Exhibit 99
Investor Presentation, First Quarter 2008
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About Us
RehabCare is a leading national provider of
physical rehabilitation services in conjunction with
1,200 hospitals and skilled nursing facilities in 42
states. We also own and/or operate 10 freestanding
rehabilitation and long-term acute care hospitals.
physical rehabilitation services in conjunction with
1,200 hospitals and skilled nursing facilities in 42
states. We also own and/or operate 10 freestanding
rehabilitation and long-term acute care hospitals.
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$712 million consolidated
revenues(1)
revenues(1)
Contract Therapy Division
$402 million revenue - 56% of revenue (1)
• 1,038 skilled nursing facility programs
• 38 states
• 7.4 million annual patient visits
Hospital Rehabilitation Services Division
$161 million revenue - 23% of revenue (1)
• 153 hospital-based programs
• 31 states
• 45,000 inpatient and skilled nursing unit discharges/year
• 1.0 million annual outpatient visits
$106 million revenue - 15% of revenue (1)
Hospital Division
• 6 rehabilitation hospitals, 3 LTACHs (fourth LTACH opened in April 2008)
• 1 rehabilitation hospital minority owned (2)
• 5 states (3)
• 462 beds (3)
• Approximately 7,000 annualized patient discharges (3)
Other Healthcare Services Division
$43 million revenue - 6% of revenue (1)
• Phase 2 Consulting - - consulting and care management for hospitals and health systems
• Polaris Group - consulting for long-term care facilities
• VTA Management Services - therapy and nurse staffing for New York
(1) For twelve months ended 3/31/08
(2) Not included in consolidated
revenues
revenues
(3) These statistics include the
minority-owned rehab hospital
minority-owned rehab hospital
Service Lines
4
(dollars in millions except per share) | 1Q 08 | 4Q 07 | 3Q 07 | 2Q 07 |
Operating Revenues | $184.1 | $173.6 | $172.9 | $181.1 |
Operating Earnings | 8.4 | 9.0(1) | 8.2(1) | 4.2(2) |
Net Earnings | 4.5 | 5.1(1) | 3.9(1) | 1.7(2) |
Diluted Earnings Per Share | $0.25 | $0.29(1) | $0.22(1) | $0.09(2) |
(1) Includes favorable net self-insurance accruals of approximately $1.4 million and $1.2 million, or
$0.05 and $0.04 per diluted share after tax in Q4 and Q3, respectively, when compared to the
quarterly run rate for these accruals in Q2.
$0.05 and $0.04 per diluted share after tax in Q4 and Q3, respectively, when compared to the
quarterly run rate for these accruals in Q2.
(2) Includes a pretax intangible asset impairment charge of $4.9 million ($2.9 million after tax), or
$0.17 per diluted share after tax.
$0.17 per diluted share after tax.
• Sequential operating revenue growth across all divisions
• Operating earnings reflect higher first-quarter incentive accruals
and more typical levels of self-insurance accruals
Consolidated Financial Summary
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(Dollars in thousands)
Cash and Cash Equivalents
Total Assets
Total Debt
Stockholders’ Equity
Percent of Debt to Total Capital
12/31/07
3/31/08
$ 10,265
408,560
74,500
$244,022
23%
$ 15,218
415,685
75,700
$250,272
23%
• Cash flow from operations totaled $4.1 million for
three months ended March 31, 2008 and $47.3 million
for the last twelve months
three months ended March 31, 2008 and $47.3 million
for the last twelve months
Consolidated Balance Sheet
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The Contract Therapy division manages skilled nursing facility rehab programs that are
designed to provide therapy intervention to both short-stay patients and long-term residents
with a wide range of conditions, including neurological, orthopedic and other conditions
common to the geriatric patient.
designed to provide therapy intervention to both short-stay patients and long-term residents
with a wide range of conditions, including neurological, orthopedic and other conditions
common to the geriatric patient.
