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): May 9, 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 May 9, 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
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., and RehabCare's other unconsolidated affiliates, 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 attracting 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 of its 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.
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: May 9, 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 May 9, 2005
Exhibit 99
[pic]
RehabCare(SM) delivering the post-acute continuum
1st Quarter 2005
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
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., AND REHABCARE'S OTHER UNCONSOLIDATED AFFILIATES, 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 ATTRACTING 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 OF ITS 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.
1
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
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 115 Acute Rehabilitation Units (ARUs)
o 26 Subacute/Transitional Care Units (TCUs)
o 41 Outpatient Rehabilitation Programs (OP)
o Skilled Nursing Facility-Based Rehabilitation Programs
o 716 Programs
2
RehabCare(SM)
delivering the post-acute continuum
(Graphic omitted)
RHB REVENUES 1Q/05
Total Revenue $102.4 million
Skilled Nursing Facility-Based
Rehabilitation Programs
(Contract Therapy Division) $52.5M 51%
Hospital-Based Rehabilitation Programs
(HRS Division) $47.8M 47%
Healthcare Consulting $ 2.1M* 2%
* Third party revenue only
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 115 ARU programs (5.8% of potential)
o 15,000 Skilled Nursing Facilities
o 5,000 meet our SNF screens
o Currently 716 programs (14.3% of potential)
o Competitors include:
- Self-operation - RehabWorks
- HealthSouth - Aegis
- Select Medical Corp - Regional providers
4
RehabCare(SM)
delivering the post-acute continuum
BUSINESS PROFILE
REHABCARE SERVICES
RehabCare's 8,500 clinicians provide physical, occupational and speech therapy
at programs across the country.
[map]
900 locations nationwide
37 states and the District of Columbia
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 each 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. Therapy is the
common link between each of these silos.
[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 Delivers 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 1.6 million Population 5.1 million Population 2.6 million
10
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
NORFOLK TARGET MARKET EXPERIENCE
We believe first quarter results in the Norfolk target market show traction of
our target market strategy
o 95% annualized staff retention versus 85%company-wide average
o Almost one-third of our clinical staff worked in multiple practice
settings
o More than 1000 patients (20%) were treated in multiple RehabCare
venues
[pic] Acute Rehab Unit Locations - 2
Norfolk, VA Outpatient Locations - 12
Population 1.6 million Contract Therapy Locations - 3
Home Health - 3
11
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 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
12
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
JOINT VENTURE ARRANGEMENTS
o Valley Baptist Health System
o 50% of local hospital market share
o Integrated 1 acute rehab unit, 2 outpatient, 1 skilled
nursing facility and 1 home health
o Signed 2 new skilled nursing facilities to open June 1
o Howard Regional Health System
o 57% of local hospital market share
o Integrated 1 acute rehab unit, 1 outpatient and 3 skilled
nursing facilities
o 9 non-binding joint venture letters of intent
[pic]
Valley Baptist Howard
Health System Regional Health System
13
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 and 2004
Q1/04 Q1/05
ARU Programs 111 115
Net change in programs during
quarter, excluding acquisitions - 2 + 1
Signings 5 12
Backlog 11 16
o This growth strategy will be accomplished through continued focus on
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
o Cope with frequent regulatory changes
Number of Programs
[graph]
'96 '97 '98 '99 '00 '01 '02 '03 '04 Q1/05
121 135 167 179 201 190 187 166 181 182
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 Q1/05
17.2% 18.6% 21.1% 18.7% 16.6% 17.2% 16.8% 14.0%
14
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
SKILLED NURSING FACILITY-BASED REHABILITATION
PROGRAMS PROFITABILITY/GROWTH
RehabCare continues to experience solid growth in the contract therapy business
o Total CT programs: 716 (Q1/05) vs. 564 (Q1/04)
o Client initiated turnover less than 1.1%
o Improving SG&A leverage
o Solid same store revenue growth of 6% (Q1/05)
o Net increase of 26 new programs (Q1/05)
NUMBER OF PROGRAMS
[graph]
'96 '97 '98 '99 '00 '01 '02 '03 '04 Q1/05
0 44 67 112 195 305 412 468 690 716
REVENUE (MILLIONS)
[graph]
'96 '97 '98 '99 '00 '01 '02 '03 '04
0 8.4 13.9 14.1 30.0 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 Q1/05
5.5% 2.7% 4.1% 6.0% 4.8% 5.4% 7.5% 4.6%
15
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
CLINICAL RESEARCH & DEVELOPMENT
RehabCare must ensure its 8,500 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 Undertaking research to develop clinical decision-making
for 75% rule
o Developed CORE program to provide high-quality care in
