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 16, 2004
REHABCARE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19294 51-0265872
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) Number)
7733 Forsyth Boulevard
23rd Floor
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 863-7422
Item 7.01 Regulation FD Disclosure.
Beginning on November 16, 2004, 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. The full slide presentation is
available in the For Our Investors section on our website at www. rehabcare.com.
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.
The presentation included in this report does not include images included
in the actual slides. In order that all investors be provided with substantially
the same information, RehabCare is making these slides available on its website.
The presentation in its entirety will be made available in the For Our Investors
section of the RehabCare 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 RehabCare's actual results in future periods to differ materially
from forecasted results. These risks and uncertainties may include, but are not
limited to, the future operating performance of InteliStaf, and the rate of
return that RehabCare will be able to achieve from its equity interest in
InteliStaf; changes in and compliance with governmental reimbursement rates
affecting RehabCare's other lines of business; RehabCare's ability to attract
new client relationships or to retain and grow existing client relationships
through expansion of RehabCare's hospital rehabilitation and contract therapy
service offerings and the development of alternative product offerings that
build stronger partnering relationships between RehabCare and its clients;
RehabCare's ability to identify and consummate, within the expected timeframes,
strategic acquisitions and joint ventures to accelerate growth in RehabCare's
hospital rehabilitation and contract therapy divisions; the adequacy and
effectiveness of RehabCare's operating and administrative systems; litigation
risks of RehabCare's pat and future business, including RehabCare's ability to
predict the ultimate costs and liabilities or the disruption of its operations;
competitive and regulatory effects on pricing and margins; and general economic
conditions, including efforts by governmental reimbursement programs, insurers,
healthcare providers and others to contain healthcare costs.
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 16, 2004
REHABCARE GROUP, INC.
By: /s/ Vincent L. Germanese
-----------------------------------------
Vincent L. Germanese
Senior Vice President, Chief Financial
Officer and Secretary
EXHIBIT INDEX
Exhibit No. Description
99 Text of Investor Relations Presentation in Use
Beginning November 16, 2004
Exhibit 99
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 RehabCare's actual results in future periods to differ materially
from forecasted results. These risks and uncertainties may include, but are not
limited to, the future operating performance of InteliStaf, and the rate of
return that RehabCare will be able to achieve from its equity interest in
InteliStaf; changes in and compliance with governmental reimbursement rates
affecting RehabCare's other lines of business; RehabCare's ability to attract
new client relationships or to retain and grow existing client relationships
through expansion of RehabCare's hospital rehabilitation and contract therapy
service offerings and the development of alternative product offerings that
build stronger partnering relationships between RehabCare and its clients;
RehabCare's ability to identify and consummate, within the expected timeframes,
strategic acquisitions and joint ventures to accelerate growth in RehabCare's
hospital rehabilitation and contract therapy divisions; the adequacy and
effectiveness of RehabCare's operating and administrative systems; litigation
risks of RehabCare's pat and future business, including RehabCare's ability to
predict the ultimate costs and liabilities or the disruption of its operations;
competitive and regulatory effects on pricing and margins; and general economic
conditions, including efforts by governmental reimbursement programs, insurers,
healthcare providers and others to contain healthcare costs.
RehabCare's Vision
RehabCare will provide a clinically integrated continuum of post-acute care
resulting in patients regaining their lives.
-1-
RHB Business Profile
The Physical Rehabilitation Industry
o The maturing of the baby boomer population will continue to drive growth in
the physical rehabilitation industry
o Acute care hospitals, skilled nursing facilities, long-term acute care
hospitals, independent therapists and contract management companies are
among those who provide therapy services to the market
o Large competitors for RehabCare include HealthSouth, Select Medical Corp,
RehabWorks, Aegis and smaller competitors
-2-
RHB Business Profile
RehabCare Services
(Graphic Omitted)
RehabCare's 7,500 therapists provide physical, occupational and speech therapy
Map omitted showing Acute Rehab Unit locations, Outpatient locations, Contract
Therapy locations, and Skilled Nursing Unit locations.
More than 780 locations nationwide
-3-
Business Profile
RehabCare Patients
o RehabCare treats approximately 14,000 patients each day
o Typical diagnoses include
- Stroke
- Neurological disorders
- Orthopedic conditions
- Musculoskeletal conditions
o 99% of RehabCare billings are to hospitals and skilled nursing facilities
o Payer sources for clients are 76% Medicare, 6% Medicaid, 18% managed care
and other
-4-
Business Profile
The Continuum of Care
RehabCare builds integrated continuums of care in markets that offer sufficient
demand for these services and appropriate therapy resources
Graphic omitted showing the post-acute care continuum.
RehabCare typically partners with hospitals and skilled nursing facilities to
provide rehabilitation services
-5-
Strategic Pillar 1
Target Market Strategy
A continuum can be built most efficiently in markets where different
rehabilitation sites of services can all be managed together.