Competitive Landscape
Owned
• Self-Operation
• Aegis (329)
• Kindred - Peoplefirst (228)
• Genesis (220)
• Sundance (107)
• Skilled Healthcare (74)
Managed
• RehabCare (1,038)
• Aegis (654)
• Genesis (480)
• Select Medical (400)
• Sundance (309)
• Kindred - Peoplefirst (318)
• EnduraCare (270)
• Skilled Healthcare (113)
Source: Information available from public filings or from company websites
Contract Therapy
Market Overview
Market Overview
Market Size
• 17,000 Medicare certified skilled nursing facilities
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Contract Therapy
Performance
Performance
Dollars in millions | Q1 08 | Q4 07 | Q3 07 | Q2 07 |
Operating Revenues | $104.3 | $99.4 | $98.3 | $100.3 |
Operating Earnings | $3.8 | $4.0(1) | $3.2(1) | $1.1 |
Number of Locations End of Period | 1,038 | 1,064 | 1,085 | 1,110 |
Outlook (assumes Part B therapy cap exception remains in place for 2008)
• 4.5 - 5.5% operating earnings margins during 2008
• Return to net additions in locations in 2008
• Operating revenues reflect 7.2% sequential same store growth as a
result of increased patient volume and enhanced therapist efficiency
result of increased patient volume and enhanced therapist efficiency
• Operating earnings margin improves from 3.6% to 3.7% sequentially
when excluding Q4 favorable adjustments for self-insurance accruals
when excluding Q4 favorable adjustments for self-insurance accruals
(1) Includes favorable net self-insurance accruals of approximately $0.4 million in both Q4 and Q3 when compared to the accruals
recorded in Q2. Excluding the favorable adjustments for self-insurance accruals, operating earnings would have been $3.6
million and $2.8 million in Q4 and Q3, respectively.
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Part B Therapy Caps & Physician Fee Schedule (PFS)
The President signed into law the Medicare, Medicaid and SCHIP
Extension Act of 2007 (Extension Act) which includes:
Extension Act of 2007 (Extension Act) which includes:
• A six-month extension of the automatic exception process which
essentially eliminates the annual limit on therapies for Part B
Medicare beneficiaries - expires June 30, 2008
essentially eliminates the annual limit on therapies for Part B
Medicare beneficiaries - expires June 30, 2008
• A 0.5% increase in the PFS, which serves as the charge master for
reimbursement for Part B therapy services, rather than the 10.1%
scheduled reduction - expires June 30, 2008
reimbursement for Part B therapy services, rather than the 10.1%
scheduled reduction - expires June 30, 2008
We are actively pursuing an 18-month extension of these provisions
Contract Therapy
Legislative/Regulatory Environment
Legislative/Regulatory Environment
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Acute care hospital-based inpatient rehabilitation facilities in RehabCare’s Hospital
Rehabilitation Services (HRS) division are for patients who require early, intensive therapies (at
least 3 hours/day 5 days/week) for recovery from stroke, brain injury, neurological disorders,
amputation and other disabling injuries and illnesses. Outpatient therapy programs provide
proactive, exercise-oriented therapy with hands-on treatment for individuals of all ages.
Rehabilitation Services (HRS) division are for patients who require early, intensive therapies (at
least 3 hours/day 5 days/week) for recovery from stroke, brain injury, neurological disorders,
amputation and other disabling injuries and illnesses. Outpatient therapy programs provide
proactive, exercise-oriented therapy with hands-on treatment for individuals of all ages.
Competitive Landscape (Acute care hospital-based IRFs)
• Self-Operation
• RehabCare (107)
• Horizon Health (Specialty Rehab Mgmt) (23)
• HealthSouth (11)
• Milestone(1)
• TherEx (formerly National Rehab Partners)(1)
(1) Private company or a subsidiary of a public company; number of locations is not available
Source: Information available from public filings or from company websites
Hospital Rehabilitation Services
Market Overview
Market Overview
Market Size
• 5,000 acute care hospitals (approximately 1,000 hospital-based IRFs)
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Hospital Rehab Services
Performance
Performance
Dollars in millions | Q1 08 | Q4 07 | Q3 07 | Q2 07 |
Operating Revenues | $40.2 | $38.8 | $40.3 | $41.8 |
Operating Earnings | $4.6 | $6.0(1) | $6.3(1) | $5.4 |
Number of Locations End of Period | 153 | 154 | 154 | 161 |
IRF Discharges | 10,276 | 10,190 | 10,173 | 10,786 |
75% Compliance Level (Avg) | 62.7% | 67.8% | 64.9% | 63.7% |
Outlook
• Modest increase in IRF units during 2008 (opened 4 IRFs in Q1/08
compared to 7 openings for the entire year of 2007)
compared to 7 openings for the entire year of 2007)
• Resumption of 3 - 5% growth in same store discharges during 2008
• Continued 12 - 15% operating margins
• First sequential top line improvement since second quarter 2005;
sequential same store admissions growth of 4%
sequential same store admissions growth of 4%
• Operating earnings reflect Q1 higher incentive accruals and more typical
levels of self-insurance accruals
levels of self-insurance accruals
(1) Includes favorable net self-insurance accruals of approximately $0.6 million and $0.5 million in Q4 and Q3, respectively, when compared
to the accruals recorded in Q2. Excluding the favorable adjustments for self-insurance accruals, operating earnings would have
been approximately $5.4 million and $5.8 million in Q4 and Q3, respectively.
