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): September 8, 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 September 8, 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.
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 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; our ability to integrate
recent and pending acquisitions and 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
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 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: September 8, 2005
REHABCARE GROUP, INC.
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 September 8, 2005
Exhibit 99
[pic]
RehabCare(SM) delivering the post-acute continuum
2nd 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 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; our ability to integrate
recent and pending acquisitions and 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
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 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.
0
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 community relations for the following
programs
o Hospital-Based Rehabilitation Programs
o 120 Acute Rehabilitation Units (ARUs)
o 26 Subacute/Transitional Care Units (TCUs)
o 42 Outpatient Rehabilitation Programs (OP)
o Skilled Nursing Facility-Based Rehabilitation Programs
o 764 Programs
o Freestanding Rehabilitation Facilities*
o 2 Acute Rehab Facilities
o 2 Long Term Acute Care Hospitals
* Includes MeadowBrook acquisition effective August 1, 2005
1
RehabCare(SM)
delivering the post-acute continuum
(graph omitted)
RHB REVENUES 2Q/05
Total Revenue $108.4 million
SNF-Based Rehabilitation Programs
(Contract Therapy Division) $57.6M 53%
Hospital-Based Rehabilitation Programs
(HRS Division) $48.1M 44%
Healthcare Consulting $ 2.7M* 3%
* Excludes intercompany revenue
2
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 120 ARU programs
o 15,000 Skilled Nursing Facilities
o 764 programs
o Competitors include
Hospital-based SNF-based
-------------- ---------
- Self-operation - Self-operation
- HealthSouth - Aegis (Beverly Enterprises, Inc.)
- Select Medical Corp. - RehabWorks
- Regional Providers
3
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]
More than 950 locations nationwide
38 states, the District of Columbia and Puerto Rico
* Includes MeadowBrook acquisition effective August 1, 2005
4
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
4 million SNF patient encounters
o Typical diagnoses include:
o Stroke
o Neurological disorders
o Orthopedic conditions
o Musculoskeletal conditions
o Payer sources for our patients are 72% Medicare, 5% Medicaid, 23%
managed care and other
[pic]
5
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]
6
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 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 where appropriate
7
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
8
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 Harlingen/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
9
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
NORFOLK TARGET MARKET EXPERIENCE
We believe second 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 Over one-third of our clinical staff worked in multiple practice
settings
o More than 1000 patients (13%) were treated in multiple RehabCare
venues
[pic] ARU Locations - 2
Norfolk, VA OP Locations - 13
Population 1.6 million SNF Locations - 3
Home Health Location - 1
Acute Care Locations - 3
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 EBITDA multiple 4-6 times
o Continuing management
o 2004 acquisitions added $45 million in annualized operating revenues,
2005 have added $55 million annualized, with more in the pipeline
o Strong balance sheet enables aggressive acquisition strategy
CPR REHAB VitalCare PHASE 2 CONSULTING Cornerstone MeadowBrook
THERAPY AMERICA A Division of Rehabilitation Healthcare
A Part of A RehabCare RehabCare
RehabCare Company
11
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
JOINT VENTURE ARRANGEMENTS
Joint ventures help us create longer term relationships and enhance
market presence
o Valley Baptist Health System, Harlingen/Brownsville, TX
o 50% of local hospital market share
o Added one acute rehab unit
o 3 skilled nursing facilities opened in June
o Howard Regional Health System, Kokomo, IN
o 57% of local hospital market share
o 30-bed LTACH in final approval stage
o Projects under development:
o Arlington, TX
o 24-bed freestanding acute rehab facility to be
owned and operated by RHB projected to open in
December 2005
o Amarillo, TX
o 40-bed freestanding rehab hospital scheduled to
open Spring 2006 with Northwest Texas Health System
o 12 non-binding joint venture letters of intent
[pic]
Valley Baptist Northwest Texas
Health System Healthcare System
Howard Arlington
Regional Health System Rehabilitation Hospital
A RehabCare Facility
12
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
HOSPITAL-BASED REHABILITATION PROGRAMS
STABILIZATION & GROWTH STRATEGY
Revenue
-------
Q2/04 Q2/05
ARU Programs 114 120
Net change in programs during
quarter, excluding acquisitions + 2 + 5
Signings 4 5
Backlog 11 11
o Manage 75% rule transition
o Longer term relationships using capital
Operating Earnings
------------------
o Manage variable cost
Number of Programs
[graph omitted]
'96 '97 '98 '99 '00 '01 '02 '03 '04 Q1/05 Q2/05
121 135 167 179 201 190 187 166 181 182 188
Revenue (Millions)
[graph omitted]
'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 omitted]
Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05
17.2% 18.6% 21.1% 18.7% 16.6% 17.2% 16.8% 14.0% 13.9%
13
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
SKILLED NURSING FACILITY-BASED REHABILITATION
PROGRAMS PROFITABILITY/GROWTH
Revenue
- -------
o Total CT programs: 764 (Q2/05) vs. 570 (Q2/04)
o Net increase of 48 new programs sequentially
o Same store revenue growth of 12.1% year-over-year
Operating Earnings
- ------------------
o New pricing strategies
o Manage variable cost
o Continued SG&A leverage
NUMBER OF PROGRAMS
[graph omitted]
'96 '97 '98 '99 '00 '01 '02 '03 '04 Q1/05 Q2/05
0 44 67 112 195 305 412 468 690 716 764
REVENUE (MILLIONS)
[graph omitted]
'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 omitted]
Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05
5.5% 2.7% 4.1% 6.0% 4.8% 5.4% 7.5% 4.6% 5.5%
14
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 approximately 14,000 patients daily
o Partner with academic medical centers
o Validate physical rehabilitation outcomes through research.
