8-K 1 eightk9805presentation.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): September 8, 2005 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 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions. [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 7.01 Regulation FD Disclosure. Beginning on September 8, 2005, 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. 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 our actual results in future periods to differ materially from forecasted results. These risks and uncertainties may include but are not limited to, our ability to consummate acquisitions; our ability to integrate recent and pending acquisitions and client partnering relationships within the expected timeframes and to achieve the revenue and earnings levels from such acquisitions and relationships at or above the levels projected; changes in governmental reimbursement rates and other regulations or policies affecting the services provided by us to clients and/or patients; the operational, administrative and financial effect of our compliance with other governmental regulations and applicable licensing and certification requirements; our ability to attract new client relationships or to retain and grow existing client relationships through expansion of our hospital rehabilitation and contract therapy service offerings and the development of alternative product offerings; the ability of new management of InteliStaf Holdings, Inc., our unconsolidated affiliate, to complete its business assessment of InteliStaf on a timely basis and to institute a business restructuring to improve revenues and earnings; the results of our impairment analysis to be conducted with respect to the carrying value of our investment in InteliStaf; the future financial results of our other unconsolidated affiliates; the adequacy and effectiveness of our operating and administrative systems; our ability to attract and the additional costs of attracting administrative, operational and professional employees; significant increases in health, workers compensation and professional and general liability costs; litigation risks of our past and future business, including our ability to predict the ultimate costs and liabilities or the disruption of its operations; competitive and regulatory effects on pricing and margins; and general and 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: September 8, 2005 REHABCARE GROUP, INC. By: /s/ Mark A. Bogovich ---------------------------------------- Mark A. Bogovich Vice President, Interim Chief Financial Officer EXHIBIT INDEX Exhibit No. Description 99 Text of Investor Relations Presentation in Use Beginning September 8, 2005 Exhibit 99 [pic] RehabCare(SM) delivering the post-acute continuum 2nd Quarter 2005 RehabCare(SM) delivering the post-acute continuum 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 our actual results in future periods to differ materially from forecasted results. These risks and uncertainties may include but are not limited to, our ability to consummate acquisitions; our ability to integrate recent and pending acquisitions and client partnering relationships within the expected timeframes and to achieve the revenue and earnings levels from such acquisitions and relationships at or above the levels projected; changes in governmental reimbursement rates and other regulations or policies affecting the services provided by us to clients and/or patients; the operational, administrative and financial effect of our compliance with other governmental regulations and applicable licensing and certification requirements; our ability to attract new client relationships or to retain and grow existing client relationships through expansion of our hospital rehabilitation and contract therapy service offerings and the development of alternative product offerings; the ability of new management of InteliStaf Holdings, Inc., our unconsolidated affiliate, to complete its business assessment of InteliStaf on a timely basis and to institute a business restructuring to improve revenues and earnings; the results of our impairment analysis to be conducted with respect to the carrying value of our investment in InteliStaf; the future financial results of our other unconsolidated affiliates; the adequacy and effectiveness of our operating and administrative systems; our ability to attract and the additional costs of attracting administrative, operational and professional employees; significant increases in health, workers compensation and professional and general liability costs; litigation risks of our past and future business, including our ability to predict the ultimate costs and liabilities or the disruption of its operations; competitive and regulatory effects on pricing and margins; and general and economic conditions, including efforts by governmental reimbursement programs, insurers, healthcare providers and others to contain healthcare costs. 