eightk1q2010presentation.htm

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RW34sebMEc/CbjKrJVh/pBiVGvQI8iHmC8QwGmySaNTXvvfJnlXLJl8rqEJRB/Q3 98k2YKWYWjaiy4tdGBYZDg== 0000812191-10-000034.txt : 20100511 0000812191-10-000034.hdr.sgml : 20100511 20100511165013 ACCESSION NUMBER: 0000812191-10-000034 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 24 CONFORMED PERIOD OF REPORT: 20100511 ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20100511 DATE AS OF CHANGE: 20100511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REHABCARE GROUP INC CENTRAL INDEX KEY: 0000812191 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HOSPITALS [8060] IRS NUMBER: 510265872 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14655 FILM NUMBER: 10821578 BUSINESS ADDRESS: STREET 1: 7733 FORSYTH BLVD STREET 2: SUITE 2300 CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3148637422 MAIL ADDRESS: STREET 1: 7733 FORSYTH BLVD 23RD FLR STREET 2: SUITE 2300 CITY: ST. LOUIS STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: REHABCARE CORP DATE OF NAME CHANGE: 19940218 8-K 1 eightk1q2010presentation.htm eightk1q2010presentation.htm

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): May 12, 2010

REHABCARE GROUP, INC.

(Exact name of Company as specified in its charter)

Delaware	001-14655	51-0265872
(State or other jurisdiction	(Commission File Number)	(I.R.S. Employer
of incorporation)		Identification No.)

	7733 Forsyth Boulevard
	Suite 2300
	St. Louis, Missouri	63105
	(Address of principal executive offices)	(Zip Code)

(800) 677-1238

(Company's telephone number, including area code)

Not applicable

(Former name or former address if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o 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 May 12, 2010, 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.

Forward-looking statements have been provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on the Company’s current expectations and could be affected by numerous factors, risks and uncertainties discussed in the Company’s filings with the Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. Do not rely on forward looking statements as the Company cannot predict or control many of the factors that ultimately may affect the Company’s ability to achieve the results estimated. The Company makes no promise to update any forward looking statements whether as a result of changes in underlying factors, n ew information, future events or otherwise.

Item 9.01

Financial Statements and Exhibits.

(d)

Exhibits - See exhibit index

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: May 12, 2010

REHABCARE GROUP, INC.

By: /s/ Jay W. Shreiner

Name: Jay W. Shreiner

Title: Executive Vice President and

Chief Financial Officer

EXHIBIT INDEX

Exhibit No.

Description

99	Investor Relations Presentation in use beginning May 12, 2010

EX-99 2 eightk1q2010presentex99.htm eightk1q2010presentex99.htm

Investor Presentation

First Quarter 2010

Exhibit 99

n Headquartered in St. Louis, MO

n Established in 1982

n Largest contract manager of rehabilitation services; fourth largest post-acute hospital
operator, third largest long-term acute care hospital provider

n Triumph HealthCare merger created more diversified business lines, reducing reliance on
management contracts for revenue and EBITDA streams

FYE 2009 “Owned” Revenue vs. “Contract” Revenue

RehabCare ex. Triumph

Pro Forma w/Triumph

Company Overview

Division Overviews

Skilled Nursing Rehabilitation
Services (SRS)

n $499 mm - 39% of pro forma
revenue

n 1,125 SNF/long-term care
programs in 37 states

n 8.1 mm annual patient visits

n Polaris Group - consulting for
long-term care facilities

n VTA Management Services -
therapy and nurse staffing for
New York

$1.3 billion pro forma operating revenues for LTM 3/31/10

Hospital Rehabilitation

Services (HRS)

n $178 mm - 14% of pro forma
revenue

n 144 hospital-based programs
in 32 states

n 43,000 IRF discharges/year

n 1.2 mm annual outpatient
visits

n $594 mm - 47% of pro forma
revenue

n 29¹ LTACHs, 6 IRFs; 13 states

n 20 FS LTACHs, 9 HIHs; 4 FS
IRFs, 2 HIHs

n 1,593 licensed LTACH beds;
243 IRF beds

n 410,000 annual patient days

LTACHs = Long-Term Acute Care Hospitals

IRFs = Inpatient Rehabilitation Facilities

SNFs = Skilled Nursing Facilities

FS = Freestanding

HIH = Hospital in Hospital

Hospital Division

1Includes Triumph Hospital-The Heights, which opened in April

13%

Patient Discharge Destination1

LTACH / SNF

IRF

No post-
acute care

Hospice/Home Health

65%

Acute care
hospital

Market Overview

2MedPAC Data Book, June 2009; does not include Home Health or
Medicare Advantage

3Avalere Health LLC, April 2009; does not include Home Health or
Medicare Advantage

