Investor Conference Call

Transcription

1 Investor Conference Call August 26,

2 Banner Health Operations Seven States with Arizona and Colorado Focus 22 Acute Care Hospitals Medical Group with 560 Providers Behavioral Hospital Home Care Services $4.8B Revenue 35,000 employees 80% of revenue from Arizona 2

3 Focus is Improving Quality and Controlling Cost Growth phase completed successfully, preparing for innovation phase Revenue will continue to grow from Integration of Sun Health Solid increases in commercial rates New capacity Implementing standardized clinical information systems in every hospital and medical group location Fully-developed operating company model 3

4 2 nd Quarter 2009 Operating Results 4

5 2009 Operating Income A Very Strong Startt $ in Millions Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 Actual 2008 Actual 2007 Actual 5

6 Consolidated Results Six Months Ended June 30 ($ in Thousands) 6/30/09 6/30/08 Variance Total Operating Revenues $2,334,695 $1,887, % Total Expenses 2,158,347 1,794,405 (20.3)% Operating Income 176,348 92, % Investment Income Realized 14,462 7, % Investment Income (Loss) Unrealized 54,063 (120,081) % Income (Loss) from Alternative Investments 32,625 (1,559) % Interest Rate Swaps 207,990 (6,311) % Minority