SNFs for displaced 75% rule orthopedic patients
o Create systems to integrate the continuum of care
o CareNexus - our proprietary care management service
[pic]
Brain Injury Program LifeSpine CORE CareNexus
Empowering Lives, Spine Care for Centers for connecting
Independence for a Lifetime Orthopedic the continuum
the Future Rehabilitation
Excellence
16
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
INFORMATION TECHNOLOGY & MANAGEMENT
To support continuum of care, RehabCare has developed a
single-technology platform
o RehabCare's PDA-based clinical system
o Patient-centric view, episodic data capture by clinical setting
o Care management system, with total plan of care discharge planning
and management tool
o Clinical and financial outcomes management tools
o Manage staff and patients across continuum
o Wireless connectivity will allow 2-way real time communication at point
of service
o Clinical pathways decision support
o Patient protocols
o Real time expertise available: clinical, technical, operational
[pic]
17
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
ACCESS TO CAPITAL
o $42 million in cash at 3/31/05
o $6.9 million in subordinated debt related to acquisitions
o $90 million new credit facility; expandable to $125 million
18
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
SHORTAGE OF THERAPISTS
Recruiting and retaining therapists are key to our success
o 85% annualized retention rate for full-time and part-time
clinicians
o 2,663 new hires in 2004 o 687 therapist openings
o Filling these openings with contract labor or overtime is driving
up labor costs and depressing margins
o New recruitment and retention strategies in place, additional
strategies will launch in May
o Campus relations program
o Flexible and innovative compensation plans
o Employee referral program
o Internet advertising and e-mail campaigns
o New employee orientation program
o Targeted supervisory training
o On-line learning and development opportunities
[pic]
19
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
ACUTE REHAB REGULATORY IMPACT
O 75 PERCENT RULE DEFINITION
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 GAO report issued April 2005
O 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
O RESULTS
o All but two units are in compliance with the 50% transition phase.
Those two will be in compliance by the end of their cost reporting
periods
o 43, or 37% of all of our acute rehab units will enter the 60%
compliance transition beginning July 1, 2005. Of the 43, 17 units
already meet the 60% transition and the remaining 26 are averaging
55%, so we are confident we will meet this year's challenge
20
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
CONTRACT THERAPY REGULATORY IMPACT
o THE 75 PERCENT RULE AND PART A/PART B
o Patients typically seen in ARUs are now being seen in SNFs as Part A
patients
o Part A patients generate lower operating margins
o The sudden, rapid growth of Part A patients has increased our gross
revenue, but unfortunately resulted in significantly higher labor
demands and costs
o Staff capacity issues are being addressed through improving
productivity and utilization efforts
o PART B THERAPY CAPS (SKILLED NURSING FACILITY-BASED REHABILITATION)
o GAO report due this year, outcome unknown
21
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
INTELISTAF HOLDINGS
StarMed, our former staffing division, sold to InteliStaf on 2/2/04 in
exchange for 25% of combined equity
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
o $400,000 loss in Q1/05 due to debt and operational restructuring -
which was expected
InteliStaf
HEALTHCARE
22
RehabCare(SM)
delivering the post-acute continuum
QUARTERLY UPDATE
- -----------------------------------------------------------------------
GAAP Q1/04 Q2/04 Q3/04 Q4/04 Q1/05
- -----------------------------------------------------------------------
REVENUE
(MILLIONS) $ 104.5* $ 90.9 $ 93.3 $ 95.1 $ 102.4
- -----------------------------------------------------------------------
OPERATING EARNINGS
(MILLIONS) $ 9.5 $ 10.2 $ 10.7 $ 11.4 $ 9.0
- -----------------------------------------------------------------------
EPS $ 0.31 $ 0.34 $ 0.36 $ 0.37 $ 0.29
- -----------------------------------------------------------------------
<FN>
* Includes $16.7 million of staffing revenues
</FN>
23
RehabCare(SM)
delivering the post-acute continuum
QUARTERLY UPDATE
$2.4 million sequential decline in operating earnings in Q1/05 versus Q4/04 due
to:
o Impact of 75% Rule on acute rehab unit census and discharges
o Part A/Part B therapy revenue mix in SNF units
o Increased labor costs and overtime
o Investments in future revenue opportunities
o Target market infrastructure
o Business development of joint ventures
o CareNexus, proprietary care management product
24
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 $1.58 to $1.73
[graph]
'01 '02 '03 '04 '05*
EPS $1.16 $1.38 $0.86 $1.38
Range $1.58-1.73
<FN>
Source - Company Annual 10-K for respective years
* 2005 Guidance.
</FN>
25
RehabCare(SM)
delivering the post-acute continuum
REHABCARE - PRIMED FOR GROWTH
Several trends in RehabCare's favor
o New therapy recruiting and retention programs
o Target market strategy
o 75% Rule implementation driving incremental revenue...creating turmoil
and increasing demand in self-op hospitals
o Strong financial position [pic]
26