0 RehabCare(SM) delivering the post-acute continuum BUSINESS PROFILE RehabCare, in partnership with hospitals and nursing homes, provides post-acute program management, medical direction, physical rehabilitation, quality assurance, specialty programs and community relations for the following programs o Hospital-Based Rehabilitation Programs o 120 Acute Rehabilitation Units (ARUs) o 26 Subacute/Transitional Care Units (TCUs) o 42 Outpatient Rehabilitation Programs (OP) o Skilled Nursing Facility-Based Rehabilitation Programs o 764 Programs o Freestanding Rehabilitation Facilities* o 2 Acute Rehab Facilities o 2 Long Term Acute Care Hospitals * Includes MeadowBrook acquisition effective August 1, 2005 1 RehabCare(SM) delivering the post-acute continuum (graph omitted) RHB REVENUES 2Q/05 Total Revenue $108.4 million SNF-Based Rehabilitation Programs (Contract Therapy Division) $57.6M 53% Hospital-Based Rehabilitation Programs (HRS Division) $48.1M 44% Healthcare Consulting $ 2.7M* 3% * Excludes intercompany revenue 2 RehabCare(SM) delivering the post-acute continuum BUSINESS PROFILE o The post-acute physical rehabilitation industry provides large opportunities for new RehabCare clients o 5,000 Hospitals o 120 ARU programs o 15,000 Skilled Nursing Facilities o 764 programs o Competitors include Hospital-based SNF-based -------------- --------- - Self-operation - Self-operation - HealthSouth - Aegis (Beverly Enterprises, Inc.) - Select Medical Corp. - RehabWorks - Regional Providers 3 RehabCare(SM) delivering the post-acute continuum BUSINESS PROFILE REHABCARE SERVICES* RehabCare's 8,500 clinicians provide physical, occupational and speech therapy at programs across the country. [map] More than 950 locations nationwide 38 states, the District of Columbia and Puerto Rico * Includes MeadowBrook acquisition effective August 1, 2005 4 RehabCare(SM) delivering the post-acute continuum BUSINESS PROFILE REHABCARE PATIENTS o RehabCare treats approximately 14,000 patients each day o 54,000 inpatient discharges, 1.1 million outpatient visits 4 million SNF patient encounters o Typical diagnoses include: o Stroke o Neurological disorders o Orthopedic conditions o Musculoskeletal conditions o Payer sources for our patients are 72% Medicare, 5% Medicaid, 23% managed care and other [pic] 5 RehabCare(SM) delivering the post-acute continuum BUSINESS PROFILE TRADITIONAL SILO DELIVERY CONCEPT Providers tend to focus on sites of service rather than continuum of care. Patients are treated at the sites in an uncoordinated manner. Therapy is the common link between each of these silos. [graph omitted] 6 RehabCare(SM) delivering the post-acute continuum BUSINESS PROFILE REHABCARE'S PATIENT-FOCUSED APPROACH RehabCare's patient-focused approach builds integrated continuums of care, rather than service silos, in markets that offer sufficient demand and appropriate therapy resources for these services [graph omitted] Acute Skilled Outpatient Rehabilitation Nursing Rehabilitation Units/Facilities Facilities Programs Hospital Medical/Surgical CARE MANAGEMENT Acute Therapies Transitional Long Term Home Care Acute Care Health Units Hospitals* Programs *RehabCare partners with providers of LTACH care where appropriate 7 RehabCare(SM) delivering the post-acute continuum HOW DO WE ACHIEVE OUR VISION? o Target Market Strategy o Acquisitions o Joint Ownership Arrangements o Hospital-Based Rehabilitation Stabilization/Growth Strategy (HRS) o SNF-Based Rehabilitation Profitability/Growth (CT) o Clinical Research and Development o Information Technology and Management o Access to Capital 8 RehabCare(SM) delivering the post-acute continuum HOW DO WE ACHIEVE OUR VISION? TARGET MARKET STRATEGY RehabCare has developed joint venture and other relationships with market-leading health delivery partners o Provides access to referral networks and market share o Develops long-term relationships: deploys capital, provides joint ownership and program management o Adds key components to continuums of care o Delivers RehabCare resources more efficiently [pic] [pic] Kokomo, IN Harlingen/Brownsville, TX Population 301,000 Population 1.0 million [pic] [pic] [pic] Norfolk, VA Philadelphia, PA St. Louis, MO Population 1.6 million Population 5.1 million Population 2.6 million 9 RehabCare(SM) delivering the post-acute continuum HOW DO WE ACHIEVE OUR VISION? NORFOLK TARGET MARKET EXPERIENCE We believe second quarter results in the Norfolk target market show traction of our target market strategy o 95% annualized staff retention versus 85% company-wide average o Over one-third of our clinical staff worked in multiple practice settings o More than 1000 patients (13%) were treated in multiple RehabCare venues [pic] ARU Locations - 2 Norfolk, VA OP Locations - 13 Population 1.6 million SNF Locations - 3 Home Health Location - 1 Acute Care Locations - 3 10 RehabCare(SM) delivering the post-acute continuum HOW DO WE ACHIEVE OUR VISION? ACQUISITIONS RehabCare's acquisition strategy supports our target market strategy o EBITDA multiple 4-6 times o Continuing management o 2004 acquisitions added $45 million in annualized operating revenues, 2005 have added $55 million annualized, with more in the pipeline o Strong balance sheet enables aggressive acquisition strategy CPR REHAB VitalCare PHASE 2 CONSULTING Cornerstone MeadowBrook THERAPY AMERICA A Division of Rehabilitation Healthcare A Part of A RehabCare RehabCare RehabCare Company 11 RehabCare(SM) delivering the post-acute continuum HOW DO WE ACHIEVE OUR VISION? JOINT VENTURE ARRANGEMENTS Joint ventures help us create longer term relationships and enhance market presence o Valley Baptist Health System, Harlingen/Brownsville, TX o 50% of local hospital market share o Added one acute rehab unit o 3 skilled nursing facilities opened in June o Howard Regional Health System, Kokomo, IN o 57% of local hospital market share o 30-bed LTACH in final approval stage o Projects under development: o Arlington, TX o 24-bed freestanding acute rehab facility to be owned and operated by RHB projected to open in December 2005 o Amarillo, TX o 40-bed freestanding rehab hospital scheduled to open Spring 2006 with Northwest Texas Health System o 12 non-binding joint venture letters of intent [pic] Valley Baptist Northwest Texas Health System Healthcare System Howard Arlington Regional Health System Rehabilitation Hospital A RehabCare Facility 12 RehabCare(SM) delivering the post-acute continuum HOW DO WE ACHIEVE OUR VISION? HOSPITAL-BASED REHABILITATION PROGRAMS STABILIZATION & GROWTH STRATEGY Revenue ------- Q2/04 Q2/05 ARU Programs 114 120 Net change in programs during quarter, excluding acquisitions + 2 + 5 Signings 4 5 Backlog 11 11 o Manage 75% rule transition o Longer term relationships using capital Operating Earnings ------------------ o Manage variable cost Number of Programs [graph omitted] '96 '97 '98 '99 '00 '01 '02 '03 '04 Q1/05 Q2/05 121 135 167 179 201 190 187 166 181 182 188 Revenue (Millions) [graph omitted] '96 '97 '98 '99 '00 '01 '02 '03 '04 91.6 106.8 128.1 147.2 162.3 173.0 179.7 185.9 190.7 Operating Margin [graph omitted] Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 17.2% 18.6% 21.1% 18.7% 16.6% 17.2% 16.8% 14.0% 13.9% 13 RehabCare(SM) delivering the post-acute continuum HOW DO WE ACHIEVE OUR VISION? SKILLED NURSING FACILITY-BASED REHABILITATION PROGRAMS PROFITABILITY/GROWTH Revenue ------- o Total CT programs: 764 (Q2/05) vs. 570 (Q2/04) o Net increase of 48 new programs sequentially o Same store revenue growth of 12.1% year-over-year Operating Earnings ------------------ o New pricing strategies o Manage variable cost o Continued SG&A leverage NUMBER OF PROGRAMS [graph omitted] '96 '97 '98 '99 '00 '01 '02 '03 '04 Q1/05 Q2/05 0 44 67 112 195 305 412 468 690 716 764 REVENUE (MILLIONS) [graph omitted] '96 '97 '98 '99 '00 '01 '02 '03 '04 0 8.4 13.9 14.1 30.0 64.7 105.3 130.8 171.3 OPERATING MARGIN [graph omitted] Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 5.5% 2.7% 4.1% 6.0% 4.8% 5.4% 7.5% 4.6% 5.5% 14 RehabCare(SM) delivering the post-acute continuum HOW DO WE ACHIEVE OUR VISION? CLINICAL RESEARCH & DEVELOPMENT RehabCare must ensure its 8,500 clinicians provide the highest quality therapy to approximately 14,000 patients daily o Partner with academic medical centers o Validate physical rehabilitation outcomes through research. Undertaking research to develop clinical decision-making matrices for 75% rule o Developed CORE program to provide high-quality care in SNFs for displaced 75% rule orthopedic patients o Create systems to integrate the continuum of care o CareNexus - our proprietary care management service [pic] Brain Injury Program LifeSpine CORE CareNexus Empowering Lives, Spine Care for Centers for connecting Independence for a Lifetime Orthopedic the continuum the Future Rehabilitation Excellence 15 RehabCare(SM) delivering the post-acute continuum HOW DO WE ACHIEVE OUR VISION? INFORMATION TECHNOLOGY & MANAGEMENT To support continuum of care, RHB has developed a single-technology platform o RHB PDA based clinical system o Patient-centric view, episodic data capture by clinical setting o Care management system, with total plan of care discharge planning and management tool o Clinical and financial outcomes management tools o Manage staff and patients across continuum o Wireless Connectivity will allow 2-way real time communication at point of service o Clinical pathways decision support o Patient protocols o Real time expertise