EXHIBIT 99
TEXT OF INVESTOR RELATIONS SLIDESHOW
IN USE BEGINNING JANUARY 10, 2001
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Forward-Looking Statements
Except for historical information discussed, the statements made today are
forward-looking statements that involve risks and uncertainties. Investors
are cautioned that such statements are only predictions and that actual
events or results may differ materially. These forward-looking statements
speak only as of this date. HEALTHSOUTH undertakes no obligation to publicly
release the results of any revisions to the forward-looking statements made
today to reflect events or circumstances after today or to reflect the
occurrence of unanticipated events. Please refer to our SEC filings for a
description of some of the factors that may affect the accuracy of such
forward-looking statements.
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HEALTHSOUTH Overview
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Leading Healthcare Provider
o Over 2,000 Facilities in all 50 States and Every Major Metropolitan Market
o Largest Operator of
- inpatient and outpatient rehabilitation facilities
- freestanding outpatient surgery centers
- freestanding diagnostic centers
o Over $4 Billion in Annual Revenues and $1 Billion in Annual EBITDA
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Leading Healthcare Provider
o Strong Growth Potential and Credit Profile
o Up to 100,000 Patients Treated per Day
o Approximately 85,000 Referring Physicians
o Excellent Relationships with National and Regional Payors
o Cutting-Edge Technological Innovations
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HRC's Competitive Advantages
o Unique National Presence
o Strong Brand Equity and Relationships with Leading Professional and Amateur
Sports Organizations
[Graphic Omitted - Logos of Representative Organizations]
o Extensive Orthopedic Expertise ("Best Practice" Techniques)
o Low-cost, Efficient Provider
o Superior Clinical Outcomes with Exceptional Patient Satisfaction
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Significant Presence in Every Major Market
[Graphic Omitted - Map]
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Substantial and Diversified Revenue Base
LTM 9/30/00 TOTAL REVENUE: $4,119 MILLION
[Graphic Omitted - Chart of Revenue Breakdown by Segment and Line of Business]
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Our Mission:
Enhance Shareholder Value Through
Superior Patient Care
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Enhancing Shareholder Value
KEY DRIVERS
o Healthcare is a Core Sector of the Economy
o HRC: Healthcare Provider of Choice
o Strong Core Business
o Growth Initiatives
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Healthcare:
Core Sector of the Economy
o Represents 14% of GDP (Over $1.3 Trillion)
o Expected to Exceed 16% of GDP by 2008
o Employs Over 10 Million People
o Resistant to Economic Downturns
Source: HCFA, Bureau of Labor Statistics
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Healthcare:
Core Sector of the Economy
o "Baby Boomer" Demographics Will Increase Healthcare Spending Over the Next
Decade
- Approx. 76 Million Between Ages 36-54
- 30% of U.S. Population
- Physically Active Segment
o Over 50 Population Will Increase 30% Over Next 15 Years
o Increasing Consumer Choice Will Benefit Low-Cost/Superior Outcome Providers
Source: HCFA, Admin. on Aging, Money, & Booz-Allen
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Enhancing Shareholder Value
KEY DRIVERS
o Healthcare is a Core Sector of the Economy
o HRC: Healthcare Provider of Choice
o Strong Core Business
o Growth Initiatives
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HRC: Provider of Choice
o Demographic and Technological Developments Favor Outpatient Services Over
Traditional Acute-Care Offerings
o Our Integrated Service Model Moves the Patient Through the System More
Efficiently
o Ambulatory Surgery is One of the Fastest Growing Segments in Healthcare (15%+
Annual Growth)
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HRC: Provider of Choice
o Strong Brand Name Reflects
- Service Excellence
- Superior Patient Outcomes
- Exceptional Patient Satisfaction
o Branding Efforts Encourage Repeat Business (Same Store Growth)
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HRC: Provider of Choice
o Strong Physician Relationships
- Approximately 85,000 Referring Physicians
- Superior Clinical Outcomes
- Convenience, Efficiency, and State-of-the-Art Equipment
- Professional Websites and Web-Enabled Scheduling for Affiliated Physicians
o Strong Payor Relationships
- National Footprint
- Proven Cost-Effective Outcomes
- Preferred Partner for National Electronic Claims Platform
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Enhancing Shareholder Value
KEY DRIVERS
o Healthcare is a Core Sector of the Economy
o HRC: Provider of Choice
o Core Business Generates 15% Growth
o Growth Initiatives
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Core Business Generates 15% Growth
o Significant Operating Leverage
- Pricing
- Volume
- Excess Capacity
o Expense Control and Efficiency Initiatives
o Substantial Free Cash Flow
