Kindred Investor Presentation

7/31/2019 Kindred Investor Presentation

1/37

KINDREDHEALTHCARE ContinuetheCare 1

KINDREDHEALTHCARE

NYSE:KND

InvestorPresentationJune2012


2/37


3/37


PremierProviderofRehabilitationServicesand

Post

Acute

Care

in

the

United

States

(1)ProformarevenuesforthetwelvemonthsendedMarch31,2012(before

intercompanyeliminations).

(2)AsofMarch31,2012.

$6.5billiontotalrevenues(1)

2,142

locations,

450

facilities

in

46

states(2)

61,800patientsandresidentsperday(2)

76,000dedicatedemployees(2)

40%($2.6billion)

Medicare

Medicaid

RevenueMix(1)

BusinessMix(1)

15%($1.0billion)

BusinesstoBusiness

CommercialInsurance/Private 17%

($1.1billion)

28%($1.8billion)

20%($1.3billion)

35%($2.2billion)

44%($2.9billion)

LTAC/IRFHospitals

RehabCare

SkilledNursingCenters

1%($0.1billion)

HomeHealth


4/37


LeadingDiversifiedPostAcuteProviderWith

Focus

on

Developing

Cluster

Market

Service

Offerings

LTAC Hospitals (120)Inpatient Rehabilitation Hospitals (6)

Hospital-Based Acute Rehab Units (100)

Nursing and Rehabilitation Centers (224)

RehabCare Total Sites of Service (2,082)

Home Health and Hospice (52)

Existing Cluster Market (13)

Potential Cluster Market (7)

KINDREDHEALTHCARE ContinuetheCare

As of March 31, 2012

4


5/37


KindredsValueProposition/StrategicOpportunityand

our

Continue The Care Campaign

Bealeaderinhelpingtocoordinateanddeliverhighqualitycareatthelowestcost(particularlyforthosepatientswhoarethehighestusersofhealthcare

services) Toprovidesuperiorclinicaloutcomesinthemostappropriatesetting,withan

approachwhichispatientcentered,disciplinedandtransparent

Totransitionpatientshomeatthehighestpossibleleveloffunctionandwellnessandpreventavoidablerehospitalizations

Lowerhealthcarecostsbyreducinglengthsofstayinacutecare hospitals(andthroughoutanepisodeofcare)

Participateinthedevelopmentofnewcaredeliveryandpaymentmodels

To

better

coordinate

care

and

manage

patients

with

chronic

conditions,

includingthedualeligibles

Toreduceavoidablerehospitalizationswithourpartnersthrough ourintegratedcaremanagementteamsandprotocols


6/37


KindredHealthcareDelivering

on

Quality,

Value

and

Innovation

in

Patient

Care

Delivery



7/37


KindredHealthcareDelivering

on

Quality,

Value

and

Innovation

in

Patient

Care

Delivery



8/37


HospitalDivision

$2.9billionRevenues(1)

$540millionOperatingIncome(2)

LongTermAcuteCareHospitals(LTACs)

120LTAC

hospitals

(3)

8,510licensedbeds(3)

InpatientRehabilitationHospitals(IRFs)

6IRFs(3)

229licensedbeds(3)


(1) ProformarevenuesforthetwelvemonthsendedMarch31,2012(divisionalrevenuesbeforeintercompanyeliminations).

(2) OperatingincomeforthetwelvemonthsendedMarch31,2012.(3) AsofMarch31,2012.

#1 Operator of Long-TermAcute Care Hospitals and

Inpatient RehabilitationFacilities

Consistentlyoutperformsnationalbenchmarksonkey

qualityindicators

InQ12012,samestoreadmissiongrowthof2%resultedin

operatingincomemarginimprovementto21.0%

Q12012operatingincomegrew48%to$161millionversus

last

year(2)

with

successful

integration

of

36

RehabCare

Hospitals

PortfolioUpdate OpenedSeattleFirstHillinFebruary2012with50LTACbedsand

30subacutebeds

OpenedHumble,TXfreestandingIRF inFebruary2012,with46beds

OpenedAustin,TXfreestandingreplacementIRFinMay2012,whichadded

30additionalbeds

ExpecttoopenDayton,OHandCharleston,SCreplacementLTAChospitals

inQ32012,whichwilladd126LTACand72subacutelicensedbeds

CompanyenteredintonewleasewithVentas for10hospitalsoriginallyset

toexpirein2013

7%$0.2 billion

32%$0.9 billion

Medicare

Medicaid

Insurance/Other

RevenueMix(1)

