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 4, 2005
REHABCARE GROUP, INC.
(Exact name of Company as specified in its charter)
Delaware | 0-19294 | 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) |
(314) 863-7422
(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 CFR230.425)
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)
Item | 7.01 | Regulation FD Disclosure |
| | |
| | Beginning on November 4, 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. This presentation in its entirety will be made available in the For Our Investors section of our 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 and other partnering relationships; our ability to integrate recent and pending acquisitions and 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 our 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. |
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| | |
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 4, 2005
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 November 4, 2005 |
Exhibit 99
3rd Quarter 2005
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 and other partnering
relationships; our ability to integrate recent and pending acquisitions and 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 our 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
Business Profile
RehabCare, primarily 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
Hospital-Based Rehabilitation Programs
120 Acute Rehabilitation Units (ARUs)
24 Subacute/Transitional Care Units (TCUs)
41 Outpatient Rehabilitation Programs (OP)
Skilled Nursing Facility-Based Rehabilitation Programs
744 Programs
Freestanding Rehabilitation Facilities
2 Acute Rehab Facilities
2 Long Term Acute Care Hospitals
1
RHB Revenues 3Q/05
Hospital-Based
Rehabilitation Programs
(HRS Division)
$47.2M
SNF-Based
Rehabilitation Programs
(Contract Therapy Division)
$60.9M
Total Revenue $120.0 million
Healthcare Consulting
$3.1M
3%
39%
51%
*Includes the MeadowBrook acquisition as of August 1, 2005
Freestanding Hospitals
$8.8M*
7%
2
Business Profile
The post-acute physical rehabilitation industry provides large
opportunities for new RehabCare clients
5,000 Acute Care Hospitals
120 ARU programs
197 Freestanding Rehabilitation Facilities
2 Acute Rehab Facilities
350 Long-Term Acute Care Hospitals
2 Long-Term Acute Care Hospitals
15,000 Skilled Nursing Facilities
744 programs
Competitors include
Hospital
Self Operation
HealthSouth
Select Medical Corp
Kindred
SNF-Based
Self Operation
Aegis (Beverly Enterprises, Inc.)
RehabWorks
Regional Providers
3
Business Profile
RehabCare Services
RehabCare’s 8,500 clinicians provide physical, occupational and
speech therapy at programs across the country
More than 930 locations nationwide
38 states, the District of Columbia & Puerto Rico
4
Business Profile
RehabCare Patients
RehabCare treats approximately 14,000
patients each day
54,000 inpatient discharges
1.1 million outpatient visits
4.3 million SNF patient visits
Typical diagnoses include:
Stroke
Neurological disorders
Orthopedic conditions
Musculoskeletal conditions
Payer sources for our patients are 72%
Medicare, 4% Medicaid, 24% managed
care and other
5
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.
High
Low
Therapists
6
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
7
How Do We Achieve Our Vision?
Target Market Strategy
Acquisitions
Joint Ownership Arrangements
Hospital-Based Rehabilitation Stabilization/Growth Strategy
(HRS)
SNF-Based Rehabilitation Profitability/Growth (CT)
Clinical Research and Development
Information Technology and Management
Access to Capital
8
How Do We Achieve Our Vision?
Target Market Strategy
RehabCare 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
Delivers RehabCare resources more efficiently
St. Louis, MO
Population 2.6 million
Harlingen/Brownsville, TX
Population 1.0 million
Norfolk, VA
Population 1.6 million
Kokomo, IN
Population 301,000
9
The Target Market Experience/Lessons
Target Markets Results
Turnover below company average of 3.75% quarterly
St. Louis and Norfolk run 1-2%
Therapists are willing to rotate among multiple care venues
St. Louis added 10 skilled nursing facilities, 2 outpatient
programs and one home health agency location in last
12 months
10
How Do We Achieve Our Vision?
Acquisitions
RehabCare’s acquisition strategy
supports our target market strategy
EBITDA multiple 4-6 times
Continuing management
2004 acquisitions added $45 million in
annualized operating revenues, 2005 have
added $55 million annualized
Strong balance sheet enables aggressive
acquisition strategy
11
How Do We Achieve Our Vision?
Joint Venture Arrangements
Valley Baptist Health System,
Harlingen/Brownsville, TX
Approximately 50% of local hospital market share
40-bed freestanding rehab hospital under development
Howard Regional Health System, Kokomo, IN
Approximately 57% of local hospital market share
30-bed LTACH currently under development
Projects under development
Arlington, TX
24-bed freestanding acute rehab facility to be owned and
operated by RHB projected to open in December 2005
Amarillo, TX
44-bed freestanding rehab hospital scheduled to open Spring
2006 with Northwest Texas Health System
12 non-binding joint venture letters of intent
Joint ventures help us create longer term relationships and
enhance market presence
12
How Do We Achieve Our Vision?
