Draft 1 1 February 14, 2006 UBS Global Healthcare Conference.
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Transcript of Draft 1 1 February 14, 2006 UBS Global Healthcare Conference.
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February 14, 2006February 14, 2006
UBS Global Healthcare ConferenceUBS Global Healthcare Conference
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Cautionary Note Regarding Forward-looking StatementsCautionary Note Regarding Forward-looking Statements
HCA’s management will be making some forward-looking statements during today’s presentation. Those forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that may cause those forward looking statements to be materially incorrect.
The presentation may contain certain (non-GAAP) measures – you may refer to the Company’s financial filings on Form 10-K or Form 10-Q for reconciliation. These non-GAAP financial measures should not be considered an alternative to GAAP financial measures.
Certain of those risks and uncertainties are discussed in HCA’s filings with the Securities and Exchange Commission, including the company’s report on Form 10-K and its quarterly reports on form 10-Q, to which you are referred. Management cautions you not to rely on, and makes no promises to update any of the forward looking statements.
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Largest, publicly traded, healthcare provider with Largest, publicly traded, healthcare provider with
• 182 hospitals182 hospitals
• 94 freestanding surgery centers94 freestanding surgery centers
Located in 22 states, London, England and Geneva, SwitzerlandLocated in 22 states, London, England and Geneva, Switzerland
NYSE: HCANYSE: HCA
Sky Ridge Medical CenterSky Ridge Medical Center
Denver, CODenver, COStoneCrest Medical CenterStoneCrest Medical Center
Nashville, TNNashville, TN
Capital Regional Medical CenterCapital Regional Medical Center
Tallahassee, FLTallahassee, FL
Hospital Corporation of AmericaHospital Corporation of America
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HCA 2005 HighlightsHCA 2005 Highlights
Revenues totaled $24.5 billion up 4.3% (same facility 4.8%)Revenues totaled $24.5 billion up 4.3% (same facility 4.8%)
EPS (GAAP basis) up 24% to $3.19 per diluted shareEPS (GAAP basis) up 24% to $3.19 per diluted share
EPS excluding gains on sale of facilities, impairments, foreign EPS excluding gains on sale of facilities, impairments, foreign
tax repatriation and hurricane expenses, increased 15%tax repatriation and hurricane expenses, increased 15%
Cash flow from operations totaled $3.2 billion vs. $3.0 billion in Cash flow from operations totaled $3.2 billion vs. $3.0 billion in
20042004
Repurchased 36.7 million shares of stock ($1.9 billion)Repurchased 36.7 million shares of stock ($1.9 billion)
Increased dividend 13% to $0.17 per quarterIncreased dividend 13% to $0.17 per quarter
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Returns Improved in 2005Returns Improved in 2005
24.3%
11.3%
21.1%
10.8%
22.3%
11.7%
Return Analysis% change from Prior Year
Return on Stockholders’ EquityReturn on Stockholders’ Equity
Return on Invested CapitalReturn on Invested Capital
200320042005
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Revenue trends favorable.Revenue trends favorable.6.6%
7.5%
6.0%6.5%
0%
4%
8%
2000-2002 2003 2004 2005*
Net Revenue / Adjusted Admission% change from Prior Year
Managed CareRevenue/AA
% Change from Prior Year
5.4% 6.3%
MedicareRevenue/AA
% Change from Prior Year
Revenue Per Unit GrowthRevenue Per Unit Growth
Favorable Medicare, Favorable Medicare, Medicaid and managed care Medicaid and managed care revenue yield per adjusted revenue yield per adjusted admission.admission.
MedicaidRevenue/AA
% Change from Prior Year
7.5%
*adjusted for uninsured discount
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Effective expense management Effective expense management
significantly contributed to significantly contributed to
favorable earnings performance.favorable earnings performance.
Cash Operating Expense/Adjusted Admission% Change from Prior Year
Same Facility
6.6% 6.4% 6.2%
4.8%
0%
5%
10%
2001-2002 2003 2004 2005
Expense Management FavorableExpense Management Favorable
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Labor management favorable:Labor management favorable:
• Wages managed to efficient Wages managed to efficient
levels.levels.
