8-K 1 eightk111604presentation.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): November 16, 2004 REHABCARE GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 0-19294 51-0265872 (State or other (Commission File (I.R.S. Employer jurisdiction of Number) Identification incorporation) Number) 7733 Forsyth Boulevard 23rd Floor St. Louis, Missouri 63105 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (314) 863-7422 Item 7.01 Regulation FD Disclosure. Beginning on November 16, 2004, RehabCare executives will make presentations at investor conferences to analysts and in other forums using the slides as included in this Form 8-K as Exhibit 99. Presentations will be made using these slides, or modifications thereof, in connection with other presentations in the foreseeable future. The full slide presentation is available in the For Our Investors section on our website at www. rehabcare.com. Information contained in this presentation is an overview and intended to be considered in the context of RehabCare's SEC filings and all other publicly disclosed information. We undertake no duty or obligation to update or revise this information. However, we may update the presentation periodically in a Form 8-K filing. The presentation included in this report does not include images included in the actual slides. In order that all investors be provided with substantially the same information, RehabCare is making these slides available on its website. The presentation in its entirety will be made available in the For Our Investors section of the RehabCare website, www.rehabcare.com, although this availability may be discontinued at any time. Forward-looking statements have been provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause RehabCare's actual results in future periods to differ materially from forecasted results. These risks and uncertainties may include, but are not limited to, the future operating performance of InteliStaf, and the rate of return that RehabCare will be able to achieve from its equity interest in InteliStaf; changes in and compliance with governmental reimbursement rates affecting RehabCare's other lines of business; RehabCare's ability to attract new client relationships or to retain and grow existing client relationships through expansion of RehabCare's hospital rehabilitation and contract therapy service offerings and the development of alternative product offerings that build stronger partnering relationships between RehabCare and its clients; RehabCare's ability to identify and consummate, within the expected timeframes, strategic acquisitions and joint ventures to accelerate growth in RehabCare's hospital rehabilitation and contract therapy divisions; the adequacy and effectiveness of RehabCare's operating and administrative systems; litigation risks of RehabCare's pat and future business, including RehabCare's ability to predict the ultimate costs and liabilities or the disruption of its operations; competitive and regulatory effects on pricing and margins; and general economic conditions, including efforts by governmental reimbursement programs, insurers, healthcare providers and others to contain healthcare costs. Item 9.01 Financial Statements and Exhibits. (c) Exhibits. See Exhibit Index. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: November 16, 2004 REHABCARE GROUP, INC. By: /s/ Vincent L. Germanese ----------------------------------------- Vincent L. Germanese Senior Vice President, Chief Financial Officer and Secretary EXHIBIT INDEX Exhibit No. Description 99 Text of Investor Relations Presentation in Use Beginning November 16, 2004 Exhibit 99 Safe Harbor Forward-looking statements have been provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause RehabCare's actual results in future periods to differ materially from forecasted results. These risks and uncertainties may include, but are not limited to, the future operating performance of InteliStaf, and the rate of return that RehabCare will be able to achieve from its equity interest in InteliStaf; changes in and compliance with governmental reimbursement rates affecting RehabCare's other lines of business; RehabCare's ability to attract new client relationships or to retain and grow existing client relationships through expansion of RehabCare's hospital rehabilitation and contract therapy service offerings and the development of alternative product offerings that build stronger partnering relationships between RehabCare and its