Medicare Post-Acute Spending (in billions)

n Large, growing and highly fragmented market

n Positive demographic trends, with first wave of Baby Boomers entering Medicare in 2011

n Medicare expenditures for post-acute services (excluding home health) projected to
increase 113% from 2007 to 2021

n RehabCare delivers services across the post-acute continuum of care, providing
the most appropriate discharge destination for acute patients

Projected3

Actual2

Hospital Division
Overview

Competitive Landscape

1MedPAC, March 2010 Report to the Congress

2Includes Triumph Hospital-The Heights, which opened in April

n RehabCare pursues joint venture hospital partnerships (nine currently,
representing 15 locations) with market-leading acute care providers and physician
groups, in addition to its wholly owned facilities

Market Size1: 221 IRFs

(Freestanding and HIHs)

Market Size1: 386 LTACHs

IRFs

LTACHs

Source: Information available from public filings or
from company websites

n Division historically has been impacted by de novo start-up losses and infrastructure
investments; Triumph merger provides level of critical mass as well as ability to adopt
proven operational strengths

n Triumph integration and expected synergies on track; early results from incorporating
Triumph’s case management and census development methodologies are positive

n In Q1 10, Triumph reported 17.7% EBITDA1 margin after slow start; legacy hospitals
sequentially improved operating loss by $3.1 mm, excluding transaction costs

Hospital Division
Performance

Operating Earnings ($ in millions)

1 See Appendix for Reconciliation to GAAP

2Includes $39.7 million in revenue and operating earnings of $3.7 million generated by Triumph
from 11/25/09 - 12/31/09

New Hospitals: 0 1 1 21 0

Revenue ($ in millions) and Patient Days

1Q2009 2Q2009 3Q2009 4Q2009 1Q2010

3Includes $112.6 million in revenue and operating earnings of $16.2 million from Triumph for
the three months ended March 31, 2010

4 Operating earnings excluding start-up & ramp-up losses and transaction and severance
related costs, see Appendix for reconciliation to GAAP

n Expect FY2010 revenue of $650 - $675 mm

n Anticipate EBITDA of $90 - $100 mm for FY2010

n Reflects the impact of:

n Market basket reductions for IRFs and LTACHs effective Apr. 1 and Oct. 1, 2010

n RY2011 proposed LTACH rule

n Reaffirm breakeven operating earnings run rate for 13 legacy hospitals by the end of
Q2 10 and breakeven operating earnings for FY2010

n Dallas LTACH anticipated to be accretive by end of Q2 10

n Triumph hospitals expected to achieve 18% to 20% EBITDA margins for FY2010

n Net income attributable to noncontrolling interests expected to approximate $3 million
for FY2010

n Patient Protection and Affordable Care Act (PPACA) extended LTACH provisions
contained in the 2007 Medicare, Medicaid and SCHIP Extension Act (MMSEA)
through the end of 2012 (see Appendix for summary of PPACA impact)

Hospital Division
Outlook

Skilled Nursing Rehabilitation Services (SRS)
Division overview

n Manages rehab programs for SNFs

n Each Medicare-certified SNF is required to provide physical, speech and occupational therapy,
but many lack the know-how and/or scale to effectively manage a program

n RehabCare provides a compelling value proposition to its SNF partners

n Access to advanced technology platform

n Broader array of clinical programming

n Better access to scarce therapist labor pool

n Reimbursement expertise and denials management

Source: Information available from public filings or from company websites

¹Source: MedPAC Report to Congress, March 2010

Competitive Landscape — # of facilities served

Self-

operated

11,000+

1,125

1,000

700

538

450

400

300

188

Market Size1: 15,000+
Medicare-certified SNFs

SRS Division
Advanced technology platform

n Rolling out next generation point-of-service
(iTouch) technology and upgraded therapy
management platform to all programs by year
end

n Increases speed and accuracy of data input
to maximize therapist productivity, reduce
billing errors and subsequent denials

n Tracks real-time patient outcome data,
including discharge location and hospital
readmissions

n Integrated Resource Utilization Group (RUG)
planner ensures appropriate RUG category
placement and appropriate payment

n Benchmarking reports provide national
comparative data and ability to track common
metrics across venues of care

