Encompass Health Corporation · NYSE:EHC
Encompass Health — Morgan Stanley 2018 Leveraged Finance Conference
18 slides from Encompass Health's conference presentation, Jun 5, 2018
Slide 1: 2018 Morgan Stanley Leveraged Finance Conference
2018 Morgan Stanley Leveraged Finance Conference Doug Coltharp, Executive Vice President and Chief Financial Officer June 5, 2018
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 legislative and regulatory developments, s
Slide 3: Company Overview - Encompass Health
Company Overview - Encompass Health National leader of inpatient rehabilitation hospitals and home-based care 127 268 36 IRFs Home Health States and and Hospice Puerto Rico Agencies Committed to delivering high-quality, cost-effective care across the post-acute continuum Encompass Health 3
Slide 4: Company Overview - Inpatient Rehabilitation
Company Overview - Inpatient Rehabilitation Largest owner and operator of IRFs 127 Inpatient Rehabilitation Hospitals 22% 30% 42 Operate as joint ventures of Licensed beds of Medicare with acute care hospitals patients served 31 106 States and Puerto Rico Hospitals hold one or more disease-specific
Slide 5: Company Overview - Home Health and Hospice
Company Overview - Home Health and Hospice 4th largest provider of Medicare-certified skilled home health services 96% Home health agencies ≥ 3 stars for quality of care 212 56 30 95% Home Health Hospice States Locations Locations Home health agencies ≥ 3 stars in patient satisfaction ~8,800 ~128,00
Slide 6: Market Overlap: Inpatient Rehabilitation and Home Health
Market Overlap Inpatient Rehabilitation and Home Health ~60% of EHC's IRFs have an EHC home health location within an approximate 30-mile radius. Encompass Health 6
Slide 7: Clinical Collaboration
Clinical Collaboration Improving the Patient Experience and Reducing Total Costs Through Integrated Care Delivery 33.5% 28.9% Collaboration Rate Collaboration Rate 460 Basis Points 5,409 Year-Over-Year Increase 4,308 Near-term Goal = 35% - 40% 10,603 10,726 Encompass Health Home Health Encompass Hea
Slide 8: Both Segments Benefit from a Demographic Tailwind: Growth in the Medicare Beneficiary Population
Both Segments Benefit from a Demographic Tailwind: Growth in the Medicare Beneficiary Population Projected Population of Age 65+ Baby Boomer wave Millions reaches average age of an Encompass Health 80 Medicare patient (~76). 70 60 ~3% CAGR CAGR (Population Growth by Age) 50 2014 2018 2022 46% Age to
Slide 9: Multi-faceted Growth Strategy - Inpatient Rehabilitation
Multi-faceted Growth Strategy - Inpatient Rehabilitation New Beds Encompass Health IRFs Total 1,600 132 127 Wholly Owned and 1,400 Joint Ventures 122 1,200 117 De Novos 112 1,000 107 800 102 Acquisitions 97 600 92 400 87 Bed Expansions 82 200 77 0 72 2013 2014 2015 2016 2017 Projected 2018 Encompass
Slide 10: Multi-faceted Growth Strategy - Home Health
Multi-faceted Growth Strategy - Home Health Home Health Industry 13,000 12,000 11,000 10,000 # of Agencies 9,000 8,000 7,000 6,000 5,000 4,000 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Encompass Health 10
Slide 11: Multi-faceted Growth Strategy - Hospice
Multi-faceted Growth Strategy - Hospice Hospice Industry 487 4,000 494 510 503 526 542 558 443 578 3,000 704 2,000 378 3,163 3,369 807 2,844 3,024 1,000 2,103 1,069 0 2000 2007 2013 2014 2015 2016 Freestanding Hospital/SNF based Home Health based Encompass Health 11
Slide 12: Adjusted Free Cash Flow Assumptions
Adjusted Free Cash Flow Assumptions Certain Cash Flow Items 2018 2017 (millions) Assumptions Actual • Cash interest expense $140 to $150 $145.7 (net of amortization of debt discounts and fees) • Cash payments for taxes, net of refunds $105 to $135 $94.5 • Working capital and other $50 to $70 $(24.1)
Slide 13: Free Cash Flow Priorities
Free Cash Flow Priorities 2018 Assumptions (In Millions) Growth in Core Business IRF bed expansions $30 to $40 New IRFs - De novos 80 to 110 - Acquisitions opportunistic - Replacement IRFs and other 40 to 50 Home health and hospice acquisitions 160 to 185 (includes Camellia in 2018) $310 to $385, ex
Slide 14: Debt Maturity Profile - Face Value
Debt Maturity Profile - Face Value As of March 31, 2018* Callable beginning September 2020 ($ in millions) Callable beginning November 2017 $568 Available $1,200 Callable beginning Senior March 2018 Notes 5.75% $95 Drawn + Revolver $37 reserved Capacity for LC’s $350 Senior $291 $300 Senior Notes 5.
Slide 15: Financial Leverage and Liquidity
Financial Leverage and Liquidity Total Debt Liquidity Leverage Ratio (billions) March 31, December 31, 4.6x 2018 2017 Cash Available $ 86.4 $ 54.4 Revolver $ 700.0 $ 700.0 Less: 3.0x - Draws (95.0) (95.0) 3.17 3.02 - Letters of Credit (37.2) (35.4) 2.8x Available $ 567.8 $ 569.6 2.58 2.58 Total Liqu
Slide 16: IRF Real Estate Portfolio
IRF Real Estate Portfolio 127 Inpatient Rehabilitation Hospitals: 8,831 Licensed Beds 4,499 Licensed Beds in CON States As of March 31, 2018 59 Own Building and Land 29 Own Building Only 39 Lease Building and Land 4,332 Licensed Beds in Non-CON States Encompass Health 16
Slide 17: Strong and Sustainable Business Fundamentals
Strong and Sustainable Business Fundamentals Attractive Healthcare Sectors Industry Leading Positions Cost-Effectiveness Real Estate Ownership Financial Strength Growth Opportunities Encompass Health 17
Slide 18: Committed to Delivering High-Quality, Cost-Effective Care Across the Post-Acute Continuum
Committed to Delivering High-Quality, Cost-Effective Care Across the Post-Acute Continuum
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