EXHIBIT 99
TEXT OF INVESTOR RELATIONS SLIDESHOW IN USE BEGINNING
JANUARY 8, 2003
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 the company's SEC filings for a description of some of
the factors that may affect the accuracy of such forward-looking statements.
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LEADING HEALTHCARE PROVIDER
o Approximately 1,800 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 $4.2 Billion in Revenue with $1.1 Billion in EBITDA Projected for
2003
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INPATIENT REHABILITATION
#1 MARKET SHARE - 118 LOCATIONS
22% OF 35,000 BED MARKET (7,643 BEDS)
(Graphic Omitted)
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OUTPATIENT SURGERY
#1 MARKET SHARE - 206 LOCATIONS
16% OF $6 BILLION MARKET
(Graphic Omitted)
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OUTPATIENT REHAB
#1 MARKET SHARE - 1,331 LOCATIONS
10% OF $10 BILLION MARKET
(Graphic Omitted)
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DIAGNOSTIC IMAGING
#1 MARKET SHARE - 136 LOCATIONS
4% OF $8 BILLION MARKET
(Graphic Omitted)
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RECOGNIZED CLINICAL EXCELLENCE
2001 JCAHO Survey Results:
HEALTHSOUTH Facility Scores vs. National Average Scores
HEALTHSOUTH Rehabilitation 94
National Hospital Organizations 91
HEALTHSOUTH Surgery Centers 95
HEALTHSOUTH Diagnostic 96
National Ambulatory Organizations 93
Source: 2001 JCAHO Survey Results
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PRISTINE AUDIT
o Unannounced Audit of Every HEALTHSOUTH Facility
o 50 Point Checklist
o Conducted by Ernst & Young
o Overall Score of 98
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MEDICARE EXPENDITURES
Total Medicare Expenditures, 1966-2000 (in Billions of Dollars)
(Graphic Omitted)
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MEDICARE EXPENDITURES
o During This Time, HEALTHSOUTH has Saved The
Medicare Program Hundreds of Millions of Dollars
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INPATIENT REHAB HOSPITAL
COST SAVINGS
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
Cost Per Discharge $ 11,504 $ 10,772 $ 9,935 $ 9,799 $ 9,669
Cost Variance (732) (1,569) (1,705) (1,835)
Medicare Discharges*
60,516 66,854 70,187 76,249
Cost Savings $ 44,297,712 $ 104,893,926 $ 119,668,835 $ 139,916,915
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TOTAL MEDICARE SAVINGS $ 408,777,388
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* HOSPITAL DISCHARGES ONLY
Through Internal Cost Reduction Initiatives, HEALTHSOUTH Has Saved the Medicare
Program over $400MM in the last 4 Years
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INPATIENT REHAB HOSPITAL
COST SAVINGS - HRC VS. INDUSTRY AVERAGE
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
Industry Cost Per Discharge $ 13,500 $ 13,500 $ 13,500 $ 13,500 $ 13,500
HRC Cost Per Discharge $ 11,504 $ 10,772 $ 9,935 $ 9,799 $ 9,669
Cost Variance $ (1,996) $ (2,728) $ (3,565) $ (3,701) $ (3,831)
HRC Medicare Discharges*
55,999 60,516 66,854 70,187 76,249
Cost Savings $ 111,774,004 $ 165,087,648 $ 238,334,510 $ 259,762,087 $ 292,109,919
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TOTAL MEDICARE SAVINGS $ 1,067,068,168
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* HOSPITAL DISCHARGES ONLY
By Consistently Keeping Costs Below the Industry Average, HEALTHSOUTH Has
Spared the Medicare Program over $1B in Excessive Costs in the last 5 Years
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SURGERY CENTERS
HRC AVERAGE CHARGE VS. ACUTE HOSPITAL CHARGE
HRC Hospital %
Procedure Description Avg. Charge Avg. Charge Savings
--------------------- ----------- ----------- -------
Endo Polpectomy Lrge Int $1,439 $5,559 74%
Colonoscopy $1,155 $5,122 77%
Rotator Cuff Repair $7,587 $11,257 33%
Cruciate Lig Repair $11,348 $19,882 43%
Tonsillectomy $2,575 $8,000 68%
Laparoscopy $4,150 $9,159 55%
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OUTPATIENT REHAB
COST SAVINGS
1995 2001
---- ----
Total Visits Reported 2,512,864 9,083,251
Medicare % 8% 8%
Estimated Medicare Visits 201,029 726,660
Visits/Referral 12.7 7.8
Medicare Visits Saved 456,478
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OUTPATIENT REHAB
FUNCTIONAL LEVELS AT ADMISSION COMPARED TO FUNCTIONAL LEVELS AT DISCHARGE
(Graphic Omitted)
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HEALTHSOUTH REVENUE
BY PRODUCT LINE (2000 VS. 2003 BUDGET)
(Graphic Omitted)
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2003 GAME PLAN
o Continue to Lead Industry with Superior Clinical Services (as
Evidenced by JCAHO Surveys)
o Improve Cost Efficiency While Increasing Patient Volumes
