Slide: 1 “To Serve All People During the End of Life’s Journey”
Slide: 2 Title: FORWARD-LOOKING STATEMENTS Body: Certain statements contained in this presentation are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements are based on management’s current expectations and are subject to known and unknown risks, uncertainties and assumptions which may cause the forward-looking events and circumstances discussed in this presentation to differ materially from those anticipated or implied by the forward-looking statements. Such risks, uncertainties and assumptions include, but are not limited to, general market conditions; adverse changes in reimbursement levels under Medicare and Medicaid programs; adverse changes in the Medicare payment cap limits and increases in the Company’s estimated Medicare cap contractual adjustment; decline in patient census growth; increases in inflation including inflationary increases in patient care costs; challenges inherent in and potential changes in the Company’s growth and development strategy; our ability to effectively implement the Company’s 2008 operations and development initiatives; the Company’s dependence on patient referral sources and potential adverse changes in patient referral practices of those referral sources; our ability to implement a new integrated billing and clinical management and electronic medical records system; the ability to attract and retain healthcare professionals; increases in the Company’s bad debt expense due to various factors including an increase in the volume of pre-payment reviews by the Company’s Medicare fiscal intermediaries; adverse changes in the state and federal licensure and certification laws and regulations; adverse results of regulatory surveys; delays in licensure and/or certification; government and private party, legal proceedings and investigations; cost of complying with the terms and conditions of our corporate integrity agreement; adverse changes in the competitive environment in which the Company operates; changes in state or federal income, franchise or similar tax laws and regulations; adverse impact of natural disasters; changes in our estimate of additional compensation costs under FASB Statement No. 123(R); and the disclosures contained under the headings “Government Regulation and Payment Structure” in “Item 1. Business” and “Item 1A. Risk Factors” of Odyssey’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 9, 2007, and its most recent report on Form 10-Q and in its other filings with the Securities and Exchange Commission. Many of these factors are beyond the ability of the Company to control or predict. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements, which reflect management’s views only as of the date hereof. The Company undertakes no obligation to revise or update any of the forward-looking statements or publicly announce any updates or revisions to any of the forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions, circumstances or assumptions underlying such statements.
Slide: 3 Title: ODYSSEY… A LEADER IN HOSPICE CARE 76
Medicare Certified Programs in
30 states 33,226 admissions in 2006 CAGR revenue = 25.1%
Slide: 4 Title: WHY ODYSSEY? Body: Growing recognition of end of life services Aging population assures increased demand Strong balance sheet/cash surplus Compelling operating/growth strategy
Slide: 5 Title: VALUE PROPOSITION Body: Ideally positioned in growing industry Company is fulfilling documented social need Sufficient funding to support growth plan and operate in current reimbursement environment Experienced management team with strong operating background
Slide: 6 Title: ODYSSEY LOCATIONS (Gp:) Hospice Office Inpatient Facility Corporate Office - Dallas
Slide: 7 Title: WHAT IS HOSPICE? More cost effective Services provided primarily in home Provides quality of life for terminal patients and families Focus on physical, emotional and spiritual
Slide: 8 Title: COVERED BY MEDICARE Benefit enacted in 1983 Aggregate per beneficiary cap of $21,410 Largest payer at > 90% is Medicare Six months life expectancy Paid on per diem basis based on level of care
Slide: 9 Title: PATIENTS BY DIAGNOSIS IN THE INDUSTRY Heart Disease 12.2% 20% 8.9% 46% 8.2% Other Dementia Cancer Lung Disease Kidney Disease 3.1% Liver Disease 1.6%
Slide: 10 Title: HOSPICE TYPES SNF-based1% Home Health-based 23% 19% 57% Hospital-based Free Standing
Slide: 11 Title: RAPIDLY GROWING MARKET Hospice Medicare Expenditures ($ in billions) $2.9 $3.6 $4.5 $5.7 $8.5 FY 2000 FY 2001 FY 2002 FY 2003 FY 2006 $6.9 FY 2004 $8.2 FY 2005
Slide: 12 Title: MARKET OPPORTUNITY Sudden Death/Other Hospice Patients Served 41% 2.5 million deaths annually in U.S. 42% Estimated Under-Served Market 17%
Slide: 13 Title: PROGRAMS EXCEEDING CAP 2002 2005 2003 Number of hospices Percent of hospices 220 2004 150 60 98 2.6% 4.1% 5.8% 7.8%
Slide: 14 Title: MEDICARE CAP LIABILITY 2002 2005 2003 ($ in millions) $166 2004 $112 $28 $65
