Encompass Health Corporation · NYSE:EHC
Encompass Health — HealthSouth — Investor Presentation (May 2012)
93 slides from Encompass Health's investor presentation, May 7, 2012
Slide 1: Investor Reference Book
I N V E S T O R R E F E R E N C E B O O K Post Q1 2012 Earnings Release – Last updated May 7, 2012 1
Slide 2: Forward-Looking Statements
The information contained in this presentation includes certain estimates projections and other forward Forward-Looking Statements , - looking information that reflect our current outlook, views and plans with respect to future events, including legislative and regulatory developments, strategy, cap
Slide 3: Table of Contents
Table of Contents 4-16 17-31 32 41 Our Company……………………………………………………………………………………………… Industry Structure…………………………………………………………………………………………… Historical Perspective - 42-45 46-50Guidance …………………………………………………………………………………………………… Business Outlook: 2012 to 2014…………………………………………………………………………… …………………………………………………
Slide 4: Our Company: Portfolio as of March 31, 2012
Portfolio – As of March 31, 2012 99 Inpatient Rehabilitation Hospitals (“IRF”) • 29 operate as JV’s with Acute Care Our Company Hospitals 26 Outpatient Rehabilitation Satellite Clinics 25 Hospital-Based Home Health Agencies 27 + Puerto Rico Number of States ~ 22,000 Employees Key Statistics – Traili
Slide 5: Our Hospitals: Major Services
Our Hospitals Major Ser ices v • 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 Referral Sources 94% Acute Care Hospitals 5% Physician Offices Admission to an IRF • Physicians and acute care hospital case managers are key decision makers M t C C diti (Q1 2012) 1% Skilled Nursing Facilities . • All IRF patients must meet reasonable and necessary criteria and must be
Slide 7: Our Quality
Our Quality • Inpatient rehabilitation hospitals evaluate all patients at admission and upon discharge to determine their functional status. − The Functional Independence Measurement (“FIM”) patient assessment instrument is used for these evaluations. • The difference between the FIM scores at admis
Slide 8: Our Cost-Effectiveness
T t l I ti t R h bilit ti F iliti (IRF ) 1 152 Our Cost-Effectiveness Avg. Avg. Medicare Discharges Avg. Est. Total Payment per Avg. Est. Total Cost per o a npa en e a a on ac es s : , HealthSouth Beds per IRF per IRF (2) Discharge for FY 2011 Discharge for FY 2011 HLS (1) = 96 68 932 $16,800 $13,00
Slide 9: CMS Fiscal Year 2012 IRF Rate Setting File Analysis
CMS Fiscal Year 2012 IRF Rate Setting File Analysis Notes: (1) All data provided was filtered and compiled from the Centers for Medicare and Medicaid Services (CMS) Fiscal Year 2012 IRF rate setting Correction Notice file found at http://www.cms.gov/InpatientRehabFacPPS/07 DataFiles.asp#. The data _
Slide 10: Payment Methodology and Our Payors
Payment MethodologyPayor Source Our Payors (Q1 2012) Medicare Prospective Payment System (“PPS”) – Payments based on Case Mix Groups (“CMGs”) • Diagnosis of patient’s illness Fi d t CMG dj t d f– xe paymen per a us e or: • Acuity/severity • Regional wage differential • Patient outcomes – Per diems f
Slide 11: HealthSouth's volume growth has outpaced competitors'
HealthSouth’s volume growth has outpaced competitors’ Historic Discharge Growth vs. Industry volume growth has outpaced competitor 120,000 Quarterly Discharge Growth Same Store HealthSouth vs. Industry UDS Industry Sites (1)6 5%Yearly 60,000 90,000 Q4 Q3 4.7% 5.9% 5.9% 2.7% 2.1% 5.1% 6 1% HLS Same S
Slide 12: Our Track Record
Our Track Record ($ in millions) $1,608 $1,701 $1,785 $1,878 $2,027 $2,060 Revenue 03 3 6 109,106 112,514 118,354 120,098 Discharge Volume 96,700 1 , 5 2007 2008 2009 2010 2011 Trailing 4Qtrs Adjusted EBITDA (1) 2007 2008 2009 2010 2011 Trailing 4Qtrs Income from Continuing Operations Attributable t
Slide 13: Our Track Record: Debt, Leverage and Free Cash Flow