Wage Rate% Change from Prior Year
• Productivity improvedProductivity improved 1.2%
0.6%1.1%
-1.0%
0%
1%
2%
2002 2003 2004 2005
Manhours / Adjusted Admission% Change from Prior Year
As Reported
5.3%4.8% 4.6%
4.2%
0%
2%
4%
6%
1999-2002 2003 2004 2005
Solid Labor ManagementSolid Labor Management
• SWB as a % of net SWB as a % of net
revenue favorable.revenue favorable.
Salary, Wages & Benefits
% of Net Revenue
39.2% 39.8% 40.1%39.4%
0%
25%
50%
1999-2002 2003 2004 2005**adjusted for uninsured discount
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3.6%
0.7%
1.1%
1.2%2.1%
2.8%
-0.1%
1.1%
3.1%1.9%
0.9%
3.5%
0.3%2.5% 1.1% 2.5%
1.7%
-0.9%
-0.4%
2.0%3.0%1.5%
2.8% 3.6%
1.8%
3.4%
-0.2%
2.5%
-3%
0%
3%
6%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
3.5%2.0%
3.0%
-0.7%0.3%
-0.3%
1.0%
3.4%
-1.4%
0.9%2.1%2.3%
3.0%
0.6%
-0.4%
0.9%
2.6%
1.8%2.2%0.4%
2.3% 2.5%1.8%
4.2%3.9% 4.3%
0.4%
0.2%
-3%
0%
3%
6%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
1999 2000 2001 2002 2003 2004
+2.7% +2.8% +2.7% +2.5% +0.6% +0.7%
Volume TrendsVolume Trends
+2.5% +2.6% +2.6% +2.6% +0.0% +1.3%
EquivalentAdmissions
Same Facility% Change from PY
EquivalentAdmissions
Same Facility% Change from PY
AdmissionsSame Facility
% Change from PY
AdmissionsSame Facility
% Change from PY
2005
+0.1%
+1.4%
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Admission TrendsAdmission Trends
Same Facility
Admissions growth Admissions growth appears more favorable appears more favorable adjusting for change in adjusting for change in DPUs and one day admits.DPUs and one day admits. 0%
2%
3%
1999-2002 2003 2004 2005
AdmissionsAdjusting for DPU and one day admits
% Change from Prior Year+2.7%
+1.0% +0.8% +1.4%
+0.6%
+0.1%
+0.7% +0.6%
+0.8% +0.3%
One day admits
DPU effectAdmissions
DPU effectAdmissions
0%
2%
3%
1999-2002 2003 2004 2005
+2.6%
+0.8%
+1.4%
+2.0%
+1.4% +1.3%
+0.8%
+0.1%
+0.6%
Adjusted Admissions% change from Prior Year
Adjusted admissions reflect Adjusted admissions reflect continued growth in continued growth in outpatient services and the outpatient services and the observation day effect.observation day effect.
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Physician RecruitmentPhysician Recruitment
Physician Recruitment
Total Number of Physicians RecruitedTotal Number of Physicians Recruited
20042004 20052005
Primary CareSpecialists
701701
55%55%
45%45%384384
53%53%
47%47%
MOB Development
2006E2005
420,000
1,300,000
sq. ft.$62M
sq. ft.$220M
• Currently 22 million square feet of Currently 22 million square feet of medical office space in service.medical office space in service.
• Total occupancy is 79%.Total occupancy is 79%.
• Medical office square footage coming on line.
• 83% increase in recruited physicians in 2005.83% increase in recruited physicians in 2005.• 76% recruited physicians using in-house service.76% recruited physicians using in-house service.
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18.3%20.7%17.7%
17.0%
20.4%21.5%
19.7%18.2%17.5%
17.1%
19.6%
19.3% 19.5%20.8%
20.3% 20.5%
10%
25%
1Q 0
0
2Q 0
0
3Q 0
0
4Q 0
0
1Q 0
1
2Q 0
1
3Q 0
1
4Q 0
1
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
16,145 17,159 16,089 15,780 16,45118,410 17,957 17,944
19,471 20,110 18,947 18,871 20,39422,820
21,548
0
25,000
2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05
4.4% 4.5%
5.7%
3.9%
5.0%
5.4%
4.9%
4.4%3.7%
4.1% 4.1% 4.2%4.7%
4.3%4.8%
4.7%
3%
6%
UninsuredAdmissions
Same Facility% of Total Admissions
20002000 20012001 20022002 20032003 20042004
UninsuredER Visits
Same Facility% of Total ER Visits
N/A
N/A
5.9%vs.
