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| 8-K - FORM 8-K - UNITED SURGICAL PARTNERS INTERNATIONAL INC | d783757d8k.htm |
 August 2014
Exhibit 99.1 |
 This
presentation contains forward-looking statements, including those regarding United Surgical
Partners International, Inc. and the services it provides. Investors are cautioned not
to place an undue reliance on these forward-looking statements, which will speak
only as of the date of this presentation. United Surgical Partners International, Inc.
undertakes no obligation to publicly revise these forward-looking statements.
Non-GAAP Measurement
We
use
the
non-GAAP
financial
measurement
term
“EBITDA.”
EBITDA
is
calculated
as
operating
income plus net gain (loss) on deconsolidations, disposals, impairments and depreciation and
amortization. USPI uses EBITDA and EBITDA less noncontrolling interests as
analytical indicators for
purposes
of
allocating
resources
and
assessing
performance.
EBITDA
is
commonly
used
as
an
analytical indicator within the health care industry and also serves as a measure of leverage
capacity and debt service ability. EBITDA should not be considered as a measure of
financial performance under generally accepted accounting principles, and the items
excluded from EBITDA could be significant components in understanding and assessing
financial performance. Because EBITDA is not a measurement determined in accordance with
generally accepted accounting principles and is thus susceptible to varying calculation
methods, EBITDA as presented by USPI may not be comparable to similarly titled measures
of other companies. Safe Harbor & Non-GAAP
Safe Harbor Statement
2 |
 •
Industry
leader
of
health
system
and
physician
partnerships
in
short
stay
facilities
with
both
local
market
strength
and
a
national
presence
(219
facilities
and
~1M
surgeries in 2014)
•
Fifteen
year
history
of
establishing
strategic
partnerships
with
leading
health
systems
which yields additional growth opportunities
•
History
of
strategic
investments
in
infrastructure
and
R&D,
that
has
positioned
the
company well to adapt to environmental changes and opportunities
•
Attractive high quality and high value solution to those paying for health care
(commercial insurance, government, employers, patients)
•
Attractive
experience
and
satisfaction
rates
for
those
accessing
the
system
(high
quality
and
high
satisfaction
rates
for
patients;
efficient,
state-of-the-art
facilities
for
physicians)
•
Attractive
business
model
with
low
risk
cash
flows,
reliable
payors,
high
margins
and
low
capital
intensity.
150+
facilities
in
joint
venture
with
~50
health
system
partners
and approximately $2.4B in systemwide revenues
•
Strong and supportive equity sponsor in Welsh, Carson, Anderson & Stowe
•
Adjusted EBITDA
CAGR of 8% from 2006 to 2013
•
Cumulative Free Cash Flow of $400 million from 2009 to 2013
•
Majority of USPI’s senior management has been with the Company over 10 years
Trusted
Strategic
Partner
Market
Leader
Surgical
Solutions
Financial
Strength
Overview
Consistent
Financial
Performance
Proven
Management
Team
USPI is an experienced and trusted partner in some of the nations most successful surgical
networks, well positioned for current and future environments.
3 |
 Growing
complex cases: Total Joints
Spine
True results (bariatric surgery)
9%
Other
Gynecology
General
GI
6%
Ophthalmology
13%
7%
6%
ENT
2%
Cosmetic
43%
Orthopedic
10%
Pain management
4%
2013 Payor Mix
2%
Self-pay
Government
19%
1%
Private insurance
Other
78%
2013 Revenue Mix
Leading Operator of Hospital and
Outpatient Surgical Facilities
4
Low risk cash flows from high margin
specialties and reliable payors
High margin, elective procedures
•
53% of revenue mix from
orthopedic and pain management
Diversification of specialties insulates
USPI from negative utilization and
specialty pricing changes
78% private insurance
•
Insurance companies favor low cost
providers
•
Modest exposure to government
reimbursement fluctuations
Reliable payors and operating
discipline yields bad debt expense of
~2% of revenues and receivable days
outstanding is under 35 |
 Quality
Industry-leading electronic tracking of quality data
5
Patient Experience
We use Press Ganey
to
benchmark our
facilities, track progress, and ensure the
highest level of service to our patients
Processes of Care
In addition to the core measures required
by CMS, we also track additional safety
measures, conduct culture of safety surveys
annually, and deploy initiatives to focus on
critical processes
Efficiency of Care
Providing efficient care ensures that we can price
our services competitively, but more importantly,
ensures that our physicians have the utmost
confidence in us and our patients receive timely
services and can return to home and work quickly
and safely.
