Quorum Health — Q1 2018 Earnings Presentation
23 slides from Quorum Health's earnings presentation, May 17, 2018
Slide 1: Earnings Presentation First Quarter 2018
Earnings Presentation First Quarter 2018 May 2018 Investor Presentation
Slide 2: Forward Looking Statements & Non-GAAP Financial Measures
Forward Looking Statements & Non-GAAP Financial Measures Except as otherwise indicated or unless the context otherwise requires, all references in this presentation to “we,” “our,” “us,” “QHC,” the “Company” or “Quorum Health” refer to Quorum Health Corporation and its subsidiaries. Forward-Looking
Slide 3: Who We Are
Who We Are QHR Affiliates Quorum Health Affiliated Hospitals 3
Slide 4: Key Initiatives
Key Initiatives Divesting Hospitals to Refine our Portfolio and Reduce our Debt Targeting proceeds of $165—$215 million by the end of 2019 to reduce our debt and refinance. Improve our Margins Costs growth at certain clinics and hospital service lines are outpacing volume growth. We are implementing
Slide 5: Divestiture Program
Divestiture Program • 2 hospitals divested Q4 2016 • 1 hospital divested Q1 2017 • 1 hospital divested Q2 2017 Completed • 2 hospitals divested Q3 2017 Targeting $165 to • 1 hospital divested Q4 2017 $215 million of • 1 hospital closed Q1 2018 additional proceeds • 2 hospitals divested in Q1 2018 by
Slide 6: Net Patient Revenues
Net Patient Revenues ($ in millions) Same-Facility, excluding Consolidated Same-Facility Potential Divestitures $444 $313 $465 $421 $293 Q1 2017 Q1 2018 Q1 2017 Q1 2017 Q1 2018 Q1 2018 2018 from Q1 2017 7.9 million of HQAF llion from the Medicare Low Volume adjustment associated with Q4 2017. Net Pa
Slide 7: Hospital Volumes
Hospital Volumes Trailing 4 Quarter Average Q1 YoY % Change % Chg Same-Facility, Same-Facility, Same- ex. Potential Same- ex. Potential Facility Divestitures Facility Divestitures Admissions 0.4% 2.2% 0.6% 1.9% Adjusted Admissions 1.1% 2.9% 1.7% 3.2% ER Visits 2.3% 3.1% 0.1% 0.4% Total Surgeries 0.1
Slide 8: Payor Mix (Same-facility)
Payor Mix (Same-facility) Net Operating Revenues Non-patient 5.5% Medicaid Non-patient Self-pay 18.7% 4.7% Medicaid 9.2% Self-pay 17.4% 10.5% Medicare 29.3% Managed Care & Commercial 37.3% Adjusted for Q1 2017 Potential Divestitures Medicare 29.3% Managed Non-patient Care & 6.4% Medicaid 16.6% Comme
Slide 9: Margin Improvement Initiatives
Margin Improvement Initiatives Managing costs as we invest in growth Expect $20 to $25 million benefit during 2018 Rate Increases in select markets Managing FTEs New service lines in Manage supply select markets spending Discontinuing Underperforming Service Lines Note: This initiative is included i
Slide 10: Operating Expenses (Same-Facility)
Operating Expenses (Same-Facility) ($ in millions) Salaries and Benefits Supplies Other Operating Expenses $141 $234 $55 $221 $51 50.3% $134 30.2% 11.9% % % % 49.6% Net 11.5% Net Net Revenues Revenues Revenues 30.1% Q1 2017 Q1 2018 Q1 2017 Q1 2017 Q1 2018 Q1 2018 Q118 vs. Q117 Q118 vs. Q117 Q118 vs.