19 182022

100119126

020406080

100

12014061%

$1.8 billion


9/37


RevenueMix(1)

Nursing

Center

Division

37Transitional

Care

Centers

(TCCs)(3)

95NursingandRehabilitation

Centers(withTCUs)(3)

92SkilledNursingCenters(TraditionalSNFs)(3)


Qualityperformanceranks1st amonglargeprovidersonsurveysandnationalbenchmarksinkeyareas

Q112admissiongrowthof1%offsetbyincreasingdischargestohomeanddeclininglengthofstay

ChallengingoperatingenvironmentundernewRUGsIVrulesandongoingMedicaidratepressures

PortfolioUpdate

CompanywillallowVentas leasesfor54nonstrategicnursingcenterstoexpireinApril2013

#4 Operator of Skilled Nursing andRehabilitation Centers

207

324277

227224 223

050

100150200250

300350

Number of Facilities39%$0.8 billion

35%$0.8 billion

26%$0.6 billion

Medicaid

Medicare

Private/Other



(1) RevenuesforthetwelvemonthsendedMarch31,2012(divisionalrevenuesbeforeintercompanyeliminations).



10/37

KINDREDHEALTHCARE ContinuetheCare 10KINDREDHEALTHCARE ContinuetheCare

2,082sitesofserviceservedthrough8,760therapists(3)

Including100hospitalbasedacuterehabilitationunits(3)

#1 Contract Rehab Manager

360

300 200

108

1,000 900471 450

342471700700

1,722

2,082

0

500

1,000

1,500

2,000

2,500

Third Party Affiliated

Providesacompellingvaluepropositiontoour

Hospital(HRS)andSkilledNursing(SRS)partners

throughadvancedtechsystems,clinicalprograms

andhighlytrainedtherapistteam

Successfullyintegrating

SRS

and

HRS

businesses

from

theRehabCareacquisition

Operatingmarginsimprovedto9.2%inQ112from

8.8%inQ411

HRS=8signedandopenedthroughMay2012

SRS=91signedand74openedthroughMay2012



BusinessMix(1)

HRS

SRS

22%$0.3 billion

78%$1.0 billion

(1) ProformarevenuesforthetwelvemonthsendedMarch31,2012(divisionalrevenuesbeforeintercompanyeliminations).



11/37


52sitesofservice

34inKindredsClusterMarkets

2,200employeesserving5,400patientsonadailybasis


Buildingmanagementteam,includingsales,

clinicaloperationsandITcapabilitiesto

supportacceleratedexpansion

Q1Revenuesof$28Million

DevelopmentUpdate

ProfessionalAcquisition

27

locations

(September

11) SynergyHomeHealthAcquisition

2locations(October11)

ActivepipelineofopportunitiesinKindred

ClusterMarkets

In2012,wehaveopened10newbranch

locationswithplanstoopenanother11

locationsbeforetheendoftheyear.

$114millionAnnualizedRevenues(1)

(1) Annual izedbaseduponrevenuesforthethreemonthsendedMarch31,2012(divisionalrevenuesbeforeintercompanyeliminations)duetorecentacquisitions.

8%

64%

28%

Medicaid

($10million)

Medicare($72million)

CommercialInsurance/Other($32million)

1%

10%

30%59%

DMEPrivateDuty

Hospice

HomeHealth

Revenue Mix(1)Business Mix


12/37


TremendousOpportunitiesExisttoBetterManagePatient

Carefor

Patients

Discharged

From

Acute

Care

Hospitals

35%ofMedicareBeneficiariesareDischargedfromAcuteHospitalstoPostAcuteCare

IntensityofService LowerHigher

(1) Source:RTI,2009:ExaminingPostAcuteCareRelationshipsinanIntegratedHospitalSystem

MedicarePatients UseofPostAcuteServicesThroughoutanEpisodeofCare (1)

Currentlythereare47.6millionMedicarebeneficiarieswithanestimated7,000individualsaddedtotheprogrameachday.*

