Odyssey Healthcare — Investor Presentation (May 2008)
44 slides from Odyssey Healthcare's investor presentation, May 22, 2008
Slide 1: To Serve All People During the End of Life's Journey
1 “To Serve All People During the End of Life’s Journey”
Slide 2: Forward-Looking Statements
2 FORWARD-LOOKING STATEMENTS Certain statements contained in this presentation are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements are based on management’s current expectations and are subject to known and unknown risks, uncertainties an
Slide 3: Odyssey... A Leader in Hospice Care
3 ODYSSEY… A LEADER IN HOSPICE CARE 100 Medicare Certified Programs in 29 states 32,294 admissions in 2007 CAGR revenue = 12.3%
Slide 4: Value Proposition
4 Growing recognition of end of life services Aging population assures increased demand VistaCare acquisition adds scale and expands leadership position Strong balance sheet Compelling operating/growth strategy Experienced management team with strong integration and operating background VALUE PROPOS
Slide 5: Odyssey Locations
5 ODYSSEY LOCATIONS Hospice Office Inpatient Facility Corporate Office – Dallas
Slide 6: Combined Locations
6 COMBINED LOCATIONS Odyssey Locations Hospice Office Inpatient Facility Corporate Office – Dallas VistaCare Locations Hospice Office Inpatient Facility
Slide 7: What Is Hospice?
7 WHAT IS HOSPICE? More cost effective Services provided primarily in home Provides quality of life for terminal patients and families Focus on physical, emotional and spiritual
Slide 8: Improves Quality of Life
8 IMPROVES QUALITY OF LIFE Prior studies have found that hospice improves quality of care Mor and Kidder 1985 National Hospice Organization 1995 Miller et al. 2002, 2004 Wu et al. 2003
Slide 9: Cost Effective
9 COST EFFECTIVE 25% of total US Medicare budget spent on last year of life Mean expenditure in last year of life $24,600 vs $9,400 for same beneficiaries in next to last year of life Duke University study (2007) Hospice use reduced Medicare costs by an average of $2,309 in last year of life For 7 i
Slide 10: Covered by Medicare
10 COVERED BY MEDICARE Benefit enacted in 1983 Aggregate per beneficiary cap of $22,386 Largest payer at > 90% is Medicare Six months life expectancy Paid on per diem basis based on level of care
Slide 11: Patients by Diagnosis in the Industry
11 PATIENTS BY DIAGNOSIS IN THE INDUSTRY Heart Disease 12.2% 20% 8.9% 46% 8.2% Other Dementia Cancer Lung Disease Kidney Disease 3.1% Liver Disease 1.6%
Slide 12: Rapidly Growing Market
12 RAPIDLY GROWING MARKET Hospice Medicare Expenditures ($ in billions) $2.9 $3.6 $4.5 $5.7 $8.5 FY 2000 FY 2001 FY 2002 FY 2003 FY 2006 $6.9 FY 2004 $8.2 FY 2005
Slide 13: Market Opportunity
13 MARKET OPPORTUNITY Sudden Death/ Other Hospice Patients Served 41% 2.5 million deaths annually in U.S. 42% Estimated Under-Served Market 17%
Slide 14: Programs Exceeding Cap
14 PROGRAMS EXCEEDING CAP 2002 2005 2003 Number of hospices Percent of hospices 220 2004 150 60 98 2.6% 4.1% 5.8% 7.8%
Slide 15: Medicare Cap Liability
15 MEDICARE CAP LIABILITY 2002 2005 2003 ($ in millions) $166 2004 $112 $28 $65
Slide 16: Growth in Hospice Programs
16 GROWTH IN HOSPICE PROGRAMS (Number of hospices) 2005 2,809 2004 2,580 2002 2,286 2003 2,401 2006 3,071
Slide 17: New Medicare-Participating Hospices Exceed Voluntary Closures
17 NUMBER OF NEW MEDICARE-PARTICIPATING HOSPICES EXCEEDS VOLUNTARY CLOSURES 2000 300 250 200 150 100 50 0 New entrants Voluntary closures 2001 2002 2003 2004 2005 2006
Slide 18: Management of Medicare Cap: Strategic Focus
18 Management of Medicare cap STRATEGIC FOCUS
Slide 19: Management of Medicare Cap
19 MANAGEMENT OF MEDICARE CAP Consolidation of programs Inpatient unit development Market for a more balanced patient mix Closed programs
Slide 20: Odyssey's Medicare Cap Expense Trend
20 ODYSSEY’S MEDICARE CAP EXPENSE TREND * 2003 - 2006 not adjusted for discontinued operations Q108 Q107 2003 0.5% 2004 0.6% 2005 3.0% 2006 3.8% 2007 1.2% 0.8% 1.2%
Slide 21: Strengthen Senior Management Team
21 Management of Medicare cap Strengthen senior management team STRATEGIC FOCUS
Slide 22: Strengthen Senior Management Team
22 Added in the past two years . . . President and Chief Executive Officer, Robert Lefton Senior Vice President and Chief Financial Officer, Dirk Allison Senior Vice President and Chief Operating Officer, Craig Goguen STRENGTHEN SENIOR MANAGEMENT TEAM
Slide 23: Focus on Existing Footprint
23 Management of Medicare cap Strengthen senior management team Focus on existing footprint STRATEGIC FOCUS