Across all Product Lines
o Manage Capital Expenditures Within Guidance, Pay Down Debt,
and Strengthen Balance Sheet
Success Will Build Investor Confidence by Meeting or Exceeding Financial
Expectations and Increase Our Return on Capital
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INPATIENT DIVISION
2003 GROWTH STRATEGIES
o Tightly Manage Patient Mix To Drive Case Mix Index Higher
o Educate Patient Referral Sources on Benefits of Inpatient Rehab vs. Other Post
Acute Settings:
- Commercial Payors
- Physicians
- Home Health Agencies
- Nursing Homes and Assisted Living Facilities
o Expand Specialized Clinical Programs for:
- Stroke (Centers of Excellence)
- Multiple Sclerosis
- Parkinson's
- Gamma Knife Centers
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INPATIENT DIVISION
TARGETED POPULATIONS
Population Profit Margin Per Case
----------------------------------------------
Stroke 33%
Joint Replacement 31%
Hip Fracture 30%
Pulmonary 28%
Cardiac 28%
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INPATIENT DIVISION
2003 GROWTH STRATEGIES
o Partner with Acute Care Hospitals To Develop Long Term Acute Care Hospital
Units (Hospital within Hospital Model) Associated with Highly Recognized and
Respected Medical Centers
o Increase Volume of Admits from Home via Free Clinical Assessments and
Community Clinical Programs
o Promote Benefits of AutoAmbulator(TM)
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AUTOAMBULATOR(TM)
The AutoAmbulator(TM) Was Conceived To More Effectively Treat Patients with a
Variety of Neurological Conditions That Affect Walking and Balance:
o Stroke
- (Market = 2MM People)
o Spinal Cord Injury
- (Market = 250,000 People)
o Multiple Sclerosis
- (Market = 200,000 Cases/Year)
o Parkinson's
- (Market = 1MM People)
o APPROXIMATELY 3MM POTENTIAL
CANDIDATES FOR THE AUTOAMBULATOR
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AUTOAMBULATOR(TM)
o HEALTHSOUTH Received Clearance from the FDA on March 22, 2002 for a Class I
Medical Device
o Phase 1 Rollout to all Inpatient Hospitals to Begin 1Q03
- 100 Units to be in Place by End of Year 2003
o The AutoAmbulator will Help:
- Provide Safe, Consistent Therapy
- Decrease Healthcare Costs
- Provide Better Patient Outcomes
- Improve Patients' Lives
- Will Facilitate Clinical Research That Will Provide Better Treatment
Modalities
- Distinguish HEALTHSOUTH from the Competition
- Attract Potential Investors from Pharmaceutical Companies for Clinical
Research
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AUTOAMBULATOR(TM)
CLINICAL RELEVANCE
o During Initial Clinical Studies, Patients Using the AutoAmbulator(TM):
- Dramatically Improved Gait
- Reduced or Eliminated the Need for Constant Use of Crutches or Canes
- Significantly Improved Balance, Which Should Reduce Number of Falls
- Experienced Pain Relief in Affected Joints and Limbs
- Reduced Dependence on Others
- Reduced the Incidence of Complications Usually Associated with Spinal Cord
Injury
- Improved Quality of Their Daily Lives
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INPATIENT DIVISION
2003 PRICING STRATEGIES
o Medicare
- Continue To Improve Clinical Mix of Patients (i.e., Higher Acuity Patients)
- Utilize Best Practices for Case Mix Index, Comorbidities, Discharge
Destination, and Admission FIM
o Commercial
- Target Commercial Payors with Cost Benefits of Inpatient vs. Other Long
Term Options
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INPATIENT DIVISION
2003 GROWTH STRATEGIES
o Continue Development of 40 and 60 Bed Freestanding Rehabilitation Facilities
- 4 New Hospitals to Open in 2003
o Bed Expansions Under Review for all Facilities with 95% or Greater Occupancy
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INPATIENT DIVISION
TARGET MARKETS FOR REHAB HOSPITAL AND LTAC DEVELOPMENT
(Graphic Omitted)
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LONG TERM ACUTE CARE HOSPITALS
MEDICARE REIMBURSEMENT CHANGE
o PPS Reimbursement Effective January 1, 2003
o Previously, Cost-Based Reimbursement
o Payment and Classification Will be Based on Hospital DRG System
o New Base Rate = $32,649
- Adjusted for Case Mix Index, Existing Facilities Range from 80% to 90% of
this Base Rate
o Current Cost per Discharge = $17,821
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AMBULATORY SERVICES
Outpatient Visits, U.S. Community Hospitals 1990-2001 (in thousands)
(Graphic Omitted)
Demand for Outpatient Services is Growing
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NUMBER OF ACUTE CARE HOSPITALS ON THE
DECLINE
Number of U.S. Community Hospitals 1995-2001
(Graphic Omitted)
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SURGERY DIVISION