Outcomes of Care
We are committed to ensuring our patients have
excellent clinical outcomes, and we measure
readmissions, adverse events, and several
procedures-specific outcomes.
Quality |
 ASCs have
been widely successful and are a significant presence in the U.S. healthcare delivery
system Advantages in patient safety and physician efficiency are meaningful
Significant savings to patients, government and commercial payors
–
Typically a savings to commercial insurers
–
Medicare savings >40%
–
Medicare beneficiary savings >50%
Able to reduce overall healthcare costs and manage need for surgical
services in an integrated care environment
Industry poised for consolidation
–
Top ten companies own less than 20%
–
Growth of new facilities has slowed in recent years
U.S. Industry Overview
6 |
 Further
consolidation likely within the industry and USPI is well-positioned to capitalize
There are over 375 surgery center chains that own 2 or more ASCs.
Top ten companies still own less than 20%
Some ASCs and ASC companies choosing to sell in face of current headwinds
From 2000 –
2012, the percentage of ASCs owned by a multi-facility chain increased from
22% to 40%
Source: CMS 2014 report
2000
3,172
2,468
(78%)
2,136
(36%)
3,740
(64%)
2004
3,957
2,973
(75%)
6,758
2012
2,717
(40%)
4,041
(60%)
2008
5,876
Independent
Multi-facility
USPI facilities
Fragmented Market
7
704
(22%)
984
(25%)
49
87
213
161 |
 USPI’s
portfolio includes 204 ASCs and 15 surgical hospitals in 26 states Local market presence
provides for attractive solutions to those accessing the system
National presence provides for attractive
solutions to those paying for healthcare
Denver
6 facilities
Centura Health
Partnership
Oklahoma City
1 facility
INTEGRIS Health Partnership
St. Louis
18 facilities
New Jersey
12 facilities
Meridian Health
Partnership
Nashville
21 facilities
St. Thomas Partnership
Atlanta
6 facilities
Houston
19 facilities
Memorial Hermann Partnership
Austin
5 facilities
Seton Partnership
San Antonio/Corpus Christi
5 facilities
CHRISTUS Health Partnership
Dallas/Ft. Worth
32 facilities
Baylor Health Care
System Partnership
Phoenix/Las Vegas
14 facilities
Dignity Health
Partnership
Los Angeles
6 facilities
Dignity Health
Partnership
Kansas City
5 facilities
North Kansas City Hospital
Ascension Partnership
Chicago
5 facilities
NorthShore University
HealthSystem, Adventist
Partnership
USPI Facilities
USPI Hospital Locations
Facility Profile
8
Key |
 Positioned to
play an important role in managing increased need for outpatient surgical services as
well as providing ambulatory surgical solutions for strategic networks Opportunities for
USPI to assist with enhancement of strategic network capabilities
9
Physician Partners
•
USPI is proven, trusted
partner
•
USPI involvement can
alleviate historical
distrust of hospitals
•
USPI can help provide
targeted solutions for
strategic positioning
Health System Partnerships
•
JV model in place
•
Commitment to highest level of quality service
•
Comfort regarding proper utilization of brand
•
Ability to assist with out-of-hospital strategies
Access to Capital
•
In a rapidly changing
environment, ability to
enhance speed to
market with new
models where there
are capital constraints
Professional Management
•
Proven ability to execute and operate low cost,
high quality facilities
•
Proven ability in managing professional
partnerships
•
Ability to leverage quality management and
decision support systems
Strategic Partnership Model Helps Position
USPI
for Strategic Network Opportunities |
 Succeed
Today in Fee-for-Service
World
Capture
Opportunities with
New Value-based
Market Segments
Balancing Success
Individual strategic initiatives balance success in current
environment by capturing new market segments.