Total Debt Our Track Record Adj t d F C h Fl (1) 7$2.25 6.7x Leverage Ratio (1) (billions) $243 $240 $230 us e ree as ow (millions) $229 $2.04 5 6 $2.00 $155 $181 $130 $180 Interest Expense $1.81 $1.66 $ 3 4 $1.50 $1.75 2.7x $80 $108 1.51 $1.25 $1.27 1 2 $1.25 $9 $11 $30 2007 2008 2009 2010 2011 Tra
Slide 14: Managing through Medicare payment cuts and recession
HealthSouth has successfully managed through Medicare payment cuts and an economic recession… RECESSION 30 000 30,500 31,000 $120 Adjusted EBITDA ($million) Discharges 28 500 29,000 29,500 , $100 $110 27,000 27,500 28,000 , $80 $90 25,500 26,000 26,500 $60 $70 MMSEA (Final Medicare Price 1st Medicar
Slide 15: Our Assets
Our Assets 99 (1) Inpatient Rehabilitation Hospitals; 6,500 Licensed Beds (2) 3,188 Licensed Beds in CON States 24 Own Hospital Building Only 40 Own Building and Land 35 Lease Building and Land 3,312 Licensed Beds in Non-CON States A Certificate of Need (CON) is a legal document required in many sta
Slide 16: Strong and Sustainable Business Fundamentals
Strong and Sustainable Business Fundamentals • Favorable demographic trends • #1 market share: above industry same-store growth and margins • Non-discretionary nature of many conditions treated in IRFs • Highly fragmented industry Attractive Healthcare Sector • Consistent achievement of high-quality
Slide 17: Industry Structure
Industry Structure HEALTHSOUTH.
Slide 18: Overall Healthcare Spending
Overall Healthcare Spending N ti l H lth S di $2 593 6 billi $146 0 Net Cost of Health Insurance $82.5 Government Public Health $149.0 Investment a ona ea care pen ng: , . on (billions) 6 . 0 6 . 0 $128 5 $70.2 $341.6 : $ 2 , 4 4 4 . 6 : $ 2 , 4 4 4 . 6 Oth H lth R id ti l d P l C Home Health Care R
Slide 19: Medicare 2010 Spending
Medicare 2010 Spending = $509.7 Billion (1) $ 27.1B Skilled Nursing 5% $6.3B (1%) Inpatient Rehabilitation Hospitals Medicare Part A $138.0B Inpatient Hospital (2) $ 63.4B Physician Payments 27% 12% Medicare Part B $ 27.1B Outpatient Hospital $ 19.3B Home Health 23%4% 5% Medicare Parts A&B $ 60.4B O
Slide 20: Continuum of Healthcare Services
Continuum of Healthcare Services Preventive Routine health care that includes Acute Medical treatment of diseases for Ambulatory Medical care delivered on an outpatient basis Post-Acute Medical care provided after a period of acute screenings, check-ups, and patient counseling to t ill which a patie
Slide 21: Medicare Spending on Post-Acute Services
Medicare Spending on Post-Acute Services Inpatient rehabilitation spending (% of total Medicare spending) 1.8% 2.1% 2.2% 2.1% 1.9% 1.5% 1.4% 1.3% 1.2% 1.2% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 $30 Total Medicare Spending on Post-Acute Services $58.5 billion in 2010 Skilled nursing 2010
Slide 22: Geographic Distribution of IRFs, 2010
Geographic Distribution of IRFs, 2010 22 Source: Medpac Report to Congress, Medicare Payment Policy, March 2012 – page 235
Slide 23: Supply of IRFs remained stable in 2010
Supply of IRFs remained stable in 2010 23 Source: MedPAC Report to Congress, Medicare Payment Policy, March 2012 – page 238
Slide 24: Inpatient Rehabilitation Sector Margins
Inpatient Rehabilitation Sector Margins Source: MedPAC analysis of Medicare cost report data from CMS. Medicare Report to Congress, Medicare Payment Policy, March 2012 – page 248 24
Slide 25: Readmission Rates by Post-Acute Care Setting
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 Rehab
Slide 26: 60% Rule: Medicare Regulation for Rehabilitation Hospitals
“60% Rule”: Medicare Regulation for Rehabilitation Hospitals The 60% Rule requires at least 60% of all patients admitted must have at least one medical diagnosis or functional impairment from a list of 13 compliant conditions (a.k.a “compliant conditions” or “CMS-13”) 1983 . 2002 2004 2007 1983: 75%
Slide 27: IRF Qualifying Conditions
Inpatient Rehabilitation Hospital (IRF): Qualifying Conditions 1. Stroke 2. Brain injury Original Qualifying Conditions 1. Stroke 2. Brain injury 3 A t ti New Qualifying Conditions 3. Amputation 4. Spinal cord 5. Fracture of the femur 6. Neurological disorder 7. Multiple trauma . mpu a on 4. Spinal