clients; RehabCare's ability to identify and consummate, within the expected timeframes, strategic acquisitions and joint ventures to accelerate growth in RehabCare's hospital rehabilitation and contract therapy divisions; the adequacy and effectiveness of RehabCare's operating and administrative systems; litigation risks of RehabCare's pat and future business, including RehabCare's ability to predict the ultimate costs and liabilities or the disruption of its operations; competitive and regulatory effects on pricing and margins; and general economic conditions, including efforts by governmental reimbursement programs, insurers, healthcare providers and others to contain healthcare costs. RehabCare's Vision RehabCare will provide a clinically integrated continuum of post-acute care resulting in patients regaining their lives. -1- RHB Business Profile The Physical Rehabilitation Industry o The maturing of the baby boomer population will continue to drive growth in the physical rehabilitation industry o Acute care hospitals, skilled nursing facilities, long-term acute care hospitals, independent therapists and contract management companies are among those who provide therapy services to the market o Large competitors for RehabCare include HealthSouth, Select Medical Corp, RehabWorks, Aegis and smaller competitors -2- RHB Business Profile RehabCare Services (Graphic Omitted) RehabCare's 7,500 therapists provide physical, occupational and speech therapy Map omitted showing Acute Rehab Unit locations, Outpatient locations, Contract Therapy locations, and Skilled Nursing Unit locations. More than 780 locations nationwide -3- Business Profile RehabCare Patients o RehabCare treats approximately 14,000 patients each day o Typical diagnoses include - Stroke - Neurological disorders - Orthopedic conditions - Musculoskeletal conditions o 99% of RehabCare billings are to hospitals and skilled nursing facilities o Payer sources for clients are 76% Medicare, 6% Medicaid, 18% managed care and other -4- Business Profile The Continuum of Care RehabCare builds integrated continuums of care in markets that offer sufficient demand for these services and appropriate therapy resources Graphic omitted showing the post-acute care continuum. RehabCare typically partners with hospitals and skilled nursing facilities to provide rehabilitation services -5- Strategic Pillar 1 Target Market Strategy A continuum can be built most efficiently in markets where different rehabilitation sites of services can all be managed together. Map omitted showing four continuum of care market locations Norfolk, VA Population 1.4 million Philadelphia, PA Population 5.1 million St. Louis, MO Population 2.6 million Brownsville, TX Population 363,000 million -6- Strategic Pillar 2 Acquisitions RehabCare's acquisition strategy supports our target market strategy o Revenue size approximately $10-$25 million o EBITDA multiple 4-7 times o Continuing management o 2004 acquisitions have added $30 million in annualized operating revenues o Strong balance sheet enables aggressive acquisition strategy -7- Strategic Pillar 3 Joint Ownership Arrangements RehabCare's has developed joint venture and other relationships with market-leading health delivery partners - Provides access to referral networks and market share - Develops long-term relationships: deploys capital, provides joint ownership and program management - Adds key components to continuums of care o Samples of JV relationships this year: Valley Baptist Health System, Howard Regional Health System, Signature Healthcare Foundation -8- Strategic Pillar 4 HRS Growth Strategy RehabCare has successfully stabilized the loss of programs experienced in 2003 o Expect no net loss of programs in 2004 compared to a net loss of 21 (excluding acquisitions) in 2003 o Increase in same-store growth YTD Graphic Omitted
Number of Programs 1997 118 1998 132 1999 135 2000 135 2001 134 2002 137 2003 123
-9- Strategic Pillar 5 Improve CT Profitability Contract therapy operating margins are returning to pre-3Q/03 levels; but more can be accomplished o Target market approach is paying off o Technology platform conversion is complete o Solid same store revenue growth of 10.9%, 3Q YOY o Increase of more than 125 programs, YTD o Improving SG&A leverage Graphic Omitted
Contract Therapy Operating Margin Q2/03 5.5% Q3/03 2.7% Q4/03 4.1% Q1/04 6.0% Q2/04 4.8% Q3/04 5.4%