Hospital-Based Rehabilitation Programs
Stabilization & Growth Strategy
Revenue
Longer term relationships using capital
Stabilization of same store discharges despite 75% rule
Operating Earnings
Adjust staffing model
Sequential margin improvement
Number of Programs
Operating Margin
Revenue (Millions)
16
14
HRS Backlog
8
4
HRS Signings
120
113
ARU Programs
Q3/05
Q3/04
13
Successfully managing the 75% rule
RHB’s YOY Q3 same store discharges and revenue
declined 2.1% as a result of the 75% rule
Moran Company reports estimated industry decline of
7.7% in Medicare discharges from July 2004-June
2005
Moran Company reports industry experienced a 15.3%
decline from January–June 2005
Other publicly traded competitors vary from declines of
12.1% in Medicare discharges to a decrease of 10.8%
in revenue
RHB’s same store ARU discharges remained constant
during the first three quarters of 2005
How Do We Achieve Our Vision?
Hospital-Based Rehabilitation Programs
Stabilization & Growth Strategy
14
How Do We Achieve Our Vision?
Skilled Nursing Facility-Based Rehabilitation
Programs Profitability/Growth
Operating Margin
Number of
Programs
Revenue (Millions)
Revenue
Total CT programs 744 (Q3/05) vs. 600 (Q3/04)
Same store revenue growth of 10.7%
year-over-year
Operating Earnings
Manage variable cost
Continued SG&A leverage
15
How Do We Achieve Our Vision?
Clinical Research & Development
Partner with academic medical centers (175
affiliates)
Validate physical rehabilitation outcomes through
research. Continuing research to develop clinical
decision-making matrices for 75% rule
Developed CORE program to provide high-quality
care in SNFs for displaced 75% rule orthopedic
patients
Create systems to integrate the continuum of care
CareNexus – our proprietary care management
service
RehabCare must ensure its 8,500 clinicians provide the highest
quality therapy to approximately 14,000 patients daily
16
How Do We Achieve Our Vision?
Information Technology & Management
To support continuum of care, RHB has developed a
single-technology platform
RHB PDA based clinical system
Patient-centric view, episodic data capture by clinical
setting
Care management system, with total plan of care
discharge planning and management tool
Clinical and financial outcomes management tools
Manage staff and patients across continuum
Wireless Connectivity will allow 2-way real time
communication at point of service
Clinical pathways decision support
Patient protocols
Real time expertise available: clinical, technical,
operational
Developed tools to manage 75% rule
MeadowBrook Hospital systems will be utilized for new
freestanding hospitals (Arlington, Amarillo, etc.)
17
How Do We Achieve Our Vision?
Access To Capital
As of September 30, 2005
$18.2 million in cash
$11.9 million in subordinated debt related to
acquisitions
$90 million credit facility; expandable to $125 million
18
Challenges
Shortage Of Therapists
Recruiting and retaining therapists are key to our
success
85% annualized retention rate for full-time and part-time
clinicians
11% reduction in average number of openings sequentially
from 709 to 632
11% improvement in average time to fill an opening
sequentially from 49 days to 44 days
Approximately 50% of open positions are due to new
program openings or same store growth
New pricing strategy to re-coup increased labor costs
19
Challenges
Regulatory Impact
75 Percent Rule Definition
Effective July 1, 2004 - 3 year transition (50%, 60%, 65%,
75%)
Senate and House bills call for freeze at 50% and National
Advisory Council to oversee future federal policies that could
deny patient care – RHB supports this effort
Status
As of Sept 30, our units, on average, were at the 60% level
of compliance
45, or 38%, of our units entered the 60% compliance period
during 3Q/05
Part B Therapy Caps (Skilled Nursing Facility-Based
Rehabilitation)
Same Senate bill calls for a one year moratorium
20
Challenges
InteliStaf Holdings
StarMed, our former staffing division, sold to
InteliStaf on 2/2/04 in exchange for 25% of
combined equity
Approximately $2.1 million RHB equity share loss
in Q3/05; $1.0 million related to normal operations
and $1.1 million related to deferred tax asset
Hired new CEO and CFO effective 10/25/05
Potential impairment
21
Quarterly Update
$0.26*
$0.32
$0.29
$0.37
$0.36
EPS (fully diluted)
$10.9
$9.8
$9.0
$11.4
$10.7
Operating Earnings
(millions)
$120.0
$108.4
$102.4
$95.1
$93.3
Revenue
(millions)
Q3/05
Q2/05
Q1/05
Q4/04
Q3/04
GAAP
*Includes InteliStaf equity loss of $2.1 million, or $0.12 per fully diluted share
22
RehabCare Summary
Opportunities
New CT and HRS business growth
Acquisitions
Development of joint venture relationships
Maturity of continuum of care strategy
Challenges
Continued 75% rule implementation
Managing growth in tight labor market
Startup and integration of JVs and acquisitions
Part B Caps
23
