2017 J.P. MORGAN HEALTHCARE...
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2017 J.P. MORGAN HEALTHCARE CONFERENCESan Francisco, CAJanuary 10, 2017
Mark Tarr, President and Chief Executive Officer
The information contained in this presentation includes certain estimates, projections and other forward-lookinginformation that reflect HealthSouth's current outlook, views and plans with respect to future events, includinglegislative and regulatory developments, strategy, capital expenditures, acquisition and other development activities,cyber security, dividend strategies, repurchases of securities, effective tax rates, financial performance, financialassumptions, business model, and shareholder value-enhancing transactions. These estimates, projections andother forward-looking information are based on assumptions HealthSouth believes, as of the date hereof, arereasonable. Inevitably, there will be differences between such estimates and actual events or results, and thosedifferences may be material.
There can be no assurance that any estimates, projections or forward-looking information will be realized.
All such estimates, projections and forward-looking information speak only as of the date hereof. HealthSouthundertakes no duty to publicly update or revise the information contained herein.
You are cautioned not to place undue reliance on the estimates, projections and other forward-looking informationin this presentation as they are based on current expectations and general assumptions and are subject to variousrisks, uncertainties and other factors, including those set forth in HealthSouth's Form 10-K for the year endedDecember 31, 2015, the Form 10-Q for the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016,and in other documents HealthSouth previously filed with the SEC, many of which are beyond HealthSouth's control,that may cause actual events or results to differ materially from the views, beliefs and estimates expressed herein.
Note Regarding Presentation of Non-GAAP Financial MeasuresThe following presentation includes certain non-GAAP financial measures as defined in Regulation G under theSecurities Exchange Act of 1934, including Adjusted EBITDA, leverage ratios, adjusted earnings per share, andadjusted free cash flow. Schedules are attached that reconcile the non-GAAP financial measures included in thefollowing presentation to the most directly comparable financial measures calculated and presented in accordancewith Generally Accepted Accounting Principles in the United States. HealthSouth's Form 8-K, dated January 9,2017, to which the following presentation is attached as Exhibit 99.1, provides further explanation and disclosureregarding HealthSouth's use of non-GAAP financial measures and should be read in conjunction with thispresentation.
Portfolio - As of December 31, 2016
123Inpatient Rehabilitation Hospitals 37 operate as joint ventures with
acute care hospitals
30 Number of States (plus Puerto Rico)
~ 28,000 Employees
HealthSouth: A Leading Provider of Post-Acute Care
59% of HealthSouth's IRFsare located within a 30-
mile radius of anEncompass location.
IRF Market ShareLargest owner and operator of IRFs
21% of Licensed Beds28% of Medicare Patients Served
Home Health andHospice Market Share
4th largest provider ofMedicare-certified
skilled home healthservices
Note: One of the 123 IRFs and two of the 188 adult home health locations are nonconsolidated. These locations are accounted for using the equity method of accounting.
Encompass Home Health and Hospice
Portfolio As of December 31, 2016
188 Home Health Locations
35 Hospice Locations
25 Number of States
~ 7,700 Employees
2014 2015 2016
10.7% 10.6% 10.7%
2014 2015 2016
14.5% 13.9% 13.1%11.4% 10.7% 10.1%
2014 2015 2016
Home Health QualityIRF QualityDischarge to Community
Discharge to Skilled Nursing
Discharge to Acute Hospital
Percent of casesdischarged to
the community,including homeor home withhome health.
Higher is better.
discharged to askilled nursing
facility. Lower is better.
discharged to anacute carehospital.
Lower is better.
Refer to pages 26-27 for end notes.
Quality of CareStar Ratings(2)
99% of Encompass' homehealth agencies are
3 Stars or higher
3.6 3.6 Patient Satisfaction Star Ratings(2)
95% of Encompass' homehealth agencies are
3 Stars or higher
Encompass National Average
Readmission Rate Percent of patients readmitted
to an acute care hospital. Lower is better.