NET RESULT: 15% EPS GROWTH
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Core Business Generates 15% Growth
Significant Operating Leverage
o Base Case: Stable Pricing Across All Lines
o Upside Initiatives:
- Stopped Taking Price Cuts in 4Q99
- In 2000, 35% of Contracts had Pricing Increases with 65% Stable
- Improve Orthopedic and Plastics Mix in Surgery Centers
- Multi-Modality Roll-Out in Diagnostics Is Substantially Complete
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Core Business Generates 15% Growth
Significant Operating Leverage
o Base Case: Modest Volume Growth of 3-5% Across all Lines
o Upside Initiatives:
- Actual Volume Growth of 7% in 3Q00
- Tap Into Excess Capacity
o Inpatient Rehabilitation - 78% Utilization
o Outpatient Rehabilitation - 75% Utilization
o Outpatient Surgery - 50% Utilization
o Diagnostic Imaging - 50% Utilization
o Enhance Cross Referrals by Completing ISM Rollout
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HEALTHSOUTH
Operating Leverage Potential
1) Cost Savings -
$50 / day in Cost Savings at Every HRC Facility
POTENTIAL IMPACT: $.04 EPS
2) Additional Volume -
One Additional Surgery Procedure Per Day at Each of Our 222 Ambulatory
Surgery Centers
POTENTIAL IMPACT: $.04 EPS
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Core Business Generates 15% Growth
o Significant Operating Leverage
o Expense Control and Efficiency Initiatives
- MedCenterDirect.com
- Source Medical
- Electronic Claims
- HEALTSOUTH Intranet
- Management Reorganization
o Substantial Free Cash Flow
NET RESULT: 15% EPS GROWTH
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Expense Control and Efficiency
MedCenterDirect.com
o Healthcare e-Procurement
o Provides:
- Increased Inventory Turns
- Enhanced Contract Compliance
- Usage and Cost Data
- Standardized Requisitions
o 1,000 Facilities Utilizing MCD
o Rollout to be Complete by End of 2001
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Expense Control and Efficiency
Source Medical
o Paperless Clinical Documentation System
o Online Charting, Coding, and Claims Administration
o Realizing $2-4 per Visit in Cost Savings / Net Revenue Enhancement
o Allows Clinician More Time With Patient
o Currently in Approximately 700 HRC Outpatient Rehabilitation Facilities
- Projected to be in 1,100 Facilities by March 2001 (80% complete)
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Expense Control and Efficiency
Electronic Claims
o Working with Payors to File Claims Electronically Using EDI Solutions
- HIPAA Requirements
o Contract Manager
- Single Database for All Payor Contracts
- Updated Real-Time for Contract Terms and Patient Information
o Claims Manager Ensures "Clean Claim" Submitted to Payor
o Will Drive Further DSO Reductions
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Expense Control and Efficiency
HEALTHSOUTH Intranet
o Improves Management Access to Financial Data and Reporting
o Standardizes Documents
o Automates Work Flow
- Human Resource Management and A/P
o Provides Online Training
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Expense Control and Efficiency Reorganization Around Local Markets
o Reorganized Operating Structure in 4Q99 into Outpatient and Inpatient
Divisions
o Empowered Local Management
- Physician Relationships
- Development
- Payor Contracting
o Streamlined Decision-Making Process
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Core Business Generates 15% Growth
o Significant Operating Leverage
o Expense Control and Efficiency Initiatives
o Substantial Free Cash Flow
- Reduced Capex
- Focused Development
- DSO Improvement
NET RESULT: 15% EPS GROWTH
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Substantial Free Cash Flow
o Rapid Acquisition Strategy and Buildout of Nationwide Network is Substantially
Complete
- Will Continue to Fine-tune and Back-fill into Existing Markets
- Substantial Capex for Equipment & Facility Upgrades Is Behind Us
- HEALTHSOUTH Is Moving from Rapid Growth by Acquisition to Steady,
Sustainable Growth from Operations
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Substantial Free Cash Flow
o Focused Development Activity
- Complete Integrated Service Model (Top 300 US Markets)
- 20% ROE Hurdle Rate
- Fewer Acquisitions and More De Novo's
o Continue DSO Improvement
- Ramp up of Electronic Claims Processing
- Utilize Claims Manager Solution
- Enhance Relationships with Payors
- EACH DAY OF DSO IMPROVEMENT NETS HEALTHSOUTH APPROXIMATELY $11 MM IN CASH
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Substantial Free Cash Flow-Summary
o Substantial Capex for Equipment & Facility Upgrades Is Behind Us
o Future Development Capex Will Be Highly Focused
o Continued Focus on DSO Improvement
Net Result: Substantial Free Cash Flow
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Growth Initiatives & Upside Opportunities
o Surgery Syndications
o Inpatient PPS
o Clinical Research and Technology
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Growth Initiatives
Surgery Syndications
o Opportunity to Bring in New Surgeons to Drive Case Volumes
o Goal of Adding 1,000 New Surgical Partners by End of 2Q01
o Operating at 50% Capacity Today; Incremental Volume is High Margin (40%+)