Slide: 15 Title: GROWTH IN HOSPICE PROGRAMS 2002 2005 2003 (Number of hospices) 2,809 2004 2,580 2,286 2,401
Slide: 16 Title: NUMBER OF NEW MEDICARE-PARTICIPATING HOSPICES EXCEEDS VOLUNTARY CLOSURES 2000 300 250 200 150 100 50 0 New entrants Voluntary closures 2001 2002 2003 2004 2005 2006
Slide: 17 Body: Management of Medicare cap Title: STRATEGIC FOCUS
Slide: 18 Title: MANAGEMENT OF MEDICARE CAP Body: Consolidation of programs Inpatient unit development Market for a more balanced patient mix Closed programs
Slide: 19 Title: ODYSSEY’S MEDICARE CAP EXPENSE TREND 2006* Q307 Q107 1.1% Q207 2.0% 3.6% 1.9% * 2006 not adjusted for discontinued operations
Slide: 20 Body: Management of Medicare cap Strengthen senior management team ��Title: STRATEGIC FOCUS
Slide: 21 Body: Added in the past two years . . . President and Chief Executive Officer, Robert Lefton Senior Vice President and Chief Financial Officer, Dirk Allison Senior Vice President and Chief Operating Officer, Craig Goguen Title: STRENGTHEN SENIOR MANAGEMENT TEAM
Slide: 22 Body: Management of Medicare cap Strengthen senior management team Focus on existing footprint Title: STRATEGIC FOCUS
Slide: 23 Title: GROWTH STRATEGY Growth Same store growth De Novos Acquisitions
Slide: 24 Title: SAME STORE GROWTH Continue to refine marketing strategies Continue offering full spectrum of services to increase market share Leverage footprint by opening alternate delivery sites
Slide: 25 Body: Management of Medicare cap Strengthen senior management team Focus on existing footprint Rationalize existing portfolio Title: STRATEGIC FOCUS
Slide: 26 Title: RATIONALIZE EXISTING PORTFOLIO Closed 11 programs Reasons for closure: Competitive position Market size Medicare cap
Slide: 27 Body: Management of Medicare cap Strengthen senior management team Focus on existing footprint Rationalize existing portfolio Implement more sophisticated sales and marketing strategy Title: STRATEGIC FOCUS
Slide: 28 Title: IMPLEMENT MORE SOPHISTICATED SALES AND MARKETING STRATEGY Body: Hired Regional Sales Manager Revamped CER bonus plan Developed detailed marketing plan for major markets
Slide: 29 Body: Management of Medicare cap Strengthen senior management team Focus on existing footprint Rationalize existing portfolio Implement more sophisticated sales and marketing strategy Inpatient program development Title: STRATEGIC FOCUS
Slide: 30 Title: INPATIENT PROGRAM DEVELOPMENT Two strategies Medicare cap – acute, short stay patients Grow market share – create differentiation One to two new projects per year Opening losses approximating $700,000
Slide: 31 Title: STRATEGIC FOCUS Body: Management of Medicare cap Strengthen senior management team Focus on existing footprint Rationalize existing portfolio Implement more sophisticated sales and marketing strategy Inpatient program development Investment in information systems
Slide: 32 Title: INVESTMENT IN INFORMATION SYSTEMS Body: Implemented new billing system In process of implementing new sales and marketing system Testing advanced clinical systems
Slide: 33 FINANCIAL SUMMARY
Slide: 34 2002 2003 2004 2006 2005 Q307 Q306 2001 Title: NET REVENUE GROWTHFROM CONTINUING OPERATIONS CAGR = 25.1% $130.2 $194.3 $267.9 $333.3 $399.0 $369.2 $104.3 $100.2 ($ in millions)
Slide: 35 Title: ADMISSIONS FROM CONTINUING OPERATIONS 15,969 21,764 26,330 30,084 33,226 32,347 8,014 7,960 2001 2002 2003 2004 2006 2005 Q307 Q306
Slide: 36 Title: AVERAGE LENGTH OF STAYFROM CONTINUING OPERATIONS 74 79 82 86 90 86 2003 2004 2006 2005 Q307 Q306 (Days)
Slide: 37 Title: AVERAGE DAILY CENSUS FROM CONTINUING OPERATIONS 3,044 4,404 5,878 7,206 8,085 7,664 8,074 8,149 2001 2002 2003 2004 2006 2005 Q307 Q306
Slide: 38 Title: ODYSSEY’S MEDICARE CAP EXPENSE $0 $118 $1,322 $1,573 $14,436 $7,871 $1,145 $3,478 2001 2002 2003 2004 2006 2005 Q307 Q306 ($ in thousands)
Slide: 39 Title: ODYSSEY’S MEDICARE CAP EXPENSE(a) 0% 0.1% 0.5% 0.5% 3.4% 2.1% 1.1% 3.3% 2001 2002 2003 2004 2006 2005 Q307 Q306 (a) Percent of gross patient service revenue.
Slide: 40 Title: INCOME FROM CONTINUING OPERATIONS (a) Excludes charge for settlement with Department of Justice of $9.6 million, net of tax. A reconciliation of GAAP to non-GAAP financial measures are available on the Investor Relations page of Odyssey’s website at www.odsyhealth.com. $30.1(a) $12.9 $21.4 $30.5 $33.4 $22.0 $3.2 $6.0 2001 2002 2003 2004 2006 2005 Q307 Q306 ($ in millions)
Slide: 41 Title: NET CASH FROM CONTINUING OPERATIONS * Exclusive of $13 million for Department of Justice payment $27.6 $47.1 $45.6* $47.9* $8.3 $3.2 2003 2004 2006 2005 Q307 Q306 ($ in millions)
Slide: 42 Title: VALUE PROPOSITION Body: Ideally positioned in growing industry Company is fulfilling documented social need Sufficient funding to support growth plan and operate in current reimbursement environment Experienced management team with strong operating background
Slide: 43 “To Serve All People During the End of Life’s Journey”
