Community Health Systems, Inc. · NYSE:CYH
Community Health Systems — Q4 2013 Earnings Presentation
35 slides from Community Health Systems's earnings presentation, February 2014
Slide 1: Community Health Systems, Inc. Fourth Quarter
9CH S Community 00 0 Health Systems, Inc. Fourth Quarter
Slide 2: Forward-Looking Statements
Forward‐Looking Statements This presentation contains forward‐looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995 that involve risk and uncertainties. All statements in this presentation
Slide 3: CHS – An Experienced Operator
CHS – An Experienced Operator YE 2013 YE 2012 Revenue (1) $12,998 $12,943 EBITDA (1) ** $1,841 $1,931 EPS from Continuing Operations (1) $2.40 $3.55 • One of the largest operators of non‐urban and mid‐size hospitals – 206 hospitals in 29 states • Ranked #198 ‐ Fortune 500 • Solid, experienced and tr
Slide 4: Consistent Results
Consistent Results ($MM) 15,000 Revenues ($MM) EBITDA ** $1,978 $13,029 $12,998 2,000 $1,837 $1,841 12,500 $12,108 $11,906 $1,761 1,750 $1,671 $11,092 $10,840 $1,525 1,500 10,000 1,250 $7,127 7,500 1,000 $827 5,000 750 $4,180 $3,738 $573 $572 $3,204 $494 $2,677 500 $429 $2,039 $349 2,500 $291 $1,531
Slide 5: Largest, Geographically Diversified Portfolio
Largest, Geographically Diversified Portfolio Over 200 hospitals across 29 states Expands and strengthens integrated state networks 70% of uninsured qualify for Health Care reform subsidy FL 2 2 1 1 PA 17 3 1 1 4 9 1 9 3 3 1 3 2 2 3 1 1 3 11 9 4 3 7 TX 6 8 2 6 2 2 10 9 2 2 3 17 1 1 3 2 TN 23 T
Slide 6: Combined Network Development
Combined Network Development Lutheran Health Network • 8 hospitals Rockwood Health System • 1,416 physicians • 2 hospitals • 567 physicians Valley Care Health of Ohio • 3 hospitals • 502 physicians Commonwealth Health • 8 hospitals • 894 physicians Tennova Healthcare • 6 hospitals Carolinas Health N
Slide 7: Compelling Industry Dynamics
Compelling Industry Dynamics Health Spending Expected to Grow 5.7% Annually Through 2021; Hospitals Represent Largest Portion Percentage of National Health Expenditures U.S. Population 65+ $5,000 $4,572 $4,500 $4,045 $4,000 13.4% 6.6% CAGR $3,538 $3,500 12.0% $3,025 11.3% $3,000 $2,710 $2,473 $2,500
Slide 8: Well Positioned for Health Care Reform
Well Positioned for Health Care Reform Build Services Deliver Care and Clinical Commit to More Infrastructure Integration & Quality Efficiently for Value‐ Collaboration Based Care 24 million Newly Insured* Patients by 2016* * Congressional Budget Office: May & July 2013 7
Slide 9: CHS Commitment to Quality
CHS Commitment to Quality Since inpatient core measure implementation, we have had 20 straight quarters of consistent improvement. Significant reductions in readmissions and hospital acquired conditions Readmission Rates Hospital Acquired Conditions AMI down 23.0% Selected Measures: 19.8% HF dow
Slide 10: Transforming Our Culture
Transforming Our Culture Community Cares • Enhancing the patient experience • Building employee and physician satisfaction Patient Safety & High Reliability Initiative launched in 2007 • Creating inherently safe hospitals to eliminate preventable harm 9
Slide 11: 95,000 Employees
CHS Legacy Employee Satisfaction 95,000 Employees 89% I am proud to be a part of the organization. National Employee I am satisfied with the courtesy and respect Satisfaction Survey: 89% I receive from others in my department. 85% Overall Satisfaction I believe the leadership in my hospital is 91% c
Slide 12: Standardized and Centralized
Standardized and Centralized Shared Resources for Performance Improvement • Acquisitions • Home Health • Ancillary Services • Human Resources/Recruiting (Pharmacy, Laboratory, Imaging) • Information Systems • Billing and Collections • Legal Services • Compliance • Managed Care • ER Management • Phys
Slide 13: Emphasis on Emergency Medicine – CHS Legacy