Slide 28: Site Neutral Payments: A Complicated Issue
Site Neutral Payments – A Complicated Issue (Post-Acute Payment Reform Background) 2005: • The Deficit Reduction Act of 2005 directed CMS to conduct a study aimed at reforming and harmonizing the disparate methods of paying for services in post-acute settings that could be substituted for one anothe
Slide 29: Different Levels of Services: Rehab Hospital vs Nursing Home
Different Levels of Services Rehab Hospital Nursing Home Average Length of Stay (1) = 13.1 days Average Length of Stay (2) = 30 days Discharge to Home (percent) (2) = 81.1% Discharge to Home (percent) (2) = 45.5% Requirements: Requirements: Rehab hospitals must also satisfy regulatory/policy require
Slide 30: CMS: Inpatient Rehabilitation vs. Skilled Nursing
CMS: Inpatient Rehabilitation vs. Skilled Nursing “… MedPAC’s analysis of recent quality measure data related to … MedPA 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
Slide 31: Future Regulatory Risk
Future Regulatory Risk Inpatient Rehabilitation Facility Skilled Nursing Facility Long-Term Acute Care Hospital Home Health Hospice Specific Post-Acute Regulatory Changes 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-distrib
Slide 32: Historical Perspective
Historical Perspective HEALTHSOUTH.
Slide 33: Historical Perspective: Massive Restructuring Effort
Historical Perspective: Massive Restructuring Effort 2004 thru early 2008 Announced Divestitures Completed Corporate Campus Sale ($44M) Recruited: ? New Board of Directors ? New Management team Cured Bond Defaults Secured New Bank Credit ($2.55B) Reached SEC Settlement ($100M) Relisted on NYSE Compl
Slide 34: Historical Perspective: 2007-2008
Historical Perspective Adjusted EBITDA (1) $307 $323 $364 $410 $466 2007 • Divested surgery centers, outpatient, and diagnostic divisions • Used proceeds plus tax refund to repay $1.4 2007 2008 2009 2010 2011 billion of debt • Reduced G&A to match residual business size • Piloted TeamWorks sales and
Slide 35: Historical Perspective: 2009
Historical Perspective 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 securities litigation settlement (Q3) • Received first Medicare market basket update in 18 months (Q
Slide 36: Historical Perspective: 2010
Historical Perspective 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 off • 2 de novos, 2 IRF acquisitions, 2 unit acquisitions • Completed senior notes offering wit
Slide 37: Historical Perspective: 2011
Historical Perspective 2011 • Grew volumes 5.2% • Sold 5 long-term acute care hospitals (LTCHs); closed remaining LTCH • Raised $122 million by reopening 2018 and 2022 senior notes • Retired approx. $501 million of 10.75% senior notes due 2016 • Opened one de novo (Cypress); acquired Drake; received
Slide 38: Historical Perspective: 2012
Historical Perspective 2012 • Established 2012 – 2014 business model • 2.5-3.5% discharge growth; 5-8% Adjusted EBITDA CAGR • 12-17% adjusted free cash flow CAGR $• Purchased 25,000 shares of our convertible perpetual preferred stock for 25 million $130 (millions) $90 2011 Adjusted EBITDA (1) = $466
Slide 39: Revenues & Expenses
Revenues & Expenses Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year Revenues (millions) 2012 2011 2011 2011 2011 2010 2010 2010 2010 2011 2010 2009 Inpatient 500.6$ 480.1$ 458.8$ 465.4$ 462.1$ 452.3$ 422.6$ 427.6$ 420.2$ 1,866.4$ 1,722.7$ 1,621.5$ Outpatient and other 38.0 38.0 38.9 39.7 43.9 38.6 38.2 39.7 38
Slide 40: Adjusted EBITDA
Adjusted EBITDA (1) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year (Millions) 2012 2011 2011 2011 2011 2010 2010 2010 2010 2011 2010 2009 Net operating revenues 538.6$ 518.1$ 497.7$ 505.1$ 506.0$ 490.9$ 460.8$ 467.3$ 458.6$ 2,026.9$ 1,877.6$ 1,784.9$ Less Prov ision for doubtful accounts (6.3) (6.1) (5.1) (5.