Slide 11: Adjusted EBITDA
Adjusted EBITDA ($ in millions) Adjusted EBITDA, Adjusted EBITDA, Adjusted EBITDA Adjusted for Divestitures Adjusted for Potential Divestitures $26 $31 $30 $28 $27 $18 6.9% % 5.8% Margin 9.5% 8.4% % Margin Q1 2017 Q1 2017 Q1 2018 Q1 2018 ed EBITDA, Adjusted EBITDA, Adjusted for Divestitures and Adju
Slide 12: Controlling our Revenue Cycle: TSA Termination Update
Controlling our Revenue Cycle: TSA Termination Update Arbitration regarding disputed payments of ~$10.6mm withheld to CHS remains scheduled for June 18th – 29th, 2018 with a decision expected by early August 2018. Additionally, we are seeking damages suffered as a result of the Transition Services A
Slide 13: Accounts Receivable Days Sales Outstanding (DSO) Analysis
Accounts Receivable Days Sales Outstanding (DSO) Analysis Days Revenue Outstanding Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Hospital, Clinic & Other (excluding 51 51 57 54 53 Illinois Medicaid > 45 Days) Hospital Illinois Medicaid > 45 Days 4 4 7 7 6 Subtotal 55 55 64 61 59 Accounts Receivable at CHS
Slide 14: Cash Flow and Capital
Cash Flow and Capital ($ in millions) Cash Flow from Operations Capital Expenditures Net Working Capital $25 $338 $19 $231 $15 ($3) Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 of $2 milli est payments, Decrease in 2018 capital spending at our Reduction due to cash collections related es and ap y
Slide 15: California Provider Tax Program
California Provider Tax Program California Hospital Quality Assurance Fee Program QHC operates two hospitals in California – Watsonville and Barstow (in millions) Q1 2018 Q2 2018 Q3 2018 Q4 2018 YE 2018 Actual Gross Program Revenues $ 7.9 $ 7.9 $ 7.9 $ 7.9 $ 31.5 Provider Taxes (2.1) (2.1) (2.1) (2.
Slide 16: Refining Our Portfolio – Illustrative EBITDA Bridge
Refining Our Portfolio – Illustrative EBITDA Bridge 2018 Adjusted EBITDA, Adjusted for Divestitures Guidance of $145—$165 million • Divest 9 Hospitals (7 Currently under ($2)-$4 LOI) MM • TSA Migration (reduced for divested $25—$35 hospitals) MM • Capital Investment: Springfield, OR $8—$12 Tower MM
Slide 17: Reducing our Debt – Illustrative leverage profile
Reducing our Debt – Illustrative leverage profile Based on Annual EBITDA Target debt of potential*, this ~5.0x implies – ~6.0x total $1,035-$1,085M leverage of Sell 9 hospitals(1) for $110-$125M Repay $30M from sale of Clearview Current debt of $1,280M *As shown on slide 15 (1) This includes 7 hospi
Slide 18: Quorum Health
QHC LISTED NYSE QUARUM HEALTH
Slide 19: California – Hospital Quality Assurance Fee
California – Hospital Quality Assurance Fee According to the California Hospital Association, the HQAF program provides funding for supplemental payments to hospitals that serve Medi-Cal and uninsured patients. Revenues generated from fees assessed on certain general and acute care California hospit
Slide 20: California – Hospital Quality Assurance Fee
California – Hospital Quality Assurance Fee CMS issued formal approval of the 2017-19 Hospital Fee Program on December 15, 2017. The approvals include the inpatient and outpatient fee-for-service supplemental payments and the overall tax structure. CHA will work with the Department of Health Care Se
Slide 21: Unaudited Supplemental Information
Unaudited Supplemental Information EBITDA is a non-GAAP financial measure that consists of net income (loss) before interest, income taxes, depreciation and amortization. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back the effect of certain legal, professional and
Slide 22: Unaudited Supplemental Information (Cont'd)
Unaudited Supplemental Information (Cont’d) The following table reconciles Adjusted EBITDA, Adjusted EBITDA, Adjusted for Divestitures and Adjusted EBITDA, Adjusted for Potential Divestitures to net income (loss), the most directly comparable U.S. GAAP financial measure (in thousands): Quarter Quart
Slide 23: Unaudited Supplemental Information (Cont'd)
Unaudited Supplemental Information (Cont’d) The following table reconciles Net patient revenues, same-facility net patient revenues and same-facility net patient revenues, excluding potential divestitures to net operating revenues, the most directly comparable U.S. GAAP financial measure (in thousan