduction in Consistent product Standard material
Slide 33: Clinical Innovation
Clinical Innovation Speakers Rusty Yeager Chief Information Officer Elissa Charbonneau, D.O., M.S. Chief Medical Officer Cheryl Miller, OTR/L, DrOT VP, Therapy Operations Mary Ellen Hatch, MSN, RN, CRRN, FARN VP, Nursing Operations
Slide 34: IT as a Strategic Enabler
IT as a Strategic Enabler Rusty Yeager Chief Information Officer
Slide 35: Our digital health strategy leverages
Post-acute innovation Lead the nation in patient-focused, Our digital health strategy leverages: evidenced-based models that improve outcomes and efficiencies •Clinical expertise •Large post-acute datasets •Business/technology partners PAYROLL GROUP PIC •Proven capabilities in –Enterprise EMR techno
Slide 36: An integrated electronic medical record
An integrated electronic medical record Document imaging Pre-admission assessment & approval Patient outcomes and Treatment plan Referral hospitals safety Operational Point of care medication Quality reporting efficiencies administration Cost effectiveness Coordinate care and Clinical notes engage p
Slide 37: Shifting from technology to strategy
Shifting from technology to strategy 37
Slide 38: Digital patient journey: patient referral to discharge
Digital patient journey: patient referral to patient discharge Customer Proprietary ACE IT and relationship pre-admission Patient patient revenue management patient documentation system system assessment tool Patient referral Independent Patient discharge physician approval 38
Slide 39: Enterprise scalability
Enterprise scalability ~50 analytic applications Internal benchmarking Data-driven decision making Information delivery & data transparency 39
Slide 40: Predictive modeling
Predictive modeling First model • Identify patients at risk to be transferred to an acute care hospital • Implemented the model in 2017 • ~40 clinical variables considered • Increased data set in 2022 to enhance accuracy 40
Slide 41: Proprietary technology is a competitive advantage
Encompass Health’s proprietary technology is a competitive advantage 41
Slide 42: Clinical Integration of Technologies
Clinical Integration of Technologies Elissa Charbonneau, D.O., M.S. Chief Medical Officer
Slide 43: Model + Core Practice Strategies = Results
Model + Core Practice Strategies = Results Acute Care Transfer (ACT) rate 12% • REACT implemented in 2017 • REACT 2.0 implemented in 2022 11% • Consistent reduction in acute care transfers 10% ACT Rate is the number of acute care discharges as a percent of total discharges. 43
Slide 44: ACT risk model identifies risk of readmission
ACT risk model identifies risk of readmission during the inpatient rehab stay Clinicians have the ability to see a patient’s risk score and the related predictors Complimentary tools and workflow strategies include the following: • Physician and nurse notifications • Automated workflow tasks created
Slide 45: General workflow
general workflow Patient ReACT ReACT risk Risk variables algorithm stratification admitted deploys ensues identified ReACT risk ReACT ReACT Clinician display & algorithm risk trend workflow notification updates in analysis with variables real time Identification Clinical of reason(s) & decision Anal
Slide 46: Readmission Prevention Program
Readmission Prevention Program Readmission risk model Intervention strategies Relies on datasets from 400,000+ Transition of care documentation patients Monitors 40+ clinical elements Secured 4-day follow-up appointment Medication reconciliation ~24 hours Risk score updates daily before discharge Fo
Slide 47: Fall prevention model
Fall prevention model Identify risk • Upon admission – high risk • Risk model + initial assessments & evaluations guide how to establish unique plan for the patient Establish care plan and customize precautions • High precautions are automated upon admission • Suggested care plan will be initiated a
Slide 48: Model + Core Practice Strategies = Results
Model + Core Practice Strategies = Results Fall prevention model 8.5 Fall rate • Fall prevention model was 8.0 initiated in 2021 with full 7.5 implementation in 2022 7.0 6.5 • 50+ metrics included in the 6.0 model 5.5 • Consistent reduction in patient 5.0 2020 2021 2022 2023 YTD falls Fall rate is t
Slide 49: Therapy Technologies
Therapy Technologies Cheryl Miller, OTR/L, DrOT Vice President, Therapy Operations
Slide 50: Implementation science