available: clinical, technical, operational o Developed tools to manage 75% rule [pic] 16 RehabCare(SM) delivering the post-acute continuum HOW DO WE ACHIEVE OUR VISION? ACCESS TO CAPITAL* As of June 30, 2005 o $45 million in cash o $3.4 million in subordinated debt related to acquisitions o $90 million credit facility; expandable to $125 million * $26 million of cash and borrowings plus $9 million of subordinated debt utilized for acquisition of Meadowbrook effective August 1, 2005 17 RehabCare(SM) delivering the post-acute continuum CHALLENGES SHORTAGE OF THERAPISTS Recruiting and retaining therapists are key to our success o 85% annualized retention rate for full-time and part-time clinicians o Average hires/month increased 18% in Q2/05 o More than 50% of open positions are due to new program openings o Contract labor premium is 60% o Mitigation strategies o Campus relations program o Flexible and innovative compensation plans o Employee referral program o Internet advertising and e-mail campaigns o New employee orientation program o Targeted supervisory training o On-line learning and development opportunities o New pricing strategy to re-coup increased labor costs 18 RehabCare(SM) delivering the post-acute continuum CHALLENGES ACUTE REHAB REGULATORY IMPACT 75 PERCENT RULE DEFINITION o Effective July 1, 2004 - 3 year transition (50%, 60%, 65%, 75%) o Estimated impact 5-6% of acute rehab revenue included in 2005 guidance o Senate and House bills for freeze at 50% and National Advisory Council to oversee future federal policies that could deny patient care - RHB supports this effort MITIGATION STRATEGIES o Computer models to better manage rule o Manage 75/25 rule on a daily/weekly basis to accept best patient mix o Clinical education and training to enhance quality care to more medically complex patients o Develop new referral sources and modify hospital clinical programs o Continuum of care model will facilitate movement of patients to appropriate care settings o Increase in non-Medicare patients STATUS o As of June 30, our units, on average, were at the 60% level of compliance, when the target was 50%. o 680 qualifying patients not admitted within the first 6 months of 2005 19 RehabCare(SM) delivering the post-acute continuum CHALLENGES CONTRACT THERAPY REGULATORY IMPACT o THE 75% RULE AND PART A/PART B o Patients typically seen in ARUs are now being seen in SNFs as Part A patients o Part A patients generate lower operating margins o PART B THERAPY CAPS (SKILLED NURSING FACILITY-BASED REHABILITATION) o GAO report due this year, outcome unknown o Bill in House and Senate calling for full repeal, pending additional clinical research o RULE 70 - PPS AND CONSOLIDATED BILLING FOR SNFs 2006 o RUGS Refinement o Believe it to be neutral for RHB 20 RehabCare(SM) delivering the post-acute continuum CHALLENGES INTELISTAF HOLDINGS StarMed, our former staffing division, sold to InteliStaf on 2/2/04 in exchange for 25% of combined equity o Approximately $300,000 RHB equity share loss in Q2/05 and $700,000 year-to-date o AlixPartners, LLC hired by Board to replace top management and conduct a turnaround o Russell Reynolds retained to conduct a search for a new CEO InteliStaf HEALTHCARE 21
RehabCare(SM) delivering the post-acute continuum QUARTERLY UPDATE ------------------------------------------------------------------------------- GAAP Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 ------------------------------------------------------------------------------- REVENUE (MILLIONS) $ 90.9 $ 93.3 $ 95.1 $102.4 $108.4 ------------------------------------------------------------------------------- OPERATING EARNINGS (MILLIONS) $ 10.2 $ 10.7 $ 11.4 $ 9.0 $ 9.8 ------------------------------------------------------------------------------- EPS $ 0.34 $ 0.36 $ 0.37 $ 0.29 $ 0.32 (FULLY DILUTED) -------------------------------------------------------------------------------
22 RehabCare(SM) delivering the post-acute continuum ANNUAL TREND
REVENUE 2005 revenue guidance is $453 to $467 [graph omitted] '01 '02 '03 '04 '05* SNF-BRS $64.7 $105.3 $130.8 $171.3 H-BRS $173.3 $179.7 $185.9 $190.7 Consulting - - - $ 5.1 Range $453-467
EPS - Fully Diluted 2005 EPS guidance is $1.35 to $1.45 [graph omitted] '01 '02 '03 '04 '05* EPS $1.16 $1.38 $0.86 $1.38 Range $1.35-1.45 Source - Company Annual 10-K for respective years * 2005 Guidance, includes MeadowBrook acquisition as of August 1, 2005
23 RehabCare(SM) delivering the post-acute continuum REHABCARE SUMMARY Opportunities ------------- o New CT and HRS business growth o Acquisitions o Development of joint venture relationships o Maturity of continuum of care strategy Challenges ---------- o 75% rule implementation o Managing growth in tight labor market o Startup and integration of JVs and acquisitions o Part B Caps 24