Slide 41: Outstanding Share Summary and Warrant Information
Outstanding Share Summary and Warrant Information (Millions) Weighted Average for the Period Q1 Q1 2012 2011 2011 2010 2009 2008 2007 Basic shares outstanding (1) (2) 94.5 93.1 93.3 92.8 88.8 83.0 78.7 Diluted shares outstanding (1) (2) (3) 108.7 109.0 109.2 108.5 103.3 96.4 92.0 Full Year Q1 Q1 FY
Slide 42: Business Outlook 2012 to 2014
Business Outlook 2012 to 2014 (as of May 7, 2012) 42
Slide 43: 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 < 3 0x Debt to EBITDA (subject to operating environment)Debt to EBITDA . Core Growth Same-store Growth (Include
Slide 44: Business Outlook: Revenue Assumptions
Business Outlook: Revenue Assumptions Revenue Volume • 2.5% to 3.5% annual growth ( l d i iti ) Pricing exc u es acqu s ons • Includes bed expansions, de novos and unit consolidations 72% Medicare FY 2012 (1) FY 2013 FY 2014 Q4 11 - Q3 12 Q4 12 - Q3 13 Q4 13 - Q3 14 Market basket update (2) 2.9% 2.9
Slide 45: Business Outlook: Expense Assumptions
Business Outlook: Expense Assumptions Expense Salaries & Benefits (1) Hospital Expenses • Other operating expenses d l ki i h 2012 2013 2014 (2) an supp y costs trac ng w t inflation • Occupancy costs relatively constant as percent of revenue Merit increases 2.25-2.5% 2.25-2.5% 2.25-2.5% Benefit cos
Slide 46: Guidance
Guidance (as of May 7, 2012) 46
Slide 47: 2012 Guidance – Adjusted EBITDA
2012 Guidance – Adjusted EBITDA (1) 2012 Adjusted EBITDA $475 million to $485 million Based on results of Q1 2012, HealthSouth expects its 2012 full year results to be at the high end of, or greater than, this guidance range. Considerations: ? Revenue growth of 3.8% to 5.2% (April through December 2
Slide 48: 2012 Guidance - EPS
2012 Guidance - EPS Based on results of Q1 2012, HealthSouth expects its 2012 full year results to be at the high end of, Earnings per Share from Continuing Operations Attributable to HealthSouth (1) $1.32 to $1.39 or greater than, this guidance range. Actual Low High (In Millions, Except Per Share
Slide 49: Income Tax Considerations
Income Tax Considerations GAAP Considerations: • As of 3/31/12, the Company had an ending balance of approx. $1.2 billion in federal NOLs and a remaining valuation allowance of approx. $50 million, primarily related to state NOLs. • 2011 effective tax rate was approx. 19%(1)(2) • Expect effective ta
Slide 50: Adjusted Free Cash Flow Considerations
Adjusted Free Cash Flow (1) Considerations The increase in 2012 maintenance CAPEX is driven by the clinical information system roll-out, two ? 2012 adjusted free cash flow growth reflects increased maintenance capital expenditures and working capital. Certain Cash Flow Items (2) (millions) 2011 Actu
Slide 51: Free Cash Flow
Free Cash Flow HEALTHSOUTH.