Implementation science: Clients, stakeholders, & subject matter experts Encompass Health model to (SMEs) input and opinions implement science into practice Clinical recommendation & practice guidelines Review of Review of existing science existing data and evidence 50
Slide 51: Therapy Innovations Model
Therapy Innovations Model 51
Slide 52: Mission to select innovative therapy solutions
Our mission is to assess and select innovative solutions to be adopted by Encompass Health. The committee uses standard criteria to implement therapy innovations that aligns with our values and promotes the use of safe, effective, state-of-art therapy technology. The Committee assesses: • Impact to
Slide 53: Implemented technologies
Implemented technologies Ambu® aScope™ Body-weight LiteGait® System Synchrony 4.0 support gait Dysphasia technologies Vector AmpCare ESP™ VitalStim® Barihab™ XKS Bioness® Treatment and Cognitive Integrated Specialty Assessment therapy Therapy System therapy Platform (BITS) Burt® 53
Slide 54: LiteGait System
LiteGait® System 54
Slide 55: Vector
Vector 55
Slide 56: Dysphagia: risks and assessment
Dysphagia: risks and assessment Risks Assessment • Difficulty with eating Encompass Health offers instrumental and drinking assessments for each patient using the Ambu® aScope™, a flexible endoscope • High risk of with a tiny camera and light used in the readmission due to fiber optic evaluation of
Slide 57: Dysphagia: oral motor intervention technologies
Dysphagia: oral motor intervention technologies Synchrony 4.0 AmpCare ESP™ VitalStim® Designed specifically for A portable, non- Technology that speech-language invasive, dual-channel electrically stimulates pathologists to help electrotherapy system swallow function. This patients visualize which e
Slide 58: Cognitive therapy technologies
Bioness® Integrated Therapy System (BITS) Cognitive therapy technologies Interactive touchscreen to help individuals with traumatic injuries and movement disorders improve coordination, balance, recall, reaction time and cognitive abilities. 58
Slide 59: Bioness Integrated Therapy System (BITS)
Bioness® Integrated Therapy System (BITS) 59
Slide 60: Specialty therapy intervention technologies
Specialty therapy intervention technologies Barihab™ XKS treatment and assessment platform Mat table designed to provide physical therapy for patients that exceed 500 pounds. The lifting capacity makes it possible to provide group and concurrent therapy. Critical in the treatment of patients of size
Slide 61: Burt
Burt® 61
Slide 62: In-house Dialysis
In-house Dialysis Mary Ellen Hatch, MSN, RN, CRRN, FARN Vice President, Nursing Operations
Slide 63: Dialysis and Tablo
Dialysis and Tablo Dialysis is a complex process that affects every system in the body • Also affects nutrition, medications, and social support. The dialyzer uses tiny hollow filters that look like microscopic straws called a semi-permeable membrane. As blood moves through these tubes, it encounter
Slide 64: In-house dialysis infrastructure
In-house dialysis infrastructure Dialysis team: • Nephrologist oversees the program • Dialysis experienced RN staff • Dialysis nursing staff involved with the patient’s overall care plan 64
Slide 65: Benefits of in-house dialysis
Benefits of in-house dialysis Better coordination of therapy and dialysis Recovery time from dialysis is shorter using Tablo, 2-3 hours versus 24 hours with $300 traditional HD cost benefit per treatment Hospital’s clinical team can take a complete holistic approach to care 72 sites Eliminates p
Slide 66: Joint ventures
ital of Columbus aE. Rehabilitation Hospl Ale
Slide 67: Joint venture partnerships
Joint venture partnerships years of operating 32 joint ventures 62 current joint ventures Inpatient rehabilitation hospitals Joint venture locations 67
Slide 68: Operations panel
Operations panel Panelists Lori Bedard Southeast Region President Troy Dedecker Central Region President Julie Duck SVP, Financial Operations Brad Kennedy South Central Region President Pat Tuer Northeast Region President
Slide 69: Operations panel
Operations panel • Scale • Standardization • Best practices
Slide 70: Operations panel discussion
Operations panel discussion Regional Regional SVP, Financial Group Group Moderator President President Operations President President Mark Tarr Lori Bedard Troy Dedecker Julie Duck Brad Kennedy Pat Tuer President and CEO Southeast Region Central Region Home Office South Central Region Northeast Regi
