Select Medical Holdings Corporation · NYSE:SEM
Select Medical — Bank of America Merrill Lynch 2011 Healthcare Conference
32 slides from Select Medical's conference presentation, May 10, 2011
Slide 1: Bank of America Merrill Lynch 2011 Healthcare Conference
Bank of America Merrill Lynch 2011 Healthcare Conference May 10, 2011
Slide 2: Disclosure
Disclosure This presentation may contain forward-looking statements based on current management expectations. Numerous factors, including those related to market conditions and those detailed from time-to-time in the Company's filings with the Securities and Exchange Commission, may cause results to
Slide 3: Select Medical Today
Select Medical Today 110 LTAC Hospitals with 4,601 beds in 28 States 945 Outpatient Rehab Clinics in 35 States and the District of Columbia $2.5 Billion Net Revenue LTM Q1 '11 $337 Million Pro Forma Adjusted EBITDA LTM Q1 '111 26,200 Employees in the United States 8 Inpatient Rehab Facilities (IRF)
Slide 4: Significant Scale and Breadth
Contract Therapy 511 locations 31 states and District of Columbia Note: As of March 31, 2011 Outpatient Rehab 945 clinics 35 states and District of Columbia LTAC 110 hospitals 28 states Inpatient Rehab 8 hospitals/1 unit 5 states WA OR CA MT ID NV AZ WY UT CO NM TX ND SD NE KS OK MN LA AR IA WI MI M
Slide 5: Recent Events
Recent Events Acquisition of Regency Hospital Company - closed September 1, 2010 23 LTAC Hospitals in 9 states Baylor Health System - Closed April 1, 2011 $100.0 million Share Buyback Program Miami Rehab addition - January 1, 2011
Slide 6: Operating and Growth Strategy
Operating and Growth Strategy Organic Joint Venture Acquisition LTAC - maturing new hospitals Regency- margin improvement Outpatient Rehab - margin improvement Draw on reputation for JV development Expand into existing and contiguous markets Focus on leading systems and university hospitals 1 to 2 p
Slide 7: Strong Track Record of Growth
(2003) (1999) Strong Track Record of Growth Company has Struck the Right Balance of Both Organic and Acquisitive Growth De Novo - 63 specialty hospitals and 307 outpatient clinics opened since inception - Q1 '11 Acquisitions - 86 specialty hospitals acquired since inception - Q1 '11 ATH and Intensiv
Slide 8: Balanced Payor Mix
Balanced Payor Mix Specialty Payor Mix Outpatient Payor Mix Overall Payor Mix Commercial Payors and Other 89% Medicare/ Medicaid 11% Commercial & Other Medicare East 34 66 West Medicare/ Medicaid 66% Commercial Payors and Other 34% Note: LTM Q1 '11
Slide 9: Segment Overview
Segment Overview
Slide 10: LTACHs Overview
Major provider of LTACH services in U.S. 110 hospitals 80 are hospital-in-hospital (2,754 beds) 29 are freestanding (1,847 beds) 1 managed freestanding hospital LTACHs Overview Note: As of Mar. 31, 2011 Overview of LTACHs Maturing New Hospitals New Hospitals Added 2008-09 ? 10 LTACs and 2 Rehab Adju
Slide 11: Regency Acquisition
Regency Acquisition On September 1, 2010, Select closed the acquisition of Regency Hospitals for $210M less assumed liabilities 23 long-term acute care hospitals with 898 licensed beds in 9 states Corporate services and back office functions fully integrated Synergies and margin enhancement Corporat
Slide 12: LTAC Hospital Regulatory Environment Summary
LTAC Hospital Regulatory Environment Summary MMSEA 2007 - extended through December 2012 Hospital in Hospital Rules - suspended at 50% Very Short Stay Outlier Rule - suspended Moratorium on new LTAC hospital licenses Future - post-2012 Patient/Facility Criteria (Supported by Industry, AHA, FAH, etc.