-10- Strategic Pillar 6 Clinical Research & Development RehabCare must ensure its 7,500 therapists provide the highest quality therapy to 14,000 patients daily o Develop clinical research programs in partnership with academic medical centers o Utilize our clinical database to improve the quality of rehabilitation outcomes o Create systems to integrate the continuum of care -11- Strategic Pillar 7 Information Technology & Management To support the continuum of care, RehabCare has developed a single-technology platform o RehabCare's PDA-based clinical system - Enhanced forecasting mechanisms - Billing turnaround of 3 to 4 days - Allows billing in any format for client o Wireless connectivity will allow 2-way real time communication - Clinical pathways at point of service - Patient protocols at point of service - Clinical expertise immediately, at point of service -12- Strategic Pillar 8 Strong Balance Sheet Access to capital is not a challenge o $47 million in cash, September 30, 2004 o $35 million year-to-date cash flow from operations o Limited subordinated debt related to acquisitions o Extended credit facility of $90 million; expandable to $125 million -13- Challenges Shortage of Therapists Recruiting and retaining therapists are key to our success o Increased web presence o Utilize large database of therapists o Increase integration with schools through clinical R&D function o Utilize staffing coordinators in markets with acceptable volume o Introduced Professional Choice Account (PCA) o No wait period 401(k) o Improved health benefits -14- Challenges Regulatory Impact o 75 Percent Rule (ARU) - Rule was final, effective date July 1, 2004 - 3 year transition (50%, 60%, 65%, 75%) - Limits access to ARU for certain diagnoses - Patients denied access to ARU will seek rehab in other venues (i.e. SNF) - Estimated impact included in 2004 guidance - 13% (15) programs will require mitigation strategies in first year o Inpatient Rehab Rate Increase 3.1% effective October 1, 2004 (ARU) o Part B Therapy Caps (Contract Therapy) - Medicare Prescription Drug Bill contains moratorium through 12/31/05 o Part B Fee Schedule 1.5% increase in 2005 (Contract Therapy & OP) o Part A increase of 2.8% to SNF's (Contract Therapy) o LTACH Hospital Within Hospital and LTACH Satellites - Effective October 1, 2004 - Admissions of more than 25% from host hospital subject to payment restrictions - Separate control of co-located hospitals o MEDPAC study due January 2005 allowing fee-for-service patients access to outpatient therapy and rehab facility services without physician's order (OP) -15- Challenges Outpatient Business Outpatient business is experiencing: o Reduced number of locations and lower same-store volumes o Increases in labor costs at the unit level o Increased competition from physician practices RehabCare is implementing a plan o Conducting unit by unit review to evaluate growth opportunities o Implementing a new weekly revenue and cost matching tool to improve productivity o Re-designing ProMOS to provide real-time outpatient clinical information collection -16- Challenges InteliStaf Holdings StarMed (our former staffing division) o Lost $5.3 million in 2003 versus estimated $0.6 million in 2004 for RHB's equity share of InteliStaf's net loss o Transaction provided immediate improvement to our results in 2004 o Healthcare staffing industry is leveling out from most recent contraction cycle o Anticipate healthcare staffing cycle to reverse in 2 to 3 years - Partner is in a strong position when the industry does return to growth phase -17-
Quarterly Update (Graphic Omitted) GAAP Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 ---- ----- ----- ----- ----- ----- Revenue (millions) $135.0 $129.5 $104.5 $90.9 $93.3 Operating Earnings (millions) $5.7 ($34.5) $9.5 $10.2 $10.7 EPS $1.20 ($1.58) $0.31 $0.34 $0.36 Proforma Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 -------- ----- ----- ----- ----- ----- Revenue (1)(millions) $79.8 $80.0 $87.7 $90.9 $93.3 Operating Earnings (millions) $5.7 $9.0(2) $9.5 $10.2 $10.7 EPS $0.20 $0.31(2)$0.31 $0.34 $0.36 (1) Excludes StarMed Operating Revenues (2) Excludes the effect on loss on sale of StarMed
-18- RHB Strategic Position o Demand - rehabilitation is a large and growing market o RHB has significant growth opportunities - Same store - New sales - Joint ventures - Acquisitions o Delivery strategy - Continuum of care/Target markets model - Responds to local market needs - Regulatory challenges - Addresses therapist shortage o Strong financial position o Solid results - both top line and bottom line -19-