Leading Positions in Quality of Care
Leading Position in Cost Effectiveness(3) - IRFs
Medicare paysHealthSouth lessper discharge,on average, andHealthSouthtreats a higheracuity patient.
Avg. Est.Total Cost
for FY 2017
Dischargefor FY 2017
HLS(4) = 119 68 956 1.25 $12,645 $19,371
(Non-HLS) =144 57 582 1.23 $16,653 $20,248
HospitalUnits = 870 24 234 1.18 $19,879 $20,551
Total 1,133 33 354 1.21 $17,152 $20,153
The average estimated total payment per discharge, as stated, does not reflect a 2% reduction for sequestration.(7) Refer to pages 26-27 for end notes.
HealthSouth differentiatesitself by: Best Practices clinical
protocols Supply chain
Economies of scale
Episodes per Episode per Episode per Visit per Visit
Encompass 137,568 $3,072 19 $162 $72
Public PeerAverage 259,215 $2,732 17* $161 $84*
EncompassCompared toPeer Average
12.4% 11.8% 0.6% (14.3)%
Leading Position in Cost Effectiveness - Home Health
Encompass' averagerevenue per episodeis 12.4% higher dueto higher acuitypatient mix.
Encompass' cost pervisit is 14.3% lowerdue to marketdensity & operationalefficiency: Caregiver optimization Full utilization of Homecare Homebase (HCHB) Employee culture
of excellence ~76% of visits conducted by full-time staff Daily monitoring of productivity
Public peer average represents 2015 data from publicly traded home health providers.* One publicly traded company (Kindred) does not report visit counts.
IRF-Home Health Clinical Collaboration (All Payors)
* Generally defined as a HealthSouth IRF located within a 30-mile radius of an Encompass location.
Q4 2015 Q4 2016
Q4 2015 Q4 2016
HealthSouth IRF Discharges tonon-Encompass Home Health
HealthSouth IRF Discharges toEncompass Home Health
Clinical collaboration rate withHealthSouth IRFs increased by730 basis points over Q4 2015
Both Segments Benefit from a Demographic Tailwind:Expanding Medicare Beneficiary Population
Key Observations: The growth rate of Medicare beneficiaries
increased in 2011 to an approx. 3% CAGRas baby boomers started turning 65.
In 2030, the Medicare population is projectedto increase to 81 million beneficiaries from55 million beneficiaries today.
Source: www.census.gov/population/projections/files/summary/NP2014-T9.xls; Center for Medicare & Medicaid Services, Medicare Trustees Report - June 2016 - pages 186, 191
Average Age of HealthSouth Patients
IRF Home Health
< 65 years 29% 11%
65 to 69 years 13% 11%
70 to 74 years 13% 13%
75 to 79 years 14% 15%
80 to 84 years 14% 17%
85 to 89 years 11% 17%
> 90 years 6% 16%
CMS: Driving Change Toward Integrated Delivery PaymentModels, Value-Based Purchasing, and Site Neutrality
Future Post-Acute Providers (Timing?)
Inpatient Rehabilitation Facilities
Full range: low acuity g high acuity 24/7 nursing coverage Eliminates payment silos
Home-Based Post-Acute Services More care in the home
(lowest cost setting) Differentiator: Ability to care for high-acuity,
>> 50% of Medicare fee-for-servicepayments via integrated deliverypayment models >> 90% of Medicare fee-for-servicepayments tied to quality/value
Integrated Delivery Payment Models
Current Post-Acute Providers
Medicare payments/regulations will beoutcome focused.
Many existing regulations will becomeobsolete.
Facility-Based Post Acute Services
>> 30% of Medicare fee-for-servicepayments via integrated deliverypayment models (e.g., bundledpayments; accountable careorganizations (ACOs))>> 85% of Medicare fee-for-servicepayments tied to quality/value (i.e.,value-based purchasing,readmissions reduction programs)
Source: Health and Human Services Fact Sheet announcing new reimbursement goals - January 26, 2015
Skilled Nursing Facilities