15 th Annual Non Profit Health Care Investors Conference

Transcription

1 15 th Annual Non Profit Health Care Investors Conference New York, New York May 21, 2014 William P. Santulli Executive Vice President, Chief Operating Officer Lee B. Sacks, M.D. Executive Vice President, Chief Medical Officer Dominic J. Nakis Chief Financial Officer and Treasurer

2 The following material and presentation contains information which is forward looking within the meaning of federal securities law. These forward looking statements are based on the current plans and expectations of Advocate Health Care Network ( Advocate ) that, although believed to be reasonable, are subject to a number of known and unknown uncertainties and risks inherent in the operation of health care facilities, many of which are beyond Advocate s control, that could significantly affect current plans and expectations and Advocate s future financial position and results of operations. These forward looking statements speak only as of the date made. Investors are cautioned not to unduly rely on such forward looking statements This presentation should be reviewed in conjunction with Advocate s December 31, 2013 and March 31, 2014 continuing disclosure reports.

3 Advocate Health Care William P. Santulli Executive Vice President Chief Operating Officer

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5 Hospitals (12) 4 teaching 1 children's 1 critical access 5 level 1 trauma centers Physicians 6,400 Medical staff members 4,540 APP 1,450 employed/affiliated Post acute $4.9B Oper Revenue 33,300 associates AA Rated

6 $614M community benefit

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8 2020 Strategies ADVOCATE EXPERIENCE Key Result Areas Measure Target Actual Achieved SAFETY Serious Safety Event Rate QUALITY Health Outcomes Score Patient Satisfaction Percentile SERVICE ACCESS AND AFFORDABILITY FUNDING OUR FUTURE ADVOCATECARE COORDINATED CARE Associate Satisfaction Percentile Physician Satisfaction Percentile GROWTH Net Revenue Growth 4.2% 7.2% Operating Margin 4.0% 6.1% Hospital Cost per Discharge $7,747 $7,727 Medical Group Cost per Visit $ $ Philanthropy (millions) $27.18 $34.14 AdvocateCare Index In Network Care Growth 3.1% 0.9%

9 Inpatient Market Share Leader 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Advocate Presence Northwestern NorthShore Rush CHE Trinity Ascension Edward/ Elmhurst Tenet Cadence Adventist

10 Strong Revenue Growth with Shift to Ambulatory 5,000,000 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000, % 28.0% 18.1% 18.5% 19.5% 28.5% 29.0% 30.1% 20.5% 30.7% Other Home Health Phy. Groups Hospital Outpt. 1,500,000 Hospital Inpt. 1,000, , % 49.8% 49.0% 46.7% 44.8%

11 Employed Clinicians Doubled 1,400 1,200 1, Specialists Primary Care Advanced Practice Clinicians

12 Pluralistic Physician Approach Physicians on Advocate Medical Staffs = 6,400 Employed/ Affiliated = 1,274 Aligned = 3,266 Non APP: Employed = 176 Independent = 1,684 Advocate Physician Partners = 4,540

13 Cost Per Adjusted Discharge Lower by 5.1% $8,200 $8,000 $7,800 $7,600 $7,400 $7,

14 Key Market Dynamics Provider consolidation Revenue utilization and price Dominant health plan Narrow networks emerging Cost pressures

15 Advocate Is Well Positioned Top decile health outcomes and safety Strong brand Leading market position Financial strength Pluralistic approach to physician relationships Leader in accountable care

16 Advancing Value Based Care Lee B. Sacks, MD Executive Vice President Chief Medical Officer

17 Strong Physician Engagement To drive improvement in health outcomes, care coordination and value creation through an innovative and collaborative partnership with our physicians and the Advocate System. Advocate Medical Group BroMenn PHO Christ PHO Condell PHO Dreyer Medical Group Good Samaritan PHO Good Shepherd PHO Illinois Masonic PHO Lutheran General PHO Sherman PHO South Suburban PHO Trinity PHO Future PHO Silver Cross PHO Future Medical Group

18 Introducing Silver Cross Hospital $300 million revenue 289 licensed beds 19,000 capitated lives 300 PHO physicians 10 employed physicians