Slide 52: Adjusted Free Cash Flow Reconciliation
Adjusted Free Cash Flow Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow (Millions) 2012 2011 2011 2010 2009 2008 2007 81.0$ 89.5$ 342.7$ 331.0$ 406.1$ 227.2$ 230.6$ (0.4) (2.1) (9.1) (13.2) (5.7) (32.5) (3.3) Full Year h id d b i Impact of discont inued operati
Slide 53: Adjusted EBITDA Reconciled to Net Cash from Operations
Adjusted EBITDA Reconciled to Net Cash Provided by Operating Activities (Millions) 2012 2011 2011 2010 2009 2008 2007 Net cash provided by operating activities 81.0$ 89.5$ 342.7$ 331.0$ 406.1$ 227.2$ 230.6$ Q1 Full Year Prov ision for doubtful accounts (6.3) (4.8) (21.0) (16.4) (30.7) (23.0) (28.5)
Slide 54: Priorities for Reinvesting Free Cash Flows
Priorities for Reinvesting Free Cash Flows (millions) •Growth in core business ? Bed expansions (80 100 beds) 2012 Assumptions Q1 2012 Actual $20 to $25 $5.5 - ? De novo hospitals (complete Ocala; start 4 others) ? Acquisitions (target 2/year) − Free standing IRFs Growth P r i o r i t i e s P r i o
Slide 55: Refinancing and Delevering
Refinancing and Delevering 55
Slide 56: Debt Schedule
Debt Schedule Change S&P Moody March 31, Dec. 31, in Debt (Millions) Corporate B+ Ba3 2012 2011 vs. YE 2011 Advances under $500 million revolving credit Credit Rating facility, May 2016 - 3 Month LIBOR +225bps BB Baa3 125.0$ 110.0$ 15.0$ Term loan facility, May 2016 - 3 Month LIBOR +225bps BB Baa3 9
Slide 57: Debt and Liquidity
Debt and Liquidity Liquidity March 31, Dec. 31, 2012 2011 Cash Available 44.3$ 30.1$ Revolver Total Line 500 0$ 500 0$ 5.6x(1) Debt Outstanding . . Less: – Draws (125.0) (110.0) – Letters of credit (44.4) (44.6) 330.6$ 345.4$ Available $1.81 $1.66 2 7x(1) Total Liquidity 374.9$ 375.5$ $1.51 $1 27 .
Slide 58: Debt Maturity Profile
Debt Maturity Profile H lthS th i iti d ith l t fl ibl it l t t ? Additional debt pre-payment opportunities and flexible covenants (1) ? No near-term maturities and well-spaced debt maturities ea ou s now pos one w a ower-cos , ex e cap a s ruc ure… ? Limited exposure to higher interest rates ($ in
Slide 59: 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 60: Growth
Growth HEALTHSOUTH.
Slide 61: Organic Growth: A Strategic Framework
Organic Growth: A Strategic Framework Demographics + population growth and changes (weighted by age) = Rehab CAGR Market Dynamics • Existing IRF beds • Managed care penetrationcare S l d M k ti St t i • Competition a es an ar e ng ra eg es • Defining “upstream” opportunities • Identifying CMS-13 dis
Slide 62: Organic Growth: Compounded Annual Growth Rate
Organic Growth: Compounded Annual Growth Rate (CAGR) (1) Weighted for Rehab Services (1) (2) % CAGR Rehab by Zip Code Organic Growth • Demographic changes • Population growth % CAGR Weighted for Rehab Services Treasure Coast Primary 2.64% Treasure Coast SSA – Glades 1.47% Treasure Coast SSA – Martin
Slide 63: De Novo Market Selection Process
De Novo Market Selection Process Active Development List Strategic Approach • Build National Market Assessment C t • Buy • JV (3,141 counties in 48 states studied) • Population and orpora e Assessment Regional President Demographics • IRF Conversion Rates • Acute Care Referral Priority Assessment “D
Slide 64: De Novo Evaluation Process
De Novo Evaluation Process CON Market Selection GO NO GO • No guarantee on timeframe or ultimate success • Input from design, operations and real estate Si ith i bilit Approval Site • ~ x acres w expans on capa y • Proximity to acute-care providers • Permitting Selection Cost • Design • Land • IRR •
Slide 65: Illustrative De Novo Timeline
Illustrative De Novo Timeline With CON Planning Design & Zoning Groundbreaking Opening Day 1 CON Process Construction 6 months to 3 years 20 months Pl i M th 20 Without CON Design ann ng & Zoning Groundbreaking on Opening Construction 65 Day 1
Slide 66: Illustrative De Novo Pro forma (40 bed)
Illustrative De Novo Pro forma (40 bed) 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 66
Slide 67: De Novo Occupancy and EBITDA Trends
