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): March 16, 2005
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
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions.
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 7.01 Regulation FD Disclosure.
Beginning on March 16, 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. 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, RehabCare's ability to integrate acquisitions and to implement
client 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 and compliance with governmental
reimbursement rates and other regulations or policies affecting RehabCare's
continuing businesses; RehabCare's 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 future financial results of
InteliStaf Holdings, Inc., RehabCare's unconsolidated affiliate, and the effect
of those results on the financial condition and results of operations of
RehabCare; the adequacy and effectiveness of RehabCare's operating and
administrative systems; RehabCare's ability to attract and the additional costs
of administrative, operational and professional employees; significant increases
in health, workers' compensation and professional and general liability costs;
litigation risks of RehabCare's past and future business, including RehabCare's
ability to predict the ultimate costs and liabilities or the disruption to 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: March 16, 2005
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 March 16, 2005
Exhibit 99
[pic]
RehabCare(SM)
delivering the post-acute continuum
4th Quarter 2004
RehabCare(SM)
delivering the post-acute continuum
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, REHABCARE'S ABILITY TO INTEGRATE ACQUISITIONS AND TO IMPLEMENT
CLIENT 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 AND COMPLIANCE WITH GOVERNMENTAL
REIMBURSEMENT RATES AND OTHER REGULATIONS OR POLICIES AFFECTING REHABCARE'S
CONTINUING BUSINESSES; REHABCARE'S 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 FUTURE FINANCIAL RESULTS OF
INTELISTAF HOLDINGS, INC., REHABCARE'S UNCONSOLIDATED AFFILIATE, AND THE EFFECT
OF THOSE RESULTS ON THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
REHABCARE; THE ADEQUACY AND EFFECTIVENESS OF REHABCARE'S OPERATING AND
ADMINISTRATIVE SYSTEMS; REHABCARE'S ABILITY TO ATTRACT AND THE ADDITIONAL COSTS
OF ADMINISTRATIVE, OPERATIONAL AND PROFESSIONAL EMPLOYEES; SIGNIFICANT INCREASES
IN HEALTH, WORKERS' COMPENSATION AND PROFESSIONAL AND GENERAL LIABILITY COSTS;
LITIGATION RISKS OF REHABCARE'S PAST AND FUTURE BUSINESS, INCLUDING REHABCARE'S
ABILITY TO PREDICT THE ULTIMATE COSTS AND LIABILITIES OR THE DISRUPTION TO 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.
1
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
o RehabCare, in partnership with hospitals and nursing homes, provides
post acute program management, medical direction, physical
rehabilitation, quality assurance, specialty programs and marketing for
the following programs:
o Hospital-Based Rehabilitation Programs
o 113 Acute Rehabilitation Units (ARUs)
o 29 Subacute/Transitional Care Units (TCUs)
o 39 Outpatient Rehabilitation Programs (OP)
o Skilled Nursing Facility-Based Rehabilitation Programs
o 690 Programs
2
RehabCare(SM)
delivering the post-acute continuum
(Graphic omitted)
RHB REVENUES 4Q/04
Total Revenue $95.1 million
Skilled Nursing Facility-Based
Rehabilitation Programs
(Contract Therapy Division) $46.7M 49%
Hospital-Based Rehabilitation Programs
(HRS Division) $46.7M 49%
Healthcare Consulting $ 1.7M 2%
3
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
o The post-acute physical rehabilitation industry provides large
opportunities for new RehabCare clients
o 5,000 Hospitals
o 2,000 meet our ARU screens
o 113 ARU programs
(5.6% of potential)
o 15,000 Skilled Nursing Facilities
o 5,000 meet our SNF screens
o Currently 690 programs (13.8% of potential)
o Competitors include:
- Self-operation - RehabWorks
- HealthSouth - Aegis
- Select Medical Corp
4
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
REHABCARE SERVICES
RehabCare's 7,900 clinicians provide physical, occupational and speech therapy
at programs across the country.
[map]
More than 870 locations nationwide
5
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
REHABCARE PATIENTS
o RehabCare treats approximately 14,000 patients each day
o 54,000 inpatient discharges, 1.1 million outpatient visits and
3.6 million SNF patient encounters this year
o Typical diagnoses include:
o Stroke
o Neurological disorders
o Orthopedic conditions
o Musculoskeletal conditions
o Payer sources for our patients are 76% Medicare, 6% Medicaid, 18%
managed care and other
o 99% of RehabCare billings are to hospitals and skilled
nursing facilities
[pic]
6
RehabCare(SM)
delivering the post-acute continuum
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.