*Source:KaiserFamilyFoundation,2011statehealthfacts.org,andAARP2011projections

Patients firstsiteofdischargeafteracute

care

hospital

stayPatients useofsite

duringa90dayepisode

SHORTTERM

ACUTECARE

HOSPITALS

LONGTERMACUTE

CARE

HOSPITALS

INPATIENTREHAB

SKILLED

NURSINGFACILITIES

OUTPATIENT

REHAB

HOME

HEALTHCARE

37%2% 10%

11%

41%

52%

9%

21%2% 61%


13/37


KindredIsPositionedtoHelpDeterminethe

MostAppropriate

Care

Setting

For

Patients

as

they

Continue Their Care ThroughoutaPostAcuteEpisode

36% 5%

Skilled

Nursing

and

RehabCenters

(1) Source:KindredInternalData,2011data.

18%with

Home

Health

Inpatient

Rehab

Facility

PatientsDischargedFromKindred

LTACHospitals

13%

Skilled

Nursing

and

RehabCenters

47%with

Home

Health

PatientsDischargedfrom

KindredHospital

Based

IRFs

52%

Home

33%with

Home

Health

28%

Home

77%

Home

PatientsDischargedfrom

KindredNursingand

RehabilitationCenters


14/37


PositionedtoTakeAdvantageofChanging

Healthcare

LandscapeContinue The Care

UniquelyPositionedForBundledOrEpisodicPaymentEnvironment

HOME

PatientService

Intensity

SKILLEDNURSING

FACILITIES

HOSPICEHOMEHEALTH

CARE

OUTPATIENTREHAB

ASSISTEDLIVING

ACUTECARE

HOSPITALS

TRANSTRANS

CARECAREICUICU

INPATIENTREHAB

LTACsFREESTANDING/HIH

Patient Illness Severity

SAUSAU

TCC&

TCU

ADULTDAY

CARE


15/37


ClusterMarketStrategyDesigned

To

Improve

Care

Coordination

and

Drive

Admissions

Growth

Astrategytopositionassets/service

lines

and

deploy

capital

to

take

advantageofanincreasinglyintegratedhealthcaredeliverysystem

Diversepostacuteservicelines

andclinical

programs

to

support

acontinuumofcarewithinanACOor

abundledpaymentenvironment

Strengthenlinkageswithacutehospitals,managedcarepayors,

andphysicians

across

settings

Potential

benefits

include

improved

carecoordination,reduced

rehospitalizations,lowercosts

andadmissionsgrowth


16/37


BusinessStrategy SuccessintheCore

Takecareofourteammatesandpromoteperformanceimprovement

Continuetoimprovequalityandclinicaloutcomes

Promoteourvaluepropositionandgrowadmissionsandrehabcontracts

ExecuteonRehabCaresynergiesandothercostreductioninitiatives

Accelerateour

Cluster

Market

(Network

Development)

Strategy

Developservicelinesandintegratedcaremanagementcapabilitiesacross

thecarecontinuum

Expandandintegratehealthsystem,physicianandmanagedcarerelationships

ContinuetoinvestinIT(electronichealthrecord)linkages

Aggressivelyexpand

Home

Health

and

Hospice

Services

RedeployFreeCashFlow,Assets,andManagementTimetoHigherMarginGrowth

BusinessesasVentas leasesexpire

Homehealth/hospicebusinesses,hospitalsandtransitionalcarecenters(TCCs)orsubacutefacilities

ParticipateandInvestinNewIntegratedCareandPaymentModels/Businesses,

includingACOs and

Bundled

Payment

Demos

with

Health

Systems,

Physician

Groups and

ManagedCarePayors


17/37


FinancialUpdate


18/37


Financial

Highlights

Q1

2012

Solidstarttotheyearreflectingoperationalstabilization

Revenuesgrew

33%

to

$1.6

billion

from

Q1

2011

RehabCareacquisitionadded$364millioninrevenues

Excludingcertainitems,Q1dilutedEPSwas$0.40vs.$0.27inQ42011

Managementtargets$124millionincostreductionmeasuresin2012 RehabCareacquisitionsynergies $70million