19 An Innovative Partnership Expands Advocate s geographic coverage Silver Cross physicians complement Advocate Physician Partners Provides Silver Cross access to contracts and population health expertise

20 Reimbursement Model Shifting

21 AdvocateCare: 608,000 Lives Blue Cross HMO 32% Medicare Shared Savings 23% Blue Cross PPO Shared Savings 32% 5% Medicare Advantage 1% Advocate Centered EPO 3% Advocate Centered HMO 3% Humana HMO

22 Commercial ACO: Strong Results Inpatient Admit Rate/1000 Length Of Stay Advocate Control Group Change Change % % % % Days/ % % Outpatient ER Visits/1000 Advanced Imaging/ % % % %

23 Advocate Physician Partners Distribution History (in millions) $120 $100 $5 $13 $8 $12 $80 $60 $40 $20 $5 $80 $101 $92 $97 $95 Unearned Earned $

24 Medicaid Accountable Care Entity Commences July 1 Focus on Temporary Assistance for Needy Families population (women & children) Over 160K lives attributable Accounts for over 50% of Advocate births Three year transition to global capitation Opportunity to improve care and enhance efficiency

25 Investing in Value Based Care Post Acute Network Palliative Care Integrated Behavioral Health Fourth Generation Disease Registry Predictive Modeling Care Managers

26 What s Next Grow Medicare Advantage Launch narrow network products co branded with health plans Strengthen retail partnerships

27 Financial Performance Dominic J. Nakis Chief Financial Officer and Treasurer

28 Strong Operating Performance Dollars in Millions % 6.8% 6.5% 6.1% 3.4% 10% 5% // YTD Q1 0% Operating Income Operating Margin 24

29 Consistently Solid Cash Flow Dollars in Millions % 11.7% 11.6% 11.5% 9.1% // YTD Q1 15% 10% 5% 0% Operating Cash Flow Operating Cash Flow Margin 25

30 Investment Yield Dollars in Millions (50) 10.5% 0.2% 10.6% 7.1% 1.5% (34) YTD Q1 Investment Income Investment Yield // 50 20% 10% 0% 10% 20% 27

31 Broad Asset Allocation Expected return of 7.2% compared to previous 6.5% anticipated return. Volatility increased from 8.5% to 9.5%. Risk/return ratio unchanged at Exposure to fixed income assets reduced.

32 Debt Profile = Low, Level and Long Tax exempt debt is $1.5 billion, maximum annual debt service is generally level through 2038 at $90 million and average life is 20 years. $120.0 $100.0 Debt Service (in $millions) $80.0 $60.0 $40.0 $20.0 $

33 Well Diversified Debt Portfolio Underlying Debt Mix Product Mix Synthetic Fixed, $321mm 21% Weekly VRDBs 21% Windows VRDB 4% Traditional Fixed, $856mm 56% Intermediate $185mm, 12% Multi-Annual Tender 11% Fixed Rate 56% Variable Rate $170mm 11% Direct Purchase 7% Annual Tender 1% 30

34 Strong Coverage and Capitalization Times % 26.1% 24.5% 24.2% 24.1% // Q1 40% 30% 20% 10% 0% Debt Service Coverage Ratio (times) Debt as % of Unrestricted Capitalization 31

35 Strong Cash to Debt Ratio Percent Q1 // 32

36 Substantial Liquidity Position Dollars in Millions 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, ,920 3,211 3,842 4,518 4,341 // Q Days on Hand Dollars Days Cash and Investments on Hand 34

37 Well Funded Pension Plans % 92% 100% 100% 100% Dollars in Millions % % 80% 70% 60% Q1 // 50% Assets PBO Percent Funded 33

38 Large Capital Commitments Past 3 Years % Dollars in Millions % 146% 150% 182% 197% 200% 150% 100% 50% YTD Q1 New Commitments Cash Spending Capital Spend Ratio // 0% 35

39 Summary National leader: Health outcomes Value based health care Metro Chicago market share leader Growth through selective acquisitions Balance sheet strength and solid operating performance All of above reflected in our bond ratings of Aa2/AA/AA (M/S&P/F), with stable outlooks 42

40 Thank you!