[graph omitted]
7
RehabCare(SM)
delivering the post-acute continuum
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
[graph omitted]
Acute Skilled Outpatient
Rehabilitation Nursing Rehabilitation
Units Facilities Programs
Hospital
Medical/Surgical
CARE MANAGEMENT
Acute
Therapies
Transitional Long Term Home
Care Acute Care Health
Units Hospitals* Programs
*RehabCare partners with providers of LTACH care
8
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
o Target Market Strategy
o Acquisitions
o Joint Ownership Arrangements
o Hospital-Based Rehabilitation Stabilization/Growth Strategy (HRS)
o SNF-Based Rehabilitation Profitability/Growth (CT)
o Clinical Research and Development
o Information Technology and Management
o Access to Capital
9
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
TARGET MARKET STRATEGY
RehabCare has developed joint venture and other relationships with
market-leading health delivery partners
o Provides access to referral networks and market share
o Develops long-term relationships: deploys capital, provides joint
ownership and program management
o Adds key components to continuums of care
o Deliver RehabCare resources more efficiently
[pic] [pic]
Kokomo, IN Brownsville, TX
Population 301,000 Population 1.0 million
[pic] [pic] [pic]
Norfolk, VA Philadelphia, PA St. Louis, MO
Population 1.4 million Population 5.1 million Population 2.6 million
10
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
ACQUISITIONS
RehabCare's acquisition strategy supports our target market strategy
o Revenue size approximately $10-$25 million
o EBITDA multiple 4-6 times
o Continuing management
o 2004 acquisitions have added $45 million in annualized operating
revenues, with more in the pipeline
o Strong balance sheet enables aggressive acquisition strategy
CPR REHAB PHASE 2 CONSULTING VitalCare Cornerstone
THERAPY A Division of AMERICA Rehabilitation
A Part of RehabCare RehabCare A RehabCare
Company
11
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
JOINT OWNERSHIP ARRANGEMENTS
o Valley Baptist Health System
o 50% of local hospital market share
o Howard Regional Health System
o 57% of local hospital market share
o Signature Healthcare Foundation
o Sponsored by 43 orthopedic surgeons
o 8 non-binding joint venture letters of intent
[pic]
Valley Baptist Howard Signature
Health System Regional Health System Healthcare Foundation
12
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
HOSPITAL-BASED REHABILITATION PROGRAMS
STABILIZATION & GROWTH STRATEGY
RehabCare has successfully stabilized the loss of hospital-based programs
experienced in 2003
o Achieved net loss of 3 programs in 2004 versus a net loss of 21 in
2003 (excluding acquisitions)
o Same-store revenue growth of 3.6% in 2004
o How to accomplish growth strategy
o Retaining business
o Longer-term relationships using capital
o Integrate delivery sites electronically
o New business
o More flexible business relationships
o Deploy capital
Number of Programs
[graph]
96 97 98 99 00 01 02 03 04
121 135 167 179 201 190 187 166 181
Revenue (Millions)
[graph]
96 97 98 99 00 01 02 03 04
91.6 106.8 128.1 147.2 162.3 173.0 179.7 185.9 190.7
Operating Margin
[graph]
Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04
17.2% 18.6% 21.1% 18.7% 16.6% 17.2% 16.8%
13
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
SKILLED NURSING FACILITY-BASED REHABILITATION
PROGRAMS PROFITABILITY/GROWTH
Contract therapy operating margins are returning to pre-3Q/03 levels; but more
can be accomplished
o Focused market sales approach is paying off
o Therapist retention and recruitment
o Improving SG&A leverage
o Solid same store revenue growth of 9.9% in 2004
o Increase of 222 net programs in 2004
NUMBER OF PROGRAMS
[graph]
'96 '97 '98 '99 '00 '01 '02 '03 '04
0 44 67 112 195 305 412 468 690
REVENUE (MILLIONS)
[graph]
'96 '97 '98 '99 '00 '01 '02 '03 '04
0 8.4 13.9 14.1 30 64.7 105.3 130.8 171.3
OPERATING MARGIN
[graph]
Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04
5.5% 2.7% 4.1% 6.0% 4.8% 5.4% 7.5%
14
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
CLINICAL RESEARCH & DEVELOPMENT
RehabCare must ensure its 7,900 clinicians provide the highest quality
therapy to 14,000 patients daily
o Partner with academic medical centers
o Improve physical rehabilitation outcomes through
research - 815,000 patient records
o Create systems to integrate the continuum of care
o CareNexus - our care management service
[pic]
Brain Injury Program CORE LifeSpine CareNexus
Empowering Lives, Centers for Spine Care for connecting
Independence for Orthopedic a Lifetime the continuum