SRS Division
Performance

Note: Includes Symphony acquisition as of July 1, 2006

1Same store analysis does not include Symphony

% Margin: 5.5% (0.3%) 1.7% 5.6% 7.6% 8.5% 8.2%

Operating Earnings ($ in millions)

YOY growth: 35.5% 49.9% 24.4% 5.6% 8.5% 9.5% 2.6%

Same store: 8.4% 1.0%¹ 7.1%1 12.4% 8.8% 11.5% (0.6%)

n Significant same store revenue and margin growth since completion of Symphony
integration in 2007

n Achieved 8.2% operating earnings margin in Q1 10, offsetting the impact of Part B
therapy caps through higher productivity and Part A volumes and better leveraging
of SG&A as a result of integrating Triumph

Revenue ($ in millions)

2.6%

SRS Division
Outlook

n Expect 7% - 8% operating earnings margins for FY2010, driven by mid-single digit year
-over-year same store revenue growth

n Reflects the estimated impact of:

n New concurrent therapy rules that go into effect Oct. 1, 2010

n MDS 3.0 / RUGs IV implementation Oct. 1, 2010 or Oct. 1, 2011???

n Rollout of new technologies

n Pricing pressures

n Wage rate increases during the year

n Anticipate 50 to 75 net new units in 2010

n PPACA extended the Part B therapy cap exceptions process through 2010

Competitive Landscape

Have IRF

No IRF

n Manages hospital-based IRFs and outpatient therapy programs on a contract basis,
providing our partners with:

n Improved internal patient flow

n Ability to attract ≈ 30% admissions from external sources

n Successful clinical outcomes and broader clinical programming (brain, stroke, spinal dysfunction)

n Regulatory compliance (60% rule, RAC, 3-hour rule)

n Recruiting and labor management

3,8592 short-term acute
care hospitals

137 outsourced

Hospital Rehabilitation Services (HRS)
Division overview

Market Size1: 981 hospital
- -based IRFs

Source: Information available from public filings or from
company websites

1MedPAC March 2010 Report to Congress

²American Hospital Directory

HRS Division
Performance

n Improved same store revenues and discharges in Q1 10 and achieved 16%
operating earnings margin; net unit count declined by one sequentially

¹Includes $1.2 mm pretax charge from a bad debt write-down related to an
outpatient transaction

YOY growth: (0.5%) (5.3%) (8.7%) 0.9% 7.6% 7.2% 0.4%

IRFs: 120 115 107 113 106 113 103

Operating Earnings ($ in millions)

% Margin: 11.9% 13.2% 14.0% 13.3% 16.6% 14.6% 16.0%

Revenue ($ in millions)

CAGR: (1.6%)

0.4%

9.9%

HRS Division
Outlook

n Expect 15% - 17% operating earnings margin for FY2010

n Anticipate 2 - 4% year-over-year growth in IRF same store discharges for
FY2010

n Unit count expected to decrease in first half of year with recovery in second,
resulting in flat unit growth for year

n 12 known unit openings YTD 2010 vs. 6 openings for TY2009

n Enhancing client value proposition through expanded
product offerings that better serve the needs of the
market

n Applying enabling technology, including:

n Electronic pre-screen to increase speed of admissions,
drive volumes

n Point-of-service technology to improve productivity and
regulatory compliance

n Upgraded inpatient outcomes management system to
enhance patient data tracking and provide benchmarking
capabilities

Openings	YTD 2010	TY 2009
IRF	6	5
Skilled Nursing	4	0
Outpatient	2	1

Revenue ($mm)

Net Earnings ($mm)

EPS: $0.732 $1.05³ $ 1.224 $0.48 $0.61

Consolidated Financial Summary

1RehabCare 2009 historical includes $39.7 million in revenue generated by Triumph

2Includes $0.17 per diluted share impairment charge on an intangible asset

3Includes $0.09 per diluted share in charges related to a bad debt write-down of an
outpatient transaction and cancellation of a planned acquisition and development project

4Includes transaction and severance related charges related to Triumph of $0.38 per
diluted share.

n Anticipate strong consolidated revenue and net earnings growth for the full year