De Novo Occupancy and EBITDA(1) Trends Occupancy 80% 90% 100% Sustained Positive EBITDA Range 60% 70% 40% 50% 10% 20% 30% 0% 1 2 3 4 5 6 7 8 9 10 11 12 Petersburg Fredericksburg Mesa Loudoun Bristol Cypress HLS Avg 2011 Occupancy Months (1) Hospital EBITDA = earnings before interest, taxes, deprecia
Slide 68: IRF Acquisition Performance
IRF Acquisition Performance Date Acquired Acquired Census One Year Later Census Vineland Q3 2008 26 31 Desert Canyon Q2 2010 16 35 Sugar Land Q3 2010 26 35 Ft. Smith Q3 2010 15 39 Drake (Cincinnati, OH) Q4 2011 0 3 month census = 22 Value added by HealthSouth • TeamWorks approach to sales/marketing
Slide 69: Portfolio Growth
Portfolio Growth • All projects have minimum IRR of 15% (pre-tax). De novos Acquisitions • Cash Payback (1) = 5 to 7 years L b k i d d t • Cash Payback (1) = 4 to 6 years T t 2 i iti /Y• onger pay ac per o ue o: − Design and construction period − Initial ramp-up of operations • Target: 4 openings/Ye
Slide 70: Future Growth: Complementary Post-Acute Care Services
Future Growth: Complementary Post-Acute Care Services Acute Care H it l Discharge Long-Term Acute C Hospice Inpatient Rehabilitation Skilled Nursing Home Health (1) (Highest Acuity) (Lowest Acuity) osp a are Hospital (1) Facility (1) Facility Medicare Spending (billions) $5.2 $13.0 $6.3 $28.0 $19.0
Slide 71: Growth: Summary
Growth: Summary The Company still believes investing in growth is a correct long-term strategy. In response to uncertainty coming from Washington, D.C., and the dislocation in the capital markets, the Company slowed the development of new de novos in the third and fourth quarters of 2011. Once the B
Slide 72: Operational Initiatives
Operational Initiatives HEALTHSOUTH.
Slide 73: Operational Strategy
Operational Strategy E ll i xce ence n … Clinical Care Operations Service El t i li i l i f ti t (CIS) • Care Management TeamWorks project • BEACON management reporting system • Patient satisfaction survey tool through Press Ganey ec ron c c n cal n orma on sys em • Identify trends and establish “be
Slide 74: CIS Standardization Improves Patient Safety and Efficiencies
CIS Standardization Improves Patient Safety and Streamlines Operational Efficiencies Pre-Admission Assessment & ApprovalDocument ImagingTreatment Plan • Computerized Physician Order Entry (CPOE) Quality Reporting • Uniform Data Systems Integrated Electronic Medical Record Referral Hospitals Integrat
Slide 75: CIS Benefits and Value Proposition
CIS Benefits and Value Proposition • Automated medication administration at the point of care • Clinical data repository (reporting and outcomes) Patient Safety • Streamline sales and marketing process • Real time patient condition awareness • Rule driven identification of preventable adverse medica
Slide 76: CIS Timeline
CIS Timeline • Install ACE IT in 12 existing hospitals • Install ACE IT in de novo located in Ocala, FL • Complete installation in remaining hospitals and acquired hospitals • Install ACE IT in all de novo HealthSouth hospitals 2012 2013 - 2016 • Signed contract with Cerner for Company-wide implemen
Slide 77: CIS Cost
CIS Cost • No incentive payments (i.e. “HITECH”) for inpatient rehabilitation hospitals (1) – Only acute care hospitals are eligible • 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 million to $1.5 millio
Slide 78: TeamWorks: Care Management
TeamWorks: Care Management 2012 will be the first full year of “Care Management” implementation. Goals • Improve operational effectiveness, patient satisfaction, Referral Management and quality outcomes • Engage interdisciplinary teams • Reduce: ― Complication rates PrePre- authorization / PrePre-ce
Slide 79: CPR: Comfort, Professionalism, Respect
CPR: Comfort, Professionalism, Respect CPR is an in-house course designed to train all employees to realize that even minor encounters between staff and patients can have a memorable impact on the patient’s entire experience. • All employees trained in the CPR campaign. • Hospital-based trained faci
Slide 80: Management Reporting
HEALTHSOUTH MANAGEMENT REPORTING HEALTHSOUTH.
Slide 81: BEACON: Hospital-Specific
BEACON: Hospital-Specific (1) 81 (1) Numbers in screen shot have been modified for presentation and do not represent actual results.
Slide 82: BEACON: Regional Roll-up
BEACON: Regional Roll-up (1) 82 (1) Numbers in screen shot have been modified for presentation and do not represent actual results.
Slide 83: Operational Metrics
Operational Metrics HEALTHSOUTH.
Slide 84: Operational Metrics: Expense Efficiencies
• Salaries and Benefits reflects continued improvement from Operational Metrics: Expense Efficiencies (% of Net Operating Revenues) productivity gains and growing revenue base. • Hospital-related Expenses includes other operating, supplies, and occupancy. • General and Administrative excludes stock-
Slide 85: Operational and Labor Metrics
Operational and Labor Metrics (1) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Full Year Full Year Full Year 2012 2011 2011 2011 2011 2010 2010 2010 2010 2011 2010 2009 Net patient revenue-inpatient 500.6$ 480.1$ 458.8$ 465.4$ 462.1$ 452.3$ 422.6$ 427.6$ 420.2$ 1,866.4$ 1,722.7$ 1,621.4$ Net patient revenue-outpatien
Slide 86: Payment Sources
Payment Sources (Percent of Revenues) Q1 Full Year 2012 2011 2011 2010 Medicare 73.5% 71.5% 72.0% 70.5% Medicaid 1.1% 1.7% 1.6% 1.8% Workers' compensation 1.5% 1.7% 1.6% 1.6% Managed care and other discount plans (1) 19.3% 19.7% 19.8% 21.3% Other third-party payors 1.7% 2.1% 2.0% 2.3% P ti t 1 4% 1
Slide 87: Reconciliations to GAAP
Reconciliations to GAAP HEALTHSOUTH.
Slide 88: Reconciliation of Net Income to Adjusted EBITDA – Q1 2012
Reconciliation of Net Income to Adjusted EBITDA (1)(3) 2012 (in millions, except per share data) Total Per Share Net income 56.8$ Loss from disc ops, net of tax, attributable to HealthSouth 0.4 Q1 Net income attributable to noncontrolling interests (12.6) Income from continuing operations attributab
Slide 89: Reconciliation of Net Income to Adjusted EBITDA – 2011
Reconciliation of Net Income to Adjusted EBITDA (1)(3) 2011 (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, attributable to HealthSouth (17.6) (2.5)
Slide 90: Reconciliation of Net Income to Adjusted EBITDA – 2010
Reconciliation of Net Income to Adjusted EBITDA (1)(3) 2010 (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 HealthSouth (1.2) (3.4) (3.4)
Slide 91: Reconciliation of Net Income to Adjusted EBITDA – 2009
Reconciliation of Net Income to Adjusted EBITDA (1) (3) 2009 Q1 Q2 Q3 Q4 F ll Y (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 Healt
Slide 92: Reconciliation of Net Income to Adjusted EBITDA – 2007 and 2008
Reconciliation of Net Income to Adjusted EBITDA (1) (3) (in millions, except per share data) Total Per Share Total Per Share Net income 718.7$ 281.8$ Income from disc ops, net of tax, attributable to HealthSouth (462.4) (32.5) Net income attributable to noncontrolling interests (65.3) (29.4) 2007 20
Slide 93: Reconciliation Notes for Slides 88-92
Reconciliation Notes for Slides 88-92 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 it tili Adj t