Emphasis on Emergency Medicine – CHS Legacy Patient • Approximately 60% of our patients begin their Encounters hospital experience in the ED • 47 trauma centers, 51 accredited chest pain Level of Service centers, 18 accredited stroke centers Renovations & • 62 ER projects completed to date Expansion
Slide 14: Physician Recruitment – CHS Legacy
Physician Recruitment – CHS Legacy 2,500 2,250 2,125 2,141 • Consistent Focus over Last 10 Years 2,000 1,852 1,864 • 32 Person Department with over 130 Years of Experience 1,750 1,679 • Strong Internal Recruiting 1,472 1,500 • Dedicated Physician Support 1,250 • Ongoing Monitoring of Practice Develo
Slide 15: Physicians: Partners in Care
Physicians: Partners in Care 27,000 physicians serving on affiliated medical staffs 3,500 employed physicians 10.6 million patient encounters at affiliated clinics in 2012 Approximately 1,575 employed physician practice locations • Physician Leadership Groups in affiliated hospitals Physician • Annu
Slide 16: CHS Legacy Physician Satisfaction
CHS Legacy Physician Satisfaction Would you recommend this hospital to your family or friends if they needed hospital care? 35% Definitely Would 56% Probably Would 91% Would Probably Would Not Definitely Would Not Recommend 7% 2% Overall, how satisfied are you with this hospital? 36% Very Satisfied
Slide 17: Growth through Acquisitions
Growth through Acquisitions 1985‐2006 2007 2008‐2013 2014 2014‐Future Significant 50+ Hospitals Select Growth Added in Triad Divestitures 71 Hospitals Focused on through Hospitals added in Acquisitions Strategic Health Network Acquisitions Development, IPO on the Acquisitions Management NYSE in 2000
Slide 18: Acquisition Performance for 2013 – CHS Legacy
Acquisition Performance for 2013 – CHS Legacy Net Revenue* EBITDA ** 15.7% $11,927 2012 ‐ 4 hospitals $10,308 2010 ‐ 4 hospitals 2009 ‐ 3 hospitals 2008 ‐ 2 hospital $1,718 (a) 2007 ‐ 2 hospitals & Triad 91.3% 2006 ‐ 7 hospitals 2005 ‐ 4 hospitals 2004 ‐ 2 hospitals 2003 ‐ 10 hospitals $898 2002 ‐ 6
Slide 19: HMA - Compelling Strategic Acquisition
HMA ‐ Compelling Strategic Acquisition Unique opportunity to develop a well‐developed hospital system • 71 facilities spread across attractive, non‐urban and suburban markets • Complementary geographic fit with hospitals located in existing CHS states • Expands and strengthens CHS’ hospital and ph
Slide 20: Key Acquisition Highlights
Key Acquisition Highlights Largest hospital footprint • 206 facilities across 29 states and geographically • Top 3 states contribute 32% of revenue diversified • Economies of scale and operating efficiencies • Strong portfolio of hospitals Emphasis on quality ̶ 93 hospitals (~45%) named Top Performe
Slide 21: Synergy Comparison
Synergy Comparison Triad HMA 2013 # of hospitals 2011 54 71 Total LTM revenue(1) $5.1 billion $5.8 billion Total annual $275 million Approx. $250 synergies realized million targeted (1) Represents revenue net of bad debt. 20
Slide 22: Combined Company
Combined Company HMA ($ in millions) CHS Unaudited Combined Revenues $12,998 $5,828 $18,826 Hospitals 135 71 206 States 29 15 29 Surgery Centers 35 17 52 Home Health 80 14 94 Agencies Employed Physicians 2,500 1,000 3,500 Licensed Beds 20,175 11,065 31,245 Note: Revenues based on year ended 12/31/20
Slide 23: Revenue and EBITDA
Revenue and EBITDA Revenue EBITDA ($ in millions) 2008‐2013 CAGR ($ in millions) 2008‐2013 CAGR CHS 6.0% CHS 3.8% HMA 8.5% HMA 4.1% CHS Legacy CHS Legacy HMA (Unaudited) HMA (Unaudited) (1) (2) (1) $12,998 $12,924 $1,837 $1,880 $1,841 $11,906 $1,761 $11,092 $1,671 $10,647 $1,525 $9,700 $934 $5,866 $
Slide 24: Cash Flow and Capital Expenditures
Cash Flow and Capital Expenditures Cash Flow From Operations Capital Expenditures ($ in millions) ($ in millions) ($ in millions) 2014 Guidance 2014 Guidance $1,600 to $1,800 million $975 to $1,150 million Includes $150 MM for replacement hospitals CHS Legacy HMA (Unaudited) $1,262 $1,280 CHS Legacy