10
Enhance Organic Growth
Accelerate Cost Transformation
Continue Development Efforts
Enhance Physician Services
Develop Direct Channel Capabilities |
 Health System Partners
USPI partners with some of the nation’s most progressive health systems yielding additional
growth opportunities in surgical space as well as ancillary opportunities
Robust pipeline provides for additional joint venture and consolidation opportunities
11 |
 Strategic Integration
Inception
End of 2013
On going development
12
•
JV formed in 1998
•
Baylor contributed 2
ASCs / USPI 3 ASCs
•
32 facilities in DFW
•
25 ASCs and 7
physician-owned
hospitals
•
Integration with Baylor
S&W Quality Alliance
•
PCP/Specialist
Alignment
•
JV formed in 1999
•
1 ASC in Las Vegas
•
18 facilities in N.
California, Las Vegas,
Phoenix
•
Integration with St.
Rose Quality Network
and Arizona ACO
•
JV formed in 1998 in
Nashville
•
21 ASCs and 1
physician-owned
hospital Nashville, K.C.,
Indiana and Austin
•
Integration with
MissionPoint
Health
Partners
•
JV formed in 2003
•
18 ASCs and 3
physician-owned
hospitals in Houston
•
Integration with
MHMD
•
Convenient Care
Centers |
 •
89 acquisitions
•
27 de novo facility developments
•
18 new health system partners
•
Facility revenue CAGR of 13% from 2006 to 2013
•
Positive each of the past 5 years
•
Same facility revenue + 6.2% for 2011
•
Same facility revenue +5.7% for 2012
•
Same facility revenue +1.1% for 2013
•
Same facility revenue +1.5% YTD 2014
•
Facility EBITDA CAGR of 10% from 2006 through 2013
•
Facility EBITDA margins of 28.9% for 2013 and 27.7% YTD 2014
•
26% SWB as a percent of systemwide revenue
•
2% G&A as a percent of systemwide revenue
•
Installed and continuously improving decision support systems
•
Investing significantly in strategic growth infrastructure and capabilities
•
Improved quality management system
•
EHR Investment
•
44 facilities divested
•
75% of revenue from top 10 markets
Expansion
Facility
revenue growth
Facility EBITDA
Cost management
System enhancements
Portfolio management
Performance Post 2007 LBO
13 |
 Financial Results
14
($ in thousands)
2011
2012
2013
Operating income
$ 233,659
$ 245,234
$ 263,791
Depreciation and amortization
21,177
23,955
27,238
EBITDA
254,836
269,189
291,029
% Growth
6%
8%
Net income attributable to noncontrolling
interests
(69,929)
(72,693)
(78,782)
EBITDA less noncontrolling interests
184,907
196,496
212,247
% Growth
6%
8%
Net (gain) loss on deconsolidations, disposals
and impairments
(1,529)
7,588
5,017
De novo start-up losses
4,009
500
-
Acquisition / transaction costs
3,314
2,200
200
Equity compensation
1,237
1,700
1,841
Management fee
2,000
2,000
2,000
Adjusted EBITDA
$ 193,938
$ 210,484
$ 221,305
Unaudited Adjusted
Years Ended December 31, |
 2014 YTD Financial Results
($ in thousands)
2014
2013
Operating Income
119,288
$
118,839
$
Depreciation and amortization
13,007
14,075
EBITDA
132,295
132,914
Net income attributable to noncontrolling interests
(35,433)
(35,330)
EBITDA less noncontrolling interests
96,862
97,584
Net loss (gain) on deconsolidations, disposals, and impairments
917
5,399
Equity compensation
1,083
899
Management Fee
1,000
1,000
Adjusted EBITDA
99,862
$
104,882
$
Unaudited Adjusted
Six Months Ended June 30
15 |
 At
June 30, 2014, total leverage was 6.4x and secured leverage was 4.7x Leverage
Trends 16 |
 Total debt of $1.5 billion
Corporate
level
debt
service
(cash
pay)
in
the
next
12
months
is
approximately
$94M,
including
$10M
principal
and
$84M
interest
Debt Maturities
17 |
 |