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IRF 75% Rule
The Extension Act:
• Permanently freezes the compliance threshold at 60% for cost reporting
periods starting July 1, 2006
periods starting July 1, 2006
• Continues the use of comorbid conditions to qualify patients and averts a
planned cut in reimbursement rates for lower extremity joint procedures
planned cut in reimbursement rates for lower extremity joint procedures
• Requires HHS to conduct a study on patient access and eligibility for
rehabilitation services
rehabilitation services
• Eliminates market basket updates through 2009
We believe the impact of the market basket elimination will be mitigated through
higher patient volumes resulting from the freeze at 60%.
higher patient volumes resulting from the freeze at 60%.
Recovery Audit Contractor (RAC) Program
Demonstration period ended and the first phase of 50-state rollout is soon to be
underway with full expansion of the program expected to be completed by January
2010. We will continue to challenge and appeal all claims we believe have been
inappropriately denied.
underway with full expansion of the program expected to be completed by January
2010. We will continue to challenge and appeal all claims we believe have been
inappropriately denied.
Proposed Rule for IRFs
CMS released their proposed rule for 2009. While we are continuing to analyze the
rule, our initial findings reveal no significant impact for either our HRS or Hospital
division. Final rule is due sometime in August of 2008.
rule, our initial findings reveal no significant impact for either our HRS or Hospital
division. Final rule is due sometime in August of 2008.
Hospital Rehab Services
Legislative/Regulatory Environment
Legislative/Regulatory Environment
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Inpatient rehabilitation facilities (IRFs) are equipped to treat patients with a wide range of
debilitating injuries and illnesses, offering inpatient and outpatient services in a home-like
environment. Long-term acute care hospitals (LTACHs) are specialty care hospitals
designed for extended stay patients with complex and chronic conditions.
debilitating injuries and illnesses, offering inpatient and outpatient services in a home-like
environment. Long-term acute care hospitals (LTACHs) are specialty care hospitals
designed for extended stay patients with complex and chronic conditions.
Hospital Division
Description and Locations
Description and Locations
Arlington, TX
Providence, RI
St. Louis, MO
N. Kansas City, MO (opened April 2008)
Reading, PA
Tulsa, OK
Miami, FL
Houston, TX
New Orleans, LA
Amarillo, TX
Midland, TX
Austin, TX
Rome, GA
Lafayette, LA
Peoria, IL
10 current locations
7 future locations
Kokomo, IN
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Market Size:
• 240+ IRFs
Competitive Landscape
• Select Medical (88)
• Kindred (84)
• Regency Hospital (23)
• Triumph Healthcare (20)
• LifeCare (20)
• Vibra Healthcare (9)
• Cornerstone Healthcare (9)
• HealthSouth (6)
• Ernest Health (7)
• RehabCare (4)1
Market Size:
• 460+ LTACHs
Freestanding IRFs
LTACHs
1RehabCare’s fourth LTACH opened in April 2008
Source: Information available from public filings or from company websites
Hospital Division
Market Overview
Market Overview
Competitive Landscape
• HealthSouth (95)
• RehabCare (7)
• Ernest Health (6)
• Select Medical (4)
• Vibra Healthcare (4)
• Centerre (3)
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Hospital Division
Performance
Dollars in millions | Q1 08 | Q4 07 | Q3 07 | Q2 07 |
Operating Revenues | $29.2 | $25.7 | $24.4 | $27.0 |
Operating Earnings (loss) | $(0.3) | $(0.8)(2) | $(1.6)(2) | $(3.1)(1) |
Number of IRFs End of Period | 6 | 6 | 6 | 5 |
IRF Patient Discharges | 1,212 | 1,104 | 1,060 | 1,006 |
75% Compliance Level (Avg) | 59.7% | 63.6% | 63.7% | 59.0% |
Number of LTACHs End of Period | 3 | 3 | 3 | 3 |
LTACH Patient Discharges | 416 | 407 | 386 | 380 |
Outlook
• 13-15% EBITDA margins before corporate overhead in 2008 for group of
8 hospitals in operation more than one year
8 hospitals in operation more than one year
• $4.5 - $5.5 million of net EBITDA drag in 2008 for group of 5 hospitals in
operation less than one year
operation less than one year
• Sequential operating revenues growth of 13.8%; same store growth of 9.3%
• Q1/08 operating results impacted by $600,000 of start-up and ramp-up losses and
investment in additional infrastructure support
investment in additional infrastructure support
(1) Includes a pretax impairment charge on a Louisiana Specialty Hospital intangible asset of $4.9 million, partially offset by net
favorable cost report/contractual adjustments of $0.9 million.
favorable cost report/contractual adjustments of $0.9 million.