Operatingdivision

reorganizations

$34

million

Enterprisecostreductions $20million


19/37


OperationalHighlights

Q12012

HospitalresultsbolsteredbyRehabCareacquisition,volumegrowthandcostefficiencies

Admissionsgrewby40%fromlastyear,samefacilityadmissionsgrew2%

Operatingincome

grew

48%

to

$161

million

Despitegrowthinnursingcenteradmissionsandimprovedcostmanagement,reimbursementpressuresanddecreasinglengthsofstayresultedinoperatingincomedeclines

WhilerecentMedicarechangesimpairedtherehabilitationdivisionsoperatingmarginscomparedtolastyear,operatingmarginsimprovedfrom8.8%inQ42011to9.2%inQ12012

Homehealthandhospicedivisionreportedrevenuegrowthof254% and

operatingincome

grew

to

$2.3

million

from

breakeven

ayear

ago


20/37


OperatingMargins

Significant LTAC margin improvement was more than offset byregulatory changes in Nursing Center and RehabCare businesses.


21/37


RegulatoryUpdate OnApril24th,CMSpublishedproposedratesforLTAChospitalsforthefiscalyear

beginningOctober1,2012

CMSprojectsLTACspendingtoincreaseby1.9%.Basedonourreviewoftheproposedrule,weexpectLTACMedicarepaymentrateswillbeflatin2013comparedtocurrentrates. Theproposedruledoesnotincludetheimpactofa2%sequestration

payment

reduction

mandated

by

Congress

that

is

expected

to

begin

inFebruary2013.

Theproposedrulealsowould: Beginathreeyearphaseinofa3.75%budgetneutralityadjustmentwhichwouldreduce

ratesby1.3%in2013

Restoreapaymentreductionforveryshortstayoutliers(0.5%reductionin2013)

Provideaoneyearextensionofthemoratoriumofthe25%Rule pendingtheresultsofongoingresearchtobetterdefinetheroleandcriteriaforLTAC hospitalsintheMedicareprogram

Allowfor

the

expiration

of

the

moratorium

on

the

development

or expansion

of

LTAC

hospitals

MedicarerateupdatesareexpectedinAugustforinpatientrehabilitationfacilitiesandnursingcenters,signalingarespitefromthesignificantregulatorychangesthathaverecentlyaffectedournursingcenterandrehabilitationservicesbusinesses


22/37


EarningsGuidanceRanges Fiscal2012*(In

millions,

except

per

share

amounts)

The Company's earnings guidance excludes the effect of (1) any costs associated with the closing of a regional office and a LTAC hospital,(2) any transaction-related charges, (3) any other reimbursement changes, (4) any acquisitions or divestitures, (5) any impairment charges,or (6) any repurchases of common stock.

*

Low High

Revenues 6,300$ 6,300$

Operating income 868 884

Income from continuing operations before income taxes 130 146

Available to common stockholders 71 81

Earnings per diluted share 1.35 1.55

Operating cash flows 240 260

Routine capital expenditures 130 140

As of May 1, 2012


23/37


ImprovedFinancialFlexibility

Financingarrangementsprovidehighercapacityatfavorableterms

$219million

of

revolving

credit

capacity

available

at

March

31

Favorablepricinginplaceforbothsecuredandunsecuredfinancing

Financialcovenantssupportoperationalflexibility Q1fixedchargecoveragewas1.68vs.1.25covenantlevel

Q1adjusted

leverage

was

4.69

vs.

6.00

covenant

level

Operatingincomecushiontotalednearly$200millionatMarch31

Extendedtenorofagreements Revolvingcredit 2016

Termloan 2018

Unsecurednotes

2019


24/37


Ventas Leases

Kindredrecentlyannouncedthatithadenteredintoanew10yearleaseagreementwithVentas for10LTAChospitalswhoseleaseterm

wasset

to

expire

in

April

2013

Theagreementalsoprovidesbothcompaniesmoreflexibilitytoacceleratethetransferofthe54nursingcenterswhoseleasesexpireApril2013andwillnotberenewed

Thefinancialeffectin2013ofenteringintothenewleasealongwiththenonrenewalofthe54nursingcentersisexpectedtobeslightlyaccretivetoKindredsconsolidatedearningspershare