Consolidated Balance Sheet

n Cash flow from operations was $8.5 mm for three months ended Mar. 31,
2010 compared with $9.4 mm in the prior year period

n Days sales outstanding was 61.8 days at Mar. 31, 2010 compared to 60.2 days at
Dec. 31, 2009

n Expect continued strong operating cash flow with DSO of approximately 60 -
63 days

n Capital expenditures anticipated to be $32 mm in 2010, consisting of $12.5
mm of information system investments; $12.5 mm in expansion projects and
$7 mm related to maintenance

Cash and Cash Equivalents

Total Assets

Total Debt

Stockholders’ Equity

Noncontrolling Interests

Percent of Debt to Total Capital¹

($mm)

$ 27.4

1,124.9

453.8

453.6

22.6

49%

3/31/10

1Total capital represents the sum of debt, stockholders’ equity and noncontrolling interests

Safe Harbor

Forward-looking statements have been provided pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Such statements
are based on the Company’s current expectations and could be affected by
numerous factors, risks and uncertainties discussed in the Company’s filings with
the Securities and Exchange Commission, including its most recent report on
Form 10-K, subsequent reports on Form 10-Q and current reports on Form 8-K.
Do not rely on forward looking statements as the Company cannot predict or
control many factors that affect its ability to achieve the results estimated. The
Company makes no promise to update any forward looking statements whether as
a result of changes in underlying factors, new information, future events or
otherwise.

Appendix

Impact of Healthcare Reform

n Extends LTACH provisions of MMSEA through Dec 2012

n Maintains existing status related to 25% Rule and short-stay outliers

n Delays one-time budget neutrality adjustment (estimated at 3.75%)

n Continues moratorium on new LTACH beds while facility criteria is established

n Extends auto exception process for Part B therapy caps through Dec. 31, 2010

n Delays implementation of RUGs IV until Oct. 1, 2011

n Establishes reductions in market basket updates for IRFs and LTACHs

n Productivity (negative) adjustments for SNFs, IRFs and LTACHs beginning in 2012

n Prohibits physician ownership of hospitals, effective Dec. 31, 2010, and creates
new transparency, reporting and expansion requirements for “grandfathered”
hospitals

	Apr. 1, 2010	RY 2011	RY 2012-13	RY 2014	RY 2015-16	RY 2017-19
IRF	0.25	0.25	0.10	0.30	0.20	0.75
LTACH	0.25	0.50	0.10	0.30	0.20	0.75

Impact of Healthcare Reform

n Beginning in 2012, allows providers organized as Accountable Care Organizations
that voluntarily meet quality thresholds to share in cost savings achieved in
Medicare program

n Establishes a national pilot program by 2013 to study effectiveness of bundled
payment system for hospital+physician+post-acute services delivered three days
prior to hospitalization through 30 days post-discharge

n In 2015, establishes Medicare Independent Payment Advisory Board (IPAB); IRFs
and LTACHs exempt from any binding proposals of IPAB

Primary Post-Acute Settings
Overview

	Long-Term Acute Care Hospitals	Skilled Nursing Facilities	Inpatient Rehab Facilities
Medicare Spending 2009	$4.6 billion	$25.5 billion (est. $6 billion rehab)	$5.8 billion
Patients Served 2008	130,869 Medicare discharges	2.6 million Medicare admissions	370,048 Medicare discharges
Type of Patient	High acuity, at least 25 days	Low to moderate acuity, may require some rehab	High acuity, requires extensive rehab (min 3 hrs/day)
Avg. Length of Stay	At least 25 days	27 days	13.2 days
Medicare Reimbursement	LTACH PPS - Receive a single payment when Medicare beneficiary is discharged for all services rendered	SNF PPS - Receive a per diem payment under both Medicare Part A and state Medicaid programs	IRF PPS- Receive a single payment when Medicare beneficiary is discharged for all services rendered
Medicare Requirements	• Patients must have an average length of stay of >25 days • 25% rule: no more than 25% of patients may be referred from a single source (fixed at 50% through 2012) • Moratorium on new LTACH beds until 2013	Medicare covers up to 100 days of SNF care following an acute hospital stay of at least 3 days	60% Rule: 60% of patients must satisfy one of 13 defined conditions

Source: MedPAC

Q110 EBITDA and Hospital Division Adjusted
Operating Earnings Reconciliations

Hospital Division Adjusted Operating Earnings

Q110 EBITDA Reconciliation