Prospect Medical — Investor Presentation (October 2007)
18 slides from Prospect Medical's investor presentation, Oct 9, 2007
Slide 1: Prospect Medical Holdings: A Vertically-Integrated Medical Services Provider Serving Southern California
Prospect Medical Holdings, Inc. (AMEX:PZZ) A Vertically-Integrated Medical Services Provider Serving Southern California October 2007
Slide 2: Safe Harbor
Safe Harbor This presentation contains forward-looking statements. Additional written or oral forward-looking statements may be made by the Company from time to time, in filings with the Securities and Exchange Commission, or otherwise. Statements contained herein that are not historical facts are f
Slide 3: Investment Considerations
Investment Considerations Managed care management company serving southern California At 3/31/07, managed the medical care of 169,000 HMO enrollees through 12 IPAs and a network of 9,000 physicians FY 2006 revenues of $135.8 million, operating income of $8.3 million June 2007 - Acquired Two IPAs: Po
Slide 4: History
History Started as a managed care management company Managed the healthcare of HMO enrollees assigned to affiliated Independent physicians Independent Physicians - primary care and specialists - are Associated by contract into medical groups called IPAs. The original business plan was to acquire and
Slide 5: Prospect Audited Financial Data (1997 – 2006)
Prospect Audited Financial Data (1997 – 2006) $28.3 $53.9 $57.0 $56.7 $74.2 $70.1 $68.5 $129.5 $135.8 $133.5 Gross Revenue ($0.8) $1.1 $0.2 ($.08) $2.1 $1.9 $1.8 $8.7 $9.1 $8.2 Shareholders’ Equity Operating Income $3.8 $4.1 $3.3 $4.3 $4.7 $6.0 $7.2 $22.9 $27.0 $33.8 ($ in millions) Depreciation & A
Slide 6: History - Evolving Market
History - Evolving Market Over the last 10 years, Prospect has modified its tactics in response to changing health care dynamics I. HMOs instituted a multi-year series of large increases in premiums, changing the inexpensive HMO health insurance product into an expensive one. 1. Several consequences
Slide 7: History - Revised Tactics
II. Higher profit margins of Senior (Medicare) line has led to intense competition for the members, making their accrual more difficult Increased investment in IT, provider relations, member services Senior reimbursement now based on severity of illness Increased investment in disease coding functio
Slide 8: Prospect Financial Data – Pre-Alta Acquisition
Revenues 33,465 34,572 34,818 32,941 34,828 33,327 40,752 Cost of revenues 24,486 23,964 25,408 23,326 26,036 26,170 31,891 Gross margin 8,979 10,608 9,410 9,615 8,792 7,157 8,861 Total non-medical expenses 7,453 8,797 7,624 7,845 8,469 9,473 9,183 Operating income from unconsolidated joint venture
Slide 9: IPA Acquisitions Continue
IPA Acquisitions Continue $90.0 million revenue, $9.0 million operating income Upland Medical Group establishes new hub in rapidly growing Inland Empire Sizable, fast-growing market with large number of Seniors 81,000 ProMed lives + 166,000 Prospect lives = 247,000 total lives Adds 10,000 new Senior
Slide 10: Acquisition of Alta Healthcare System
FY 2006 revenues of $107.0 million, operating income of $16.9 million (after interest expense of $4.6 million) Privately-held owner and operator of 4 community-based hospitals in greater Los Angeles Combined 339 licensed beds served by 351 on-staff physicians Physician-driven model Successful turnar
Slide 11: Alta Acquisition Rationale
Alta Acquisition Rationale Creates a vertically-integrated medical services platform Addresses increasing demand from HMOs to contract with managed care partners that offer an integrated physician/hospital solution Highly effective medical management which facilitates: Superior benefits to enrollee
Slide 12: Benefits to Prospect
Benefits to Prospect Develop IPA networks around Alta’s physician relationships Potential to gain control of Medicare revenue stream Opportunistically drive marginal business to Alta facilities where geographic and market conditions are favorable Execute more favorable contracts with HMOs IPA IPA IP
Slide 13: Benefits to Alta
Gain HMO hospital admissions that are currently leaving its network Alta’s cost efficient operating model with Prospect’s current hospital rates should contribute to Alta’s profitability Acquire hospitals in regions where Prospect has IPA networks Benefits to Alta Hollywood Van Nuys Los Angeles Norw
Slide 14: FY 2006 Pro-Forma and Future Initiatives
FY 2006 Pro-Forma and Future Initiatives ($ in 000s) Financial Salients - Most Recent Audited Fiscal Year Prospect ProMed Alta Subtotal Est. Expense Adjustments Combined 2007 Developments & Initiatives 2008 Initiatives 2006 2006 2006 Reclass Interest Depr & Tax Rate 2006 Audited Audited Audited Alta
Slide 15: Vertically Integrated Healthcare Services Provider
Vertically Integrated Healthcare Services Provider Sixth-largest IPA in California Manage 247,000 HMO lives Operations in 4 contiguous counties 14 IPAs 4 community-based hospitals 9,000 physicians Agreements with all major HMOs Prospect and ProMed revenue and operating income as of 9/30/06; Alta rev
Slide 16: FY 2006 Historical and Pro-Forma Financial Data
FY 2006 Historical and Pro-Forma Financial Data $28.3 $53.9 $57.0 $56.7 $74.2 $70.1 $68.5 $129.5 $135.8 $133.5 Gross Revenue ($0.8) $1.1 $0.2 ($.08) $2.1 $1.9 $1.8 $8.7 $9.1 $8.2 $3.8 $4.1 $3.3 $4.3 $4.7 $6.0 $7.2 $22.9 $27.0 $33.8 ($ in millions) $332.5 Est. 2006 Pro-Forma Est. 2006 Pro-Forma Est.
Slide 17: Key Considerations
Acquisitions have added significant size, scale, and geography Vertically-integrated platform aligns business model with HMO demands, and establishes platform for future acquisitions Favorable Medicare reimbursement environment Attractive service area and demographics Limited integration risk Conser
Slide 18: Prospect Medical Holdings, Inc. (AMEX:PZZ)
Prospect Medical Holdings, Inc. (AMEX:PZZ) A Vertically-Integrated Medical Services Provider Serving Southern California October 2007
Prospect Medical Holdings — Investor Presentation (October 2007) on 6ix