Map omitted showing four continuum of care market locations
Norfolk, VA Population 1.4 million
Philadelphia, PA Population 5.1 million
St. Louis, MO Population 2.6 million
Brownsville, TX Population 363,000 million
-6-
Strategic Pillar 2
Acquisitions
RehabCare's acquisition strategy supports our target market strategy
o Revenue size approximately $10-$25 million
o EBITDA multiple 4-7 times
o Continuing management
o 2004 acquisitions have added $30 million in annualized operating revenues
o Strong balance sheet enables aggressive acquisition strategy
-7-
Strategic Pillar 3
Joint Ownership Arrangements
RehabCare's 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
o Samples of JV relationships this year:
Valley Baptist Health System,
Howard Regional Health System,
Signature Healthcare Foundation
-8-
Strategic Pillar 4
HRS Growth Strategy
RehabCare has successfully stabilized the loss of programs experienced in 2003
o Expect no net loss of programs in 2004 compared to a net loss of 21
(excluding acquisitions) in 2003
o Increase in same-store growth YTD
Graphic Omitted
Number of Programs
1997 118
1998 132
1999 135
2000 135
2001 134
2002 137
2003 123
-9-
Strategic Pillar 5
Improve CT Profitability
Contract therapy operating margins are returning to pre-3Q/03 levels; but more
can be accomplished
o Target market approach is paying off
o Technology platform conversion is complete
o Solid same store revenue growth of 10.9%, 3Q YOY
o Increase of more than 125 programs, YTD
o Improving SG&A leverage
Graphic Omitted
Contract Therapy Operating Margin
Q2/03 5.5%
Q3/03 2.7%
Q4/03 4.1%
Q1/04 6.0%
Q2/04 4.8%
Q3/04 5.4%
-10-
Strategic Pillar 6
Clinical Research & Development
RehabCare must ensure its 7,500 therapists provide the highest quality therapy
to 14,000 patients daily
o Develop clinical research programs in partnership with academic medical
centers
o Utilize our clinical database to improve the quality of rehabilitation
outcomes
o Create systems to integrate the continuum of care
-11-
Strategic Pillar 7
Information Technology & Management
To support the continuum of care, RehabCare has developed a single-technology
platform
o RehabCare's PDA-based clinical system
- Enhanced forecasting mechanisms
- Billing turnaround of 3 to 4 days
- Allows billing in any format for client
o Wireless connectivity will allow 2-way real time communication
- Clinical pathways at point of service
- Patient protocols at point of service
- Clinical expertise immediately, at point of service
-12-
Strategic Pillar 8
Strong Balance Sheet
Access to capital is not a challenge
o $47 million in cash, September 30, 2004
o $35 million year-to-date cash flow from operations
o Limited subordinated debt related to acquisitions
o Extended credit facility of $90 million; expandable to $125 million
-13-
Challenges
Shortage of Therapists
Recruiting and retaining therapists are key to our success
o Increased web presence
o Utilize large database of therapists
o Increase integration with schools through clinical R&D function
o Utilize staffing coordinators in markets with acceptable volume
o Introduced Professional Choice Account (PCA)
o No wait period 401(k)
o Improved health benefits
-14-
Challenges
Regulatory Impact
o 75 Percent Rule (ARU)
- Rule was final, effective date July 1, 2004
- 3 year transition (50%, 60%, 65%, 75%)
- Limits access to ARU for certain diagnoses
- Patients denied access to ARU will seek rehab in other venues
(i.e. SNF)
- Estimated impact included in 2004 guidance
- 13% (15) programs will require mitigation strategies in first year
o Inpatient Rehab Rate Increase 3.1% effective October 1, 2004 (ARU)
o Part B Therapy Caps (Contract Therapy)
- Medicare Prescription Drug Bill contains moratorium through 12/31/05
o Part B Fee Schedule 1.5% increase in 2005 (Contract Therapy & OP)
o Part A increase of 2.8% to SNF's (Contract Therapy)
o LTACH Hospital Within Hospital and LTACH Satellites
- Effective October 1, 2004
- Admissions of more than 25% from host hospital subject to payment
restrictions
- Separate control of co-located hospitals
o MEDPAC study due January 2005 allowing fee-for-service patients access to
outpatient therapy and rehab facility services without physician's order
(OP)
-15-
Challenges
Outpatient Business
Outpatient business is experiencing:
o Reduced number of locations and lower same-store volumes
o Increases in labor costs at the unit level
o Increased competition from physician practices
RehabCare is implementing a plan
o Conducting unit by unit review to evaluate growth opportunities
o Implementing a new weekly revenue and cost matching tool to improve
productivity
o Re-designing ProMOS to provide real-time outpatient clinical information
collection
-16-
Challenges
InteliStaf Holdings
StarMed (our former staffing division)
o Lost $5.3 million in 2003 versus estimated $0.6 million in 2004 for RHB's
equity share of InteliStaf's net loss
o Transaction provided immediate improvement to our results in 2004
o Healthcare staffing industry is leveling out from most recent contraction
cycle
o Anticipate healthcare staffing cycle to reverse in 2 to 3 years
- Partner is in a strong position when the industry does return to
growth phase
-17-
Quarterly Update
(Graphic Omitted)
GAAP Q3/03 Q4/03 Q1/04 Q2/04 Q3/04
- ---- ----- ----- ----- ----- -----
Revenue (millions) $135.0 $129.5 $104.5 $90.9 $93.3
Operating Earnings
(millions) $5.7 ($34.5) $9.5 $10.2 $10.7
EPS $1.20 ($1.58) $0.31 $0.34 $0.36
Proforma Q3/03 Q4/03 Q1/04 Q2/04 Q3/04
- -------- ----- ----- ----- ----- -----
Revenue (1)(millions) $79.8 $80.0 $87.7 $90.9 $93.3
Operating Earnings
(millions) $5.7 $9.0(2) $9.5 $10.2 $10.7
EPS $0.20 $0.31(2)$0.31 $0.34 $0.36
<FN>
(1) Excludes StarMed Operating Revenues
(2) Excludes the effect on loss on sale of StarMed
</FN>
-18-
RHB Strategic Position
o Demand - rehabilitation is a large and growing market
o RHB has significant growth opportunities
- Same store
- New sales
- Joint ventures
- Acquisitions
o Delivery strategy
- Continuum of care/Target markets model
- Responds to local market needs
- Regulatory challenges
- Addresses therapist shortage
o Strong financial position
o Solid results - both top line and bottom line
-19-