Slide 25: Year-End Income Summary
Year‐End Income Summary Year‐Ended (Amounts in 000’s except margin and EPS) 12‐31‐2013 12‐31‐2012 Net Revenue $ 12,997,693 $ 13,028,985 EBITDA ** $ 1,725,079 $ 1,977,715 EBITDA Margin ** 13.3% 15.2% Same Store EBITDA ** $ 1,855,937 $ 1,950,200 Same Store EBITDA Margin ** 14.4% 15.1% Income from Cont
Slide 26: YE 2013 Financial Results – Excluding Adjustments
YE 2013 Financial Results – Excluding Adjustments YE 2013 YE 2012 Net Net Operating Adjusted EPS from Operating Adjusted EPS from Revenues EBITDA ** Cont. Ops. Revenues EBITDA ** Cont. Ops. As Reported $ 12,977,693 $ 1,725,079 $ 1.51 $ 13,028,985 $ 1,977,715 $ 2.96 Loss on Early Extinguishment of De
Slide 27: Fourth Quarter EBITDA Rollforward
Fourth Quarter EBITDA Rollforward ($ in millions) CYH HMA Combined Reported Adjusted EBITDA $ 454.1 $ 237.4 $ 691.5 Adjust: HiTech (55.6) (72.9) (128.5) Subtotal $ 398.5 $ 164.5 $ 563.0 Adjustments One month of HMA (60.0) Four divested hospitals (7.3) Combined Adjusted EBITDA $ 495.7 Note: The above
Slide 28: Consolidated Net Revenue by Payor
Consolidated Net Revenue by Payor Medicare Self Pay Medicare Self Pay 13.7% 26.0% 13.0% 24.9% Medicaid Medicaid 9.7% 9.8% Managed Care & Other Managed Care & Other 51.2% 51.7% Year Ended Year Ended December 31, 2013 December 31, 2012 Self Pay Medicare Self Pay Medicare 12.5% 24.5% 13.5% 26.2% Medica
Slide 29: Balance Sheet Data
Balance Sheet Data ($ in thousands) 12‐31‐2011 12‐31‐2012 12‐31‐2013 Working Capital $ 934,950 $ 1,275,922 $ 1,290,480 Total Assets $ 15,208,840 $ 16,606,335 $ 17,117,295 Long Term Debt $ 8,782,798 $ 9,451,394 $ 9,286,495 Stockholders’ Equity $ 2,397,096 $ 2,731,207 $ 3,067,827 Note: As of December
Slide 30: Pro Forma Debt Maturity Profile
Pro Forma Debt Maturity Profile $6,000 $5,601 $5,000 $4,000 $3,000 $3,000 $3,000 $2,000 $1,676 $1,600 $1,200 $1,000 $500 2014 2015 2016 2017 2018 2019 2020 2021 2022 Receivables facility TLE due 2017 5.125% Senior Secured Notes TLA due 2019 8.000% Senior Notes 7.125% Senior Notes TLD due 2021 5.125%
Slide 31: Consolidated Financial Information
Consolidated Financial Information QE YE 12‐31‐13 12‐31‐13 A/R Days 67 67 Bad Debt as a % of Net Revenue 13.7% 13.8% Allowance for Doubtful Accounts (Allowances for doubtful accounts and self pay related $ 2,448 MM contractual allowances are approximately 84% of hospital segment self pay receivables
Slide 32: Strategically Positioned for Health Care Reform
Strategically Positioned for Health Care Reform CHS and HMA are well positioned to participate as a network provider on various health insurance exchanges ̶ Hospitals located in 9 of top 10 highest uninsured states and 26 of top 30 highest uninsured states CHS HMA 134 of 135 hospitals participat
Slide 33: Focused Strategy Delivers Results
Focused Strategy Delivers Results Experienced Growth Management Attractive Quality Markets Improvement Geographic Acquisition Diversity Demonstrate Quality Opportunities Build Infrastructure Increase Productivity Consistent Proven Financial Formula Performance 32
Slide 34: Unaudited Supplemental Information
Unaudited Supplemental Information EBITDA consists of net income attributable to Community Health Systems, Inc. before interest, income taxes, and depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude discontinued operations, gain/loss from early extinguishment of debt and net
Slide 35: Unaudited Supplemental Information Continued
Unaudited Supplemental Information Continued The following table reconciles ADJUSTED EBITDA, as defined, to net cash provided by operating activities as derived directly from the condensed consolidated financial statements (in thousands): Three Months Ended Year Ended December 31, December 31, 2013
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