the Future Rehabilitation
Excellence
15
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
INFORMATION TECHNOLOGY & MANAGEMENT
To support the continuum of care, RehabCare has developed a
single-technology platform
o RehabCare's PDA-based clinical system
o Enhanced forecasting tools for management
o Billing turnaround of 3 to 4 days
o Allows billing in any format for client
o Wireless connectivity will allow 2-way real time communication at point
of service
o Clinical pathways
o Patient protocols
o Clinical expertise immediately available [pic]
16
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
ACCESS TO CAPITAL
o $54 million in cash, 12/31/04
o $50 million cash flow from operations for 2004
o $6.9 million in subordinated debt related to acquisitions
o $90 million new credit facility; expandable to $125 million
17
RehabCare(SM)
delivering the post-acute continuum
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 student affiliations and clinical research opportunities
with universities to enhance new grad recruitment
o Utilize staffing coordinators in select markets
o Competitive benefits package
o PCA
o 401K
[pic]
18
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
REGULATORY IMPACT
O 75 PERCENT RULE (Acute Rehabilitation Units)
o Effective July 1, 2004 - 3 year transition (50%, 60%, 65%, 75%)
o Estimated impact 3-5% of acute rehab revenue included in 2005
guidance
o Coping with fiscal intermediary transmittals #347 and #478
o Best guess is GAO report issued first part of April 2005,
effective July 2005
O PART B THERAPY CAPS (SKILLED NURSING FACILITY-BASED REHABILITATION)
o Medicare Prescription Drug Bill contains moratorium through
12/31/05
O FEE SCHEDULE INCREASES
19
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
REGULATORY IMPACT - TACTICS
75 PERCENT RULE MITIGATION STRATEGIES
o Clinical Education and training to enhance quality care to more medically
complex patients
o Develop new referral sources and modify hospital clinical programs
o Continuum of care model will facilitate movement of patients to appropriate
care settings
20
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
INTELISTAF HOLDINGS
StarMed, our former staffing division, sold to InteliStaf on 2/3/04 in
exchange for 25% of combined equity
o Cumulative equity share of InteliStaf's net loss was $0.7 million in 2004
o Anticipate healthcare staffing cycle to improve within 2 to 3 years
o Partner is in a strong position when the industry does return to
growth phase
o InteliStaf has strong industry differentiators
o One-stop shop
o Partnership model
InteliStaf
HEALTHCARE
21
RehabCare(SM)
delivering the post-acute continuum
QUARTERLY UPDATE
- -----------------------------------------------------------------------
GAAP Q4/03 Q1/04 Q2/04 Q3/04 Q4/04
- -----------------------------------------------------------------------
REVENUE
(MILLIONS) $129.5 $104.5 $90.9 $93.3 $95.1
- -----------------------------------------------------------------------
OPERATING EARNINGS
(MILLIONS) $(34.5) $ 9.5 $10.2 $10.7 $11.4
- -----------------------------------------------------------------------
EPS $( 1.58) $ 0.31 $ 0.34 $ 0.36 $ 0.37
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
PROFORMA Q4/03 Q1/04 Q2/04 Q3/04 Q4/04
- -----------------------------------------------------------------------
REVENUE(1)
(MILLIONS) $80.0 $ 87.7 $90.9 $93.3 $95.1
- -----------------------------------------------------------------------
OPERATING EARNINGS
(MILLIONS) $ 9.0(2) $ 9.5 $10.2 $10.7 $11.4
- -----------------------------------------------------------------------
EPS $ 0.31(2)$ 0.31 $ 0.34 $ 0.36 $ 0.37
- -----------------------------------------------------------------------
<FN>
(1) EXCLUDES STARMED OPERATING REVENUES
(2) EXCLUDES THE EFFECT OF LOSS ON SALE OF STARMED
</FN>
22
RehabCare(SM)
delivering the post-acute continuum
ANNUAL TREND
REVENUE (Millions)
2005 revenue guidance is $418 to $438
[graph]
'01 '02 '03 '04 '05*
SNF-BRS $64.7 $105.3 $130.8 $171.3
H-BRS $173.3 $179.7 $185.9 $190.7
Consulting $ 5.1
Range $418-438
EPS
2005 EPS guidance is $1.43 to $1.58
including approximately $0.15 for equity compensation
[graph]
'01 '02 '03 '04 '05*
EPS $1.16 $1.38 $0.86 $1.38
Range $1.43-1.58
<FN>
Source - Company Annual 10-K for respective years
* 2005 Guidance.
</FN>
23
RehabCare(SM)
delivering the post-acute continuum
REHABCARE - PRIMED FOR GROWTH
o Increasing demand
o Significant growth strategies
o Coordinated and efficient
delivery strategy
o Strong financial position
o Solid results - both top line
and bottom line [pic]
24