Slide 24: Growth Strategy
24 GROWTH STRATEGY Growth Growth Same store growth De Novos Acquisitions
Slide 25: Rationalize Existing Portfolio
25 Management of Medicare cap Strengthen senior management team Focus on existing footprint Rationalize existing portfolio STRATEGIC FOCUS
Slide 26: Rationalize Existing Portfolio
26 RATIONALIZE EXISTING PORTFOLIO Closed 18 programs Reasons for closure: Competitive position Market size Medicare cap
Slide 27: Implement More Sophisticated Sales and Marketing Strategy
27 Management of Medicare cap Strengthen senior management team Focus on existing footprint Rationalize existing portfolio Implement more sophisticated sales and marketing strategy STRATEGIC FOCUS
Slide 28: Implement More Sophisticated Sales and Marketing Strategy
28 IMPLEMENT MORE SOPHISTICATED SALES AND MARKETING STRATEGY Hired Regional Sales Manager Revamped CER bonus plan Developed detailed marketing plan for major markets
Slide 29: Inpatient Program Development
29 Management of Medicare cap Strengthen senior management team Focus on existing footprint Rationalize existing portfolio Implement more sophisticated sales and marketing strategy Inpatient program development STRATEGIC FOCUS
Slide 30: Inpatient Program Development
30 INPATIENT PROGRAM DEVELOPMENT Two strategies Medicare cap – acute, short stay patients Grow market share – create differentiation One to two new projects per year Opening losses approximating $700,000
Slide 31: Investment in Information Systems
31 STRATEGIC FOCUS Management of Medicare cap Strengthen senior management team Focus on existing footprint Rationalize existing portfolio Implement more sophisticated sales and marketing strategy Inpatient program development Investment in information systems
Slide 32: Investment in Information Systems
32 INVESTMENT IN INFORMATION SYSTEMS Implemented new billing system In process of implementing new sales and marketing system
Slide 33: VistaCare Transaction
33 VISTACARE TRANSACTION Expands leadership position Compatible organizations Strengthens existing markets Management experience with acquisitions and integration Reducing corporate overhead and closing corporate offices drives profitability Operational and Medicare cap improvements not required for
Slide 34: Combined Company
34 COMBINED COMPANY $650 million in revenues 100 locations ADC of more than 12,000 29 states
Slide 35: Financial Summary
a HealthCare SSEY FINANCIAL SUMMARY a —,,
Slide 36: Net Revenue Growth from Continuing Operations
36 Q108 Q107 NET REVENUE GROWTH FROM CONTINUING OPERATIONS CAGR = 12.3% 2003 $251.3 2004 $312.9 2005 $348.6 2006 $379.3 2007 $398.9 $123.3 $96.6 ($ in millions)
Slide 37: Admissions from Continuing Operations
37 ADMISSIONS FROM CONTINUING OPERATIONS Q108 Q107 2003 24,900 2004 28,620 2005 30,972 2006 32,001 2007 32,294 10,810 8,489
Slide 38: Average Length of Stay from Continuing Operations
38 AVERAGE LENGTH OF STAY FROM CONTINUING OPERATIONS (Days) Q108 Q107 2003 72 2004 77 2005 80 2006 83 2007 85 82 82
Slide 39: Average Daily Census from Continuing Operations
39 AVERAGE DAILY CENSUS FROM CONTINUING OPERATIONS Q108 Q107 2003 5,449 2004 6,691 2005 7,145 2006 7,528 2007 7,652 12,170 7,585
Slide 40: Odyssey's Medicare Cap Expense
40 ODYSSEY’S MEDICARE CAP EXPENSE ($ in thousands) Q108 Q107 2003 $1,322 2004 $2,089 2005 $11,968 2006 $16,464 2007 $5,039 $1,035 $1,108 * 2003 - 2006 not adjusted for discontinued operations
Slide 41: Income from Continuing Operations
41 INCOME FROM CONTINUING OPERATIONS * Excludes charge for settlement with Department of Justice of $9.6 million, net of tax. A reconciliation of GAAP to non-GAAP financial measures are available on the Investor Relations page of Odyssey’s website at www.odsyhealth.com. ($ in millions) Q108 Q107 200
Slide 42: Net Cash from Continuing Operations
42 NET CASH FROM CONTINUING OPERATIONS * Exclusive of $13 million for Department of Justice payment ($ in millions) Q108 Q107 2003 $27.6 2004 $47.1 2005 $45.2* 2006 $47.7* 2007 $16.9 $10.4 $1.5
Slide 43: Value Proposition
43 Growing recognition of end of life services Aging population assures increased demand VistaCare acquisition adds scale and expands leadership position Strong balance sheet Compelling operating/growth strategy Experienced management team with strong integration and operating background VALUE PROPO
Slide 44: To Serve All People During the End of Life's Journey
44 “To Serve All People During the End of Life’s Journey”
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