o Focus on Orthopedics and Plastics
- Superior Pricing
- High Private Pay on Plastics
o Solidifies Physician Relationship; Enhances Cross-Referrals for Physical
Therapy and Diagnostic
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Growth Initiatives
Surgery Syndications
o Strong Growth in Demand for Outpatient Surgery From all Primary Participants:
Patients [arrow] Convenience
Physicians [arrow] Efficiency
Payors [arrow] Cost-effective
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Outpatient Surgery:
Cost Effective Alternative
HRC vs. Acute-Care Outpatient
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HRC ACUTE-CARE SAVINGS
FACILITY
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Knee (ACL) $1,607 $2,768 42%
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Shoulder Arthroscopy $2,259 $4,070 44%
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Gall Bladder $2,741 $5,051 46%
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Mastectomy $1,313 $2,430 46%
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Nasal Septum $1,111 $2,327 52%
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Colonoscopy $582 $2,197 73%
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Growth Initiatives
Surgery Syndications - Potential Impact
o 1,000 New Surgical Partners
o Perform 1 Case Per Day
o Average Pricing of $1,100/Case
o 40% EBITDA Margin
o HRC Ownership Decreases From 67% to 60%
Result: Approx. $277 MM Incremental Revenue
Approx. $111 MM Incremental EBITDA
Approx. $66 MM Incremental Pre-Tax Earnings
POTENTIAL IMPACT: $.10 EPS
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Growth Initiatives
Inpatient Rehabilitation PPS
o HCFA's Proposed Rules/Rates Issued November 2000
o HCFA's Sample Database Reflects Overall Average PPS Rate of $11,509 per
Discharge
o HRC's Current Cost Is $9,600
o Approximately 70,000 Annual Medicare Discharges
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Growth Initiatives
Inpatient Rehabilitation PPS
o Potential Impact of New PPS Rates at Full Implementation:
- $1,400 x 70,000 Discharges = $98 MM (Pre-tax Earnings)
o Additional Upside:
- 10% Utilization Increase = $50 MM (Pre-tax Earnings)
POTENTIAL IMPACT: $.22 EPS
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Growth Initiatives
Inpatient Rehabilitation PPS
o Medicare Relief Package Contained Two Key Points Regarding Inpatient PPS:
- Gives Provider Option to Select 100% PPS Rate vs. Multi-Year Phase-in
- 2% First Year Cut Restored in 2002
o Implementation Currently Scheduled for April 1, 2001
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Growth Initiatives
Clinical Research &Technology
o Nationwide Platform of 2,000+ HRC Facilities
o Extensive Patient Database Across Broad Range of Therapeutic Areas
(Orthopedic, Neurological, Vascular, Ophthalmic)
o Interaction with 100,000 Patients per Day
o Referral Base of 85,000 Physicians
o Existing Physician Advisory Boards by Disease Specialty
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Growth Initiatives
Clinical Research
o HEALTHSOUTH Offers Expedited Patient Enrollment via:
- Direct Enrollment at the Facility Level
- On-line Enrollment at healthsouth.com
o Physicians Want to Become More Involved in Clinical Trials:
- Exposes Physicians to Latest Therapies
- Attracts More Patients
- Additional Source of Income for Physicians
o Enables HEALTHSOUTH to Enhance Patient Care by Offering Access to Potential
New Therapies
RESULT: STRONGER PATIENT AND PHYSICIAN TIES WHICH GENERATE NEW SOURCES OF
REVENUE AND INCREASED VOLUMES
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Growth Initiatives
New Technology Launches
o Surgical Devices: Trivex Varicose Vein Procedure
- Two Year Agreement with Smith & Nephew
- Trained 200+ General and Vascular Surgeons
- Resulted in 100 New Surgical Partners
o New Diagnostic Applications: High-speed Organ Scans
- New Technology Allows High-speed, High-resolution Scans
- Growing Use as Wellness Tool To Establish Benchmarks and Provide Early
Detection
- Growing Demand from More Educated Consumer Population
RESULT: STRONGER PATIENT AND PHYSICIAN TIES WHICH GENERATE NEW SOURCES OF
REVENUE AND INCREASED VOLUMES
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Valuation Comparison
o HRC Trading at a Discount to the Healthcare Provider Universe
- HRC Trades at 8x EBITDA vs. 13x for Industry
- HRC Trades at a 20 P/E vs. 29 P/E for Industry
- HRC's Implied Stock Valuation at Industry Multiples: $21 - $29
- Improving EBITDA Margin
o HRC Trading at a Discount to the Healthcare Provider Universe
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Revenue Trend
[Graph omitted]
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EBITDA Trend
[Graph omitted]
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EBITDA Margin Trend
[Graph omitted]
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Stock Price Performance
[Graph omitted]
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Summary
o National Presence
o Superior Clinical Outcomes with Exceptional Patient Satisfaction
o Strong Core Business (15% Base Growth)
o Significant Growth Initiatives and Upside Potential
o Compelling Valuation
o Investment Grade Rating