25/37


StrategicCapitalAllocationFramework

Investinhighermarginandlesscapital

intensivebusinesses

primarily

in

Cluster

Markets

Investinbusinessesthathavegoodorganicgrowth

characteristics

Establishedrangeofinvestmentreturnsforeachasset

class

Ownmoreofourownrealestate Provideshighermarginsandoperationalflexibility

Allowsde

leveraging

through

free

cash

flow

Removesincreasingrentpayments

Enterleasesonaselectivebasis

ContinueassetreplacementplaninourClusterMarkets

PaydowndebtincurredinRHB

acquisition

Reduceadjustedleverageovertime

FRAMEWORK CONSIDERATIONS


26/37


CapitalInvestmentComparison

$0.000

$0.050

$0.100

$0.150

$0.200

$0.250

0x2x4x6x8x10x12x

Acquisition/Development Multiple (Stabilized Enterprise Value / EBITDAR)

EPS/$100MSpend

LTAC/IRF Hospital Cluster Market Acquisition

Debt Reduction - RevolverReal Estate Purchase

DeNovo LTAC/IRF Hospital (Owned)

Home Health & Hospice

SNF Cluster Market Acquisition


27/37


Investment

Rationale Eachyear,nearly9millionpeople 24,000aday aredischargedfrom

shorttermacutecarehospitalsandrequiresomeformofpostacutecare

Asthelargestdiversifiedpostacuteprovider,Kindredisuniquelypositionedtogrowandsucceedinwhatwillbeanincreasinglyintegratedhealthcaredeliverysystem

Kindredhas

atrack

record

of

providing

quality,

cost

effective

care,

operationalexcellenceandconsistentlevelsoffreecashflows

Ourexperiencedmanagementteam,robusttechnologyplatform,anddemonstratedabilitytoadapttochange,togetherwithoursuccessful