(2) Includes favorable net self-insurance accruals of approximately $0.2 million in both Q4 and Q3 when compared to the accruals
recorded in Q2. In addition, Q3 contains unfavorable contractual allowance adjustments of approximately $1.4 million. Excluding
the favorable self-insurance accrual adjustments in Q4 and Q3 and the unfavorable contractual allowance adjustments in Q3,
operating losses would have been $1.0 million and $0.4 million in Q4 and Q3, respectively.
recorded in Q2. In addition, Q3 contains unfavorable contractual allowance adjustments of approximately $1.4 million. Excluding
the favorable self-insurance accrual adjustments in Q4 and Q3 and the unfavorable contractual allowance adjustments in Q3,
operating losses would have been $1.0 million and $0.4 million in Q4 and Q3, respectively.
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Hospital Division
Development Timeline
Development Timeline
• Division established in 2005 with the acquisition of
MeadowBrook Healthcare
MeadowBrook Healthcare
• 10 existing hospitals, 5 in development, 2 awaiting State
Attorney General approval
Attorney General approval
• Anticipated 4-6 new projects/year
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LTACH 25% Rule
The Extension Act:
• Eliminates application of the 25% Rule for freestanding LTACHs and grandfathered
LTACHs for next three years
LTACHs for next three years
• Eliminates the recent payment reductions for very short stay outlier cases for a three-
year period
year period
• Imposes a three-year moratorium on new LTACHs and new LTACH beds with some
exceptions - - we believe all of our announced LTACH JVs will not be subject to this
moratorium
exceptions - - we believe all of our announced LTACH JVs will not be subject to this
moratorium
• Requires a study by HHS to establish facility and patient criteria.
IRF 75% Rule
• Freestanding Hospitals are subject to the same 75% Rule provisions as previously
discussed.
discussed.
Proposed Rule for IRFs
• CMS released their proposed rule for 2009. While we are continuing to analyze the
rule, our initial findings reveal no significant impact for either our HRS or Hospital
division. Final rule is due sometime in August of 2008.
rule, our initial findings reveal no significant impact for either our HRS or Hospital
division. Final rule is due sometime in August of 2008.
Hospital Division
Legislative/Regulatory Environment
Legislative/Regulatory Environment
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Intermediate
Long-Term
• Open 4-6 joint ventures
annually
annually
• Standardize care
management processes
across Hospital and HRS
divisions
management processes
across Hospital and HRS
divisions
• Implement IT roadmap for
improved clinical,
revenue cycle, and data
warehouse systems
improved clinical,
revenue cycle, and data
warehouse systems
• Standardize and integrate
back office processes and
information systems
back office processes and
information systems
• Implement centralized
support infrastructure
for Hospital division
support infrastructure
for Hospital division
• Build out continuum of
care delivery model
around key market
relationships
care delivery model
around key market
relationships
• Implement electronic
medical record system
medical record system
• Continue to address
therapist supply issue
through innovative
programs like Allied
Health Research Institute
and partnerships with
the Universities of
Kansas and Missouri
therapist supply issue
through innovative
programs like Allied
Health Research Institute
and partnerships with
the Universities of
Kansas and Missouri
2008 Initiatives
• Return CT operating
earnings margins to 4.5% -
5.5%
earnings margins to 4.5% -
5.5%
• Achieve modest increase in
HRS IRF units and
resume 3-5% growth
in same store discharges
HRS IRF units and
resume 3-5% growth
in same store discharges
• Roll out HRS product line
to better match long-term
client needs
to better match long-term
client needs
• Achieve Hospital EBITDA
margin before corporate
overhead of 13-15% target
for group of mature
hospitals
margin before corporate
overhead of 13-15% target
for group of mature
hospitals
• Roll out PatientPlus
compensation program in
CT division
compensation program in
CT division
Continuous Improvement
Initiatives
Initiatives
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Investment Considerations
Why RehabCare?
Why RehabCare?
Increasing market demand
Unique continuum of care model
Demonstrated ability to grow revenue
organically and through acquisitions
organically and through acquisitions
Proven ability to adapt to market
and regulatory changes
Expenditures for post-acute services:
Increase of 239% since 1998
Projected increase of 150% by 2016
Represents 12% of Medicare spending
Represents 12% of Medicare spending
75% rule, Part B therapy caps,
LTACH 25% rule, physician fee schedule
LTACH 25% rule, physician fee schedule
Over 25 years as one of the longest tenured post-acute providers
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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, new information, future events or otherwise.
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, new information, future events or otherwise.
Safe Harbor