Slide 71: Encompass Health's regions
Encompass Health’s 8 regions West region Northeast region 18 total hospitals 19 total hospitals 0 future hospitals 4 future hospitals Southwest region Midatlantic region 19 total hospitals 17 total hospitals 2 future hospitals 0 future hospitals South Central region South Atlantic region 27 total ho
Slide 72: Management bench strength
Management bench strength Staff seek out opportunities for career upward mobility and/or geographic preference Business Director of Southeast region Chief Nursing CEO Development Therapy hospital Officer Director Operations Lakeland Cape Coral Naples Clermont DFCEO Internal transfer from another EHC
Slide 73: Overview of opening a new hospital
Overview of opening a new hospital A standardized approach with consistent tasks and timeframes helps to guide the project > 120 Days 120 - 60 Days 60 - 0 Days from hospital opening from hospital opening from hospital opening 66 total tasks 191 total tasks 350 total tasks 31 Recruiting & HR 14 Recru
Slide 74: Proven record of adapting to regulatory changes
Proven record of adapting to regulatory changes IRF Quality Transition to CMS revised 75% Rule Reporting CMS updated diagnosis CMS updated Section GG permanently Program (IRF IRF coverage codes that IRF QRP quality changed to QRP) requires criteria count toward requirements indicators for “60% Rule”
Slide 75: Recent Regulatory Updates
Recent Regulatory Updates IRF-PAI • The IMPACT Act requires collection and reporting of quality measures • Currently a 30-page assessment Implementation • Completed training in 3Q22, for implementation on October 1, 2022. • Over 20 hours of training for the critical positions impacted by IRF PAI upd
Slide 76: Review Choice Demonstration
Review Choice Demonstration RCD • 100% pre-claim/post-claim review of Medicare FFS claims for select IRFs. • After 6 months, if 80% affirmation is attained, an IRF can move to a spot check (~5% of claims). Implementation • Pilot began in Alabama on August 21, 2023. • States next on the rollout list
Slide 77: Staffing model for a 50-Bed de novo
Staffing model for a 50-Bed de novo ~11 Hospital management FTEs ~18 Therapy staff FTEs ~38 ~100 FTEs FTEs Nursing staff ~33 Support staff FTEs 77
Slide 78: Investment case
Investment case Speaker Doug Coltharp EVP, Chief Financial Officer
Slide 79: Inpatient rehabilitation industry
Inpatient rehabilitation industry Traditional All Medicare payors Current market size $8.5 B $14.5 B Number of discharges ~380,000 ~745,000 Conservative estimate based on Estimated addressable $17 B to $29 B to low conversion rate $25 B $44 B of presumptively market size IRF-eligible patients Source
Slide 80: Medicare spending on post-acute services
Medicare spending on post-acute services Medicare spent ~ $54 billion on post-acute services in 2021 (IRF, SNF, HH) Percent of total Medicare FFS spending on inpatient rehabilitation Medicare spending on post-acute services 2002 2021 Post-Acute setting Spending Spending Skilled nursing facilities $1
Slide 81: IRF qualifying conditions
IRF qualifying conditions CMS requires that 60% of an IRF’s admissions must have at least one medical diagnosis or functional impairment from a list of 13 compliant conditions (“CMS-13”). CMS-13 qualifying conditions Other IRF qualification requirements at the time of a patient’s admission 1 Stroke
Slide 82: Medicare levels of service required - IRF vs. SNF
Medicare levels of service required - IRF vs. SNF Industry averages IRF SNF FFS average length of stay 12.9 days 34.5 days Quality metrics Discharge to community rate 67.6% 43.5% CMS requirements for IRFs vs. SNFs IRF SNF Facility must satisfy regulatory and policy requirements for hospitals, Regula
Slide 83: IRF supply
IRF supply Number of IRFs – Industry Number of IRFs - EHC vs. Non-EHC 1,400 160 1,100 1,200 120 1,075 1,000 Non-EHC IRFS EHC IRFs 800 80 1,050 600 400 40 1,025 200 0 1,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total IRFs Non-EHC IRFs EHC IRFs IRF industry supply has grow
Slide 84: Growth Strategy and Growth Targets 2023-2027
Growth Strategy Growth Targets 2023 – 2027 Number of de novos per year • De novo growth 6 to 10 • Bed additions • Disintermediate SNFs Bed additions per year • Increase MA conversion 80 to 120 rates • Increase share of high Discharge CAGR acuity patients 6% to 8% 84
Slide 85: Encompass Health
Encompass Health