2003 GROWTH STRATEGIES
o Management Team Dedicated Exclusively to Surgery
o Maximize Existing Partnerships and Drive Capacity Utilization Through the
Resyndication Process
- Over 250 New Physician Partners Added in 2002
- Have Added Over 800 New Physician Partners Under Initiative of Adding 1,000
- Targeting Approximately 200 New Physician Partners in 2003
- Same Store Volume Up Nine Consecutive Quarters
o Strong Opportunity for Opening New Centers with Dedicated
Development Team
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SURGERY DIVISION
2003 GROWTH STRATEGIES
o Expand/Relocate Existing Centers To Increase Volumes and
Improve Block Time Capacity
o Initiate Pricing Initiatives Focused on Case Rates, Carve-in
Procedures and Implants
o Work with Top Payors to Dislodge Cases from More Costly
Acute Care Setting to ASC's
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SURGERY DIVISION
2003 GROWTH STRATEGIES
o Tightly Manage Case Mix To Enhance Efficiencies and Target
Higher Margin Cases
o Focus on Expense Control:
- Productivity
- Salary Management
- Inventory Efficiencies
- Fixed Asset Utilization
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SURGERY DIVISION
2003 GROWTH STRATEGIES
o Aggressively Market Consumer Programs:
- Endometrial Ablation
- Trivex
- Gerds and GI programs
- Ophthalmology
- Unispacer
- Facility Specific Physician Promotions
- Patient Financing Venture with a National Bank
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SURGERY DIVISION
TARGET MARKETS
(Graphic Omitted)
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OUTPATIENT DIVISION
2003 GROWTH STRATEGIES - VOLUME
o Sales Initiatives
- Increase Referrals from "Top 20" Physicians per Market
- Utilize Marketing Representatives To Drive Volume and Enhance Referrals
o Fitness Club Site Development
- Low Cost Model Which Generates Higher Margin and Returns
- Target Large 20,000+ Member Health Clubs
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OUTPATIENT REHABILITATION
STRATEGY FOR TRANSMITTAL 1753
o Improve Scheduling Patterns To Maximize "One on One" Care
o Limit Group Sessions To Appropriately Sized Groups To
Optimize Productivity and Reimbursement
o Sponsor Legislative Change to CMS Transmittal 1753
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FINANCIAL OVERVIEW
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BALANCE SHEET RATIOS
1999 2000 2001 1Q02 2Q02 3Q02
---- ---- ---- ---- ---- ----
Net Debt/Cap 48.2% 46.2% 42.0% 43.6% 46.9% 44.8%
EBITDA/Interest 6.9x 5.1x 5.6x 6.0x 6.3x 5.8x
Debt/EBITDA 2.6x 2.8x 2.5x 2.4x 2.7x 2.6x
Debt $3.11B $3.21B $3.03B $3.02B $3.48B $3.21B
Balance Sheet Ratios Remain Strong
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2003 GUIDANCE
Ranges
------
Revenues $4,230,000 - $4,320,000
EBITDA $1,045,000 - $1,090,000
EPS $0.55 - $0.57
Capital Expenditures $375,000 - $425,000
Depreciation and Amortization $320,000 - $330,000
Interest Expense $235,000 - $245,000
Minority Interests $130,000 - $140,000
Shares Outstanding 400,000 - 402,000
Tax Rate 38.75%
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STRONG LIQUIDITY POSITION
o $1B Available Under $1.25B Bank Facility
o New Facility Provides Ample Availability to Take Out Last
Remaining 2003 Maturity ($344MM Outstanding); No Significant
Maturities until 2007
o No Off-Balance Sheet Financing Issues
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FOCUSED ON RETURN ON CAPITAL
o Goal is to Increase ROC to 12% Over Time by Making Progress Each Quarter
o Strategies Include:
- Increased Throughput in Existing Facilities
- Maintain or Increase Pricing Across All Divisions
- Carefully Manage Expenses
- Deploy New Capital on Projects with Highest Returns
- Reduce DSO's
- Use Free Cash Flow to Pay Down Debt
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SUMMARY
o 2002 Was Difficult Year Due to Transmittal 1753
- Had to Overcome Confusion from Payors, Physicians, and Therapists
- Negative Press Added to Difficulties and Damaged Some Referral Sources
- Wall Street Overreacted
o 2003 is a "Comeback" Year
- Rebuilding Relationships
- Closing Underperforming Facilities
- Adding Incentives for Marketing Team
- Cutting Expenses
- Adding Programs Aimed Directly at Consumers (i.e. stroke)
- Focus on Re-establishing Our Leadership Role in All Business Lines
- Focus on Building Shareholder Value
- Ongoing Governance Improvements
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SUMMARY (CONTINUED)
o HEALTHSOUTH Remains a Great Company
- Highest Quality Assets
- Brightest Management Team
- Over $1B in EBITDA
- Ample Liquidity
- Sound Balance Sheet
- Focused on Increasing Our Return on Capital