organicdevelopment

strategy,

offer

the

potential

for

creating

significant

valueforshareholdersovertime


28/37


KINDREDHEALTHCARE

NYSE:KND



29/37


Appendix


30/37


ConsolidatedBalancedScorecardMarch2012YTD Performanceasmeasuredagainst2012goals

Legend

MaximumAchieved

BetweenMaximum&Target

BetweenTarget&Minimum

BelowMinimum

NotMeasuredforPeriod

PeopleFirst

DivisionPeopleFirst

Division

NursingCenter

Division

NursingCenter

Division

NursingCenter

Division

RehabCareDivisionRehabCareDivisionRehabCareDivision

EBITDARM EBITDAM

HospitalDivisionA/RDaysHospitalDivisionHospitalDivision

5%

Efficiency CapitalOrganizational

Excellence

35%

NursingCenter

Division

PeopleQuality&

Service10%10%

Growth

15%10% 15%

TotalEmployee

TurnoverHospitalDivision

RehabCareDivision

PeopleFirst

DivisionPeopleFirst

Division

30


31/37


HospitalDivision BalancedScorecard

March2012

YTD

STIPMeasures

Legend

MaximumAchieved



BelowMinimum


15%

AverageDaily

Census

NetRevenue

PPD

People Quality&Service

10% 15%

Efficiency CapitalOrganizational

Excellence

30%

Growth

EBITDARM EBITDAM

Sho

rt

Term

Incentive

Plan

CCOTurnover%

TotalEmployee

Turnover%ClinicalQualityIndex Admissions

5%15%

Rehospitalization

Rate

Worker'sComp

ClaimsperFTE

Revenue/Cost

GrowthRatio

ARDays

(NonMedicare)OperatingCostPPD

10%

CustomerService

Index

ClearConditionOut

onFirst

Follow

up

31


32/37


NursingCenterDivision BalancedScorecard

March2012

YTD

STIPMeasures

Legend

MaximumAchieved



BelowMinimum


Implementationof

Abaqis,Phase2

A/RDays

30%

AverageDaily

Census

Implementationof

Interact

TotalAncillary

ExpensePPD

5%

Implementationof

PointClickCare

10%15% 15% 15%

Growth

EBITDARM EBITDAM

Capital Organizational

Excellence

Sh

ort

Term

IncentivePlan

Employee

Retention%

Turnover%

Employee

10%

Efficiency

Gov'tNetRevenue

PPD

ClearingTagson

FirstFollowupTotalAdmissions

Rehospitalization

Rate

People Quality&

Service

AverageDeficiency

Index

TotalOperating

ExpensePPD

32


33/37


Legend

MaximumAchieved



BelowMinimum


RehabCareDivision BalancedScorecard

March

2012

YTD

STIP

Measures

SRSOutcomesMeasurement

HRSOPOutcomes

DaysSalesOutstanding

10% 5%

CapitalOrganizational

ExcellencePeople Quality&Service

CustomerSatisfaction

EmployeeTurnover%

10% 10%

ClinicalProgramImplementation

NetNewContracts

Growth

TotalRevenue

30%

Efficiency

ContributionMargin%

20% 15%

SRSRevenuePerMinute

SRSCostPerMinute

EBITDARM EBITDAM

Short

Te

rm

IncentivePlan

HRSLTACHFOMGain

HRSIRFFIMGain

33


34/37


Legend

MaximumAchieved



BelowMinimum


PeopleFirstHomeHealth &HospiceDivision BalancedScorecardMarch2012YTD STIPMeasures

EBITDARM EBITDAM

Quality&Service

OutcomeMeasures

ExceedAverages

Employee

Turnover

People Growth

45%

Efficiency

ARDays

10% 5%

Capital OrganizationalExcellence

7.5% 7.5%

PatientSatisfactionTotalAdmissions

AverageDaily

Census

Short

Term

Incentive

Plan

CaseloadperFTE

TotalBilledHours

17.5% 7.5%

34


35/37


ReconciliationofNonGAAPMeasures(In

millions)

First First

Quarter Quarter

2007 2008 2009 2010 2011 2011 2012

Income (loss) from continuing operations:

Operating income (loss):

Hospital division 365$ 346$ 364$ 360$ 488$ 108$ 161$

Nursing center division 295 322 305 304 338 87 66

Rehabilitation division 34 39 52 53 110 15 30

Home health and hospice division - (1) (1) - 3 - 2

Pharmacy division 18 - - - - - -

Corporate:

Overhead (168) (133) (135) (134) (175) (38) (43)

Insurance subsidiary (7) (7) (6) (3) (2) (1) -

(175) (140) (141) (137) (177) (39) (43)

Impairment charges - - - - (129) - (1)

Transaction costs - - - (5) (51) (4) (1)

Operating income 537 566 579 575 582 167 214

Rent (338) (339) (348) (357) (399) (91) (108)

Depreciation and amortization (118) (120) (126) (122) (166) (33) (49)

Interest, net (1) (8) (3) (6) (80) (5) (26)

Income (loss) from continuing operations

before income taxes 80 99 102 90 (63) 38 31

Provision (benefit) for income taxes 37 39 39 34 (7) 16 13

43$ 60$ 63$ 56$ (56)$ 22$ 18$

Year ended Decem ber 31,


36/37


ReconciliationofNonGAAPMeasures(Continued)(Inmillions,expectpershareamounts)

Three months endedMarch 31, December 31,

2012 2011 2011

Detail of charges:

Severance and other miscellaneous costs ($2) - ($1)

Lease cancellation charge (2) - (2)

Transaction costs (1) (4) (4)

Loss on hospital divestiture - - (2)

Impairment charges - - (102)Financing costs (in connection with RehabCare acquisition) - (2) -

(5) (6) (111)

Income tax benefit 2 2 24

Charges net of income taxes (3) (4) (87)

Allocation to participating unvested restricted stockholders - - -

Available to common stockholders ($3) ($4) ($87)

Weighted average diluted shares outstanding 51.6 39.5 51.3

Diluted loss per common share related to charges ($0.05) ($0.10) ($1.69)

Reconciliation of income from continuing operations before charges:

Income from continuing operations before charges $21 $26 $14

Charges (3) (4) (87)

Reported income (loss) from continuing operations $18 $22 ($73)

Reconciliation of diluted earnings per common share from continuing operations before charges:

Diluted earnings per common share before charges (a) $0.40 $0.65 $0.27

Charges (0.05) (0.10) (1.69)

Reported diluted earnings per common share $0.35 $0.55 ($1.42)

For purposes of computing diluted earnings per share, income from continuing operations before charges was reduced by $0.3 million, $0.5 million

and $0.2 million for the three months ended March 31, 2012, March 31, 2011 and Decem ber 31, 2011, respectively, for the allocation of income to

participating unvested restricted stockholders.

Three months ended

(a)

(a)


37/37


KINDREDHEALTHCARE

NYSE:KND


Documents

Kindred Investor Presentation