Undertaking research to develop clinical decision-making matrices 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
15
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
INFORMATION TECHNOLOGY & MANAGEMENT
To support continuum of care, RHB has developed a single-technology platform
o RHB 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
o Developed tools to manage 75% rule
[pic]
16
RehabCare(SM)
delivering the post-acute continuum
HOW DO WE ACHIEVE OUR VISION?
ACCESS TO CAPITAL*
As of June 30, 2005
o $45 million in cash
o $3.4 million in subordinated debt related to acquisitions
o $90 million credit facility; expandable to $125 million
* $26 million of cash and borrowings plus $9 million of subordinated debt
utilized for acquisition of Meadowbrook effective August 1, 2005
17
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 Average hires/month increased 18% in Q2/05
o More than 50% of open positions are due to new program openings
o Contract labor premium is 60%
o Mitigation strategies
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
o New pricing strategy to re-coup increased labor costs
18
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
ACUTE REHAB REGULATORY IMPACT
75 PERCENT RULE DEFINITION
o Effective July 1, 2004 - 3 year transition (50%, 60%, 65%, 75%)
o Estimated impact 5-6% of acute rehab revenue included in 2005
guidance
o Senate and House bills for freeze at 50% and National Advisory
Council to oversee future federal policies that could deny
patient care - RHB supports this effort
MITIGATION STRATEGIES
o Computer models to better manage rule
o Manage 75/25 rule on a daily/weekly basis to accept best patient
mix
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 Increase in non-Medicare patients
STATUS
o As of June 30, our units, on average, were at the 60% level of
compliance, when the target was 50%.
o 680 qualifying patients not admitted within the first 6 months of
2005
19
RehabCare(SM)
delivering the post-acute continuum
CHALLENGES
CONTRACT THERAPY REGULATORY IMPACT
o THE 75% 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 PART B THERAPY CAPS (SKILLED NURSING FACILITY-BASED REHABILITATION)
o GAO report due this year, outcome unknown
o Bill in House and Senate calling for full repeal, pending additional
clinical research
o RULE 70 - PPS AND CONSOLIDATED BILLING FOR SNFs 2006
o RUGS Refinement
o Believe it to be neutral for RHB
20
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 Approximately $300,000 RHB equity share loss in Q2/05 and $700,000
year-to-date
o AlixPartners, LLC hired by Board to replace top management and conduct a
turnaround
o Russell Reynolds retained to conduct a search for a new CEO
InteliStaf
HEALTHCARE
21
RehabCare(SM)
delivering the post-acute continuum
QUARTERLY UPDATE
- -------------------------------------------------------------------------------
GAAP Q2/04 Q3/04 Q4/04 Q1/05 Q2/05
- -------------------------------------------------------------------------------
REVENUE
(MILLIONS) $ 90.9 $ 93.3 $ 95.1 $102.4 $108.4
- -------------------------------------------------------------------------------
OPERATING EARNINGS
(MILLIONS) $ 10.2 $ 10.7 $ 11.4 $ 9.0 $ 9.8
- -------------------------------------------------------------------------------
EPS $ 0.34 $ 0.36 $ 0.37 $ 0.29 $ 0.32
(FULLY DILUTED)
- -------------------------------------------------------------------------------
22
RehabCare(SM)
delivering the post-acute continuum
ANNUAL TREND
REVENUE
2005 revenue guidance is $453 to $467
[graph omitted]
'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 $453-467
EPS - Fully Diluted
2005 EPS guidance is $1.35 to $1.45
[graph omitted]
'01 '02 '03 '04 '05*
EPS $1.16 $1.38 $0.86 $1.38
Range $1.35-1.45
<FN>
Source - Company Annual 10-K for respective years
* 2005 Guidance, includes MeadowBrook acquisition as of August 1, 2005
</FN>
23
RehabCare(SM)
delivering the post-acute continuum
REHABCARE SUMMARY
Opportunities
-------------
o New CT and HRS business growth
o Acquisitions
o Development of joint venture relationships
o Maturity of continuum of care strategy
Challenges
----------
o 75% rule implementation
o Managing growth in tight labor market
o Startup and integration of JVs and acquisitions
o Part B Caps
24