PY1.9%
vs.
PY
7.3%vs.
PY
11.6%vs.
PY
13.7%vs.
PY
15.2%vs.
PY 7.2%vs.
PY
3.7%vs.
PY
UninsuredAdmissions
Same Facility% Chg from Prior Year
2004: +9.7%
20052005
3.3%vs.
PY
5.1%vs.
PY
*2002 Totals based on 2003 Prior Year
15.0%vs.
PY
5.3% 5.5%5.3% 5.5% 5.4% 5.4% OctOct NovNov Dec Dec
+14.7% +14.3% +17.0%+14.7% +14.3% +17.0% Oct Oct NovNov Dec Dec
21.1% 20.6%21.1% 20.6% 20.3%20.3% OctOct NovNov Dec Dec
5.1%Dec YTD
+9.5%Dec YTD
20.4%Dec YTD`
15.3%vs.
PY
Uninsured VolumeUninsured Volume
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HCA Hospitals Located in Growth MarketsHCA Hospitals Located in Growth Markets
Switzerland
U.K.
Percent Growth in Market Population
2000-2005Compared to the
National Average of 4.5%
Percent Growth in Market Population
2000-2005Compared to the
National Average of 4.5%
Las Vegas+22%
Las Vegas+22%
Southern California
+9%
Southern California
+9%
Denver+9%
Denver+9%
Dade+8%
Dade+8%
Nashville+8%
Nashville+8%
Panhandle+10%
Panhandle+10%
Tampa Bay+8%
Tampa Bay+8%
Dallas/Ft. Worth+12%
Dallas/Ft. Worth+12%
Austin+18%
Austin+18%
Richmond+8%
Richmond+8%
Palm Beach+11%
Palm Beach+11%
Houston+10%
Houston+10%
Kansas City+5%
Kansas City+5%
182 Hospitals
94 Surgery Centers
Generally 25%-40%
Market Share
40% of facilities in
Texas & Florida
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20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
95
100
105
110
115
120
125
Acu
te C
are
Uti
lizat
ion
Ind
ex(2
003=
100)
Baby Boomer Impact Accelerates
1.58% CAGR 2003-2012
1.58% CAGR 2003-2012
121
119
117
115
113
112
110
108
106
105
103
102100
9897
96
1.7%1.6%
1.6%1.6%
1.5%1.6%
1.6%1.6%
1.6%1.6%
1.6%1.5%
1.6%1.5%
1.4%
1.56%3-Year CAGR
1.59%3-Year CAGR
1.58%3-Year CAGR
1.62%3-Year CAGR
Socio-Demographics-Age WaveSocio-Demographics-Age WaveDriving Healthcare UtilizationDriving Healthcare Utilization
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HCA Capital ExpendituresHCA Capital Expenditures
$0.0
$0.5
$1.0
$1.5
$2.0
2003 2004 2005 2006P
Facility ExpansionProjects
New andReplacement Facilities
IT&S and Patient Safety
RoutineCapital
Billions 2003
$1.842004
$1.522005
$1.62006P
$1.9
Dollars in BillionsDollars in BillionsCapital Commitments:
Houston, TX $517 millionHouston, TX $517 million
Pearland, TX new hospital (2007)
Denver, CO $250 millionDenver, CO $250 million
new children’s hospital/ expansion of 3 hospitals
San Antonio, TX $165 millionSan Antonio, TX $165 million
new hospital with JV partner (2007)
Atlanta, GA $130 millionAtlanta, GA $130 million
Emory John’s Creek, new hospital (2007)
Salt Lake City, UT $85 millionSalt Lake City, UT $85 million
new hospital (2007/ 08)
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$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
2002 2003 2004 2005 2006 2007
Capital Placed in Service by YearCapital Placed in Service by Year
(Do
llar
s in
Mil
lio
ns)
2005 projects typically 2005 projects typically approved 24-30 months agoapproved 24-30 months ago
In Service
Design & Permits
Construction
9 mo.9 mo. 18 mo.18 mo.