Slide 13: Specialty Hospitals Inpatient Rehabilitation
Specialty Hospitals Inpatient Rehabilitation
Slide 14: Rehabilitation Hospitals
Rehabilitation Hospitals Eight hospitals - 552 beds, one managed unit Kessler Institute (3) Penn State Hershey Rehabilitation (1) SSM Rehabilitation (1) Dallas, TX area (2) Miami, FL (1) Baylor Joint Venture closed April 1, 2011 2 I/P rehab hospitals and 3 I/P rehab units 30 outpatient clinics LTACH
Slide 15: Rehab Overview - Kessler Institute
Rehab Overview - Kessler Institute Founded in 1948 Largest licensed rehab hospital in U.S. (three campuses) 18 consecutive years U.S. News & World Report best hospital One of six rehab hospitals in U.S. to have model system designation for head injury and spinal cord injury LTACH Inpatient Rehab Con
Slide 16: Rehab JV Overview
Rehab JV Overview 80 inpatient rehab beds 33 outpatient locations (18 SSM, 15 Select) 6 contract therapy locations/4 onsite rehab locations 3 occupational health clinics 3 day institute clinics Construction of new 60 bed facility on SSM DePaul Campus ; expands bed capacity to 95 upon completion Expa
Slide 17: Inpatient Rehabilitation Regulatory Environment
Inpatient Rehabilitation Regulatory Environment Stable 75% Rule issue resolved in 2007 part of MMSEA frozen at 60% 10/1/10 net 1.7% increase in Medicare rates LTACH Inpatient Rehab Contract Therapy Outpatient Rehab
Slide 18: Outpatient Rehabilitation Segment Outpatient Rehab Clinics
Outpatient Rehabilitation Segment Outpatient Rehab Clinics
Slide 19: Outpatient Rehabilitation Clinics
Outpatient Rehabilitation Clinics Outpatient Rehab Facilities (Number of Facilities) ^ 945 Source: Company public filings and websites as of Mar. 31, 2011. Outpatient Margin Opportunity Continue to expand former HealthSouth clinics' EBITDA margins 2009 EBITDA margin differential - greater than 5% 20
Slide 20: Outpatient Rehabilitation locations
Outpatient Rehabilitation 117 locations Philadelphia/South Jersey 78 locations North Jersey LTACH Outpatient Rehab Inpatient Rehab Contract Therapy
Slide 21: Outpatient Rehabilitation - St. Louis, MO locations
Outpatient Rehabilitation - St. Louis, MO 39 locations LTACH Outpatient Rehab Inpatient Rehab Contract Therapy
Slide 22: Outpatient Rehabilitation Regulatory Environment
Outpatient Rehabilitation Regulatory Environment Commercial - Stable Medicare MPPR changes to therapy payments (effective Jan. 2011) 25% reductions to practice expense component for 2nd and subsequent codes Contract Therapy rates LTACH Outpatient Rehab Inpatient Rehab Contract Therapy
Slide 23: Outpatient Rehabilitation Segment Contract Therapy
Outpatient Rehabilitation Segment Contract Therapy
Slide 24: Contract Services
Contract Services 511 contracts in 31 states and the District of Columbia LTM Q1 '11 Revenue $152.8M Strong ROI with organic growth only LTACH Inpatient Rehab Outpatient Rehab Contract Therapy
Slide 25: Financial Overview
Financial Overview
Slide 26: Historical Net Revenue and Adjusted EBITDA
Revenue Specialty Outpatient Other 2008 1488.4 664.8 0.2 2009 1557.8 681.9 0.2 2010 1702.2 688 0.1 Q1 2010 412 173 0 Q1 2011 520 173 0 EBITDA Specialty Outpatient 2008 236 77 2009 253 77 2010 259 71 Q1 2010 73 18 Q1 2011 87 19 $2,390 $2,240 $2,153 Historical Net Revenue and Adjusted EBITDA Note: In
Slide 27: EBITDA Growth and Margin Stability
2008 2009 2010 Q1 2010 Q1 2011 Revenue 236 290 301 83 100 EBITDA 0.159 0.186 0.167 0.201 0.193 EBITDA Growth and Margin Stability Specialty Hospitals Adj. EBITDA / Adj. EBITDA Margin Outpatient Rehabilitation Adj. EBITDA / Adj. EBITDA Margin Growth in Admissions/Visits Supports Adj. EBITDA Growth an
Slide 28: Key Financial Metrics
Key Financial Metrics Pricing and Volume Trends Specialty Hospital Revenue per Patient Day1 / Admissions Outpatient Rehab Revenue per Visit2 / Visits (Admissions in Thousands) (Visits in Thousands) 1 Net revenue per patient day is calculated by dividing specialty hospital direct patient service reve
Slide 29: Free Cash Flow
Free Cash Flow Free Cash Flow1 Note: Free Cash Flow calculated as Net Cash Provided by Operating Activities less Purchases of Property and Equipment 1 See slide 31 for non-GAAP reconciliation Intense Focus on Free Cash Flow Generation ($ in millions)
Slide 30: Appendix: Additional Materials
Appendix: Additional Materials
Slide 31: Non-GAAP Reconciliation
2008 2009 2010 LTM Q1 '11 Net Income $ 25 $ 79 $ 82 $ 92 (+) Income tax 26 37 42 51 (+) Equity in losses of unconsolidated subsidiaries - - 1 1 (+/-) Other expense / (income) - 1 (1) (1) (+) Interest expense, net 146 132 112 108 (-/+) (Gain) / Loss on debt retirement (1) (13) - - (+) Depreciation an
Slide 32: Select Medical Corporation
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Select Medical Holdings — Bank of America Merrill Lynch 2011 Healthcare Conference on 6ix