ApprovedAverage Timeframe
Western $249 $499 $373 $466 $641 $791
Eastern $427 $675 $450 $179 $500 $242
Total HCA $676 $1,174 $823 $645 $1,141 $1,033
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Two new ASCs; one expansion
Three new imaging centers
Two new oncology centers
Three Hospital-based imaging expansions
Seven Hospital-based surgery expansions
13 ICU/bed expansions
Three major surgery expansions
Eight ED expansions
Seven Women’s Services expansions
Interior/Exterior renovations, parking garages, etc.
2005 Major Capital Projects Coming On Line2005 Major Capital Projects Coming On Line
$95M (15%)
Infrastructure
Outpatient
Inpatient
$150M (23%)
$400M (62%)
Total $645M
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Eight new ASCs; two expansions; one replacement
15 new imaging centers
One new oncology center
Three Hospital-based imaging expansions
Six Hospital-based surgery expansionsEight medical office buildings (on balance sheet)
17 ICU/bed expansions
Six major surgery expansions
11 ED expansions
Six Women’s Services expansions
Interior/Exterior renovations, parking garages, etc.
2006 Major Capital Projects Coming On Line2006 Major Capital Projects Coming On Line
$90M (8%)Infrastructure
Outpatient
Inpatient
$290M (26%)
$630M (55%)
Total $1.14B
Emory Johns Creek (118 beds and 135,000 sq. ft. MOB)
$130M (11%)
Replacement Facility
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2006 Outpatient Under Development2006 Outpatient Under Development
Ambulatory Surgery Centers
Imaging Centers
Oncology Centers
Cath Lab
Freestanding ER
Total
# ofCenters Amount
11 $65
15 73
1 4
4 13
3 12
34 $167
(Dollars in Millions)(Dollars in Millions)
Excludes Hospital-based DevelopmentExcludes Hospital-based Development
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Transactions totaling $130 million completed20–30 imaging center and 8-10 surgery center transactions expected to be
completed over the next 12 months
Sarah Cannon Research Institute
(Nashville)
Sarah Cannon Research Institute
(Nashville)
Austin Radiology Assoc.
2 imaging centers
Austin Radiology Assoc.
2 imaging centers
Diversified Radiology (Denver)
4 imaging centers/fifth under construction
Diversified Radiology (Denver)
4 imaging centers/fifth under construction
Thousand OaksDiagnostic Imaging
Thousand OaksDiagnostic Imaging
Millcreek Imaging Center
Salt Lake City, UT
Millcreek Imaging Center
Salt Lake City, UT
HCA Surgery Centers
LAD Imaging Centers(Orange City, Deltona)
LAD Imaging Centers(Orange City, Deltona)
Total I Management, LLC
(Tampa Bay Area)5 imaging centers
Total I Management, LLC
(Tampa Bay Area)5 imaging centers
Outpatient Strategy ProgressingOutpatient Strategy Progressing
First Health (Jacksonville)
First Health (Jacksonville)
MDI 7 Centers
MDI 7 Centers
Ultra Open MRI (Tampa) 6 centers
Ultra Open MRI (Tampa) 6 centers
Hope Cancer Centers(Tallahassee) 3 centers
Hope Cancer Centers(Tallahassee) 3 centers
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$2,648$2,292
$2,954$3,159
$0
$3,500
2002 2003* 2004 2005
Net Cash Provided by Operating ActivitiesNet Cash Provided by Operating ActivitiesDollars in MillionsDollars in Millions
HCA’s Cash Flow Remains StrongHCA’s Cash Flow Remains Strong
6.9%6.9%
* Reduced due to government settlement and investigation related costs* Reduced due to government settlement and investigation related costs
Uses of CashUses of Cash
(1) Capital Reinvestment
$1.6B in 2005 in existing markets
and $1.9B in 2006
(2) Share Repurchase Program
$12B in 8 years
36.7 million shares purchased in 2005
11.1 million shares purchased in 2006 under $1B open-market authorization
(3) Dividend Policy
Approx. 20 to 25 percent payout
(4) Acquisitions – opportunistic
$1B Health Midwest - April 2003
Austin, TX and Nashville, TN - pending acquisitions
(5) Debt Repayment
Debt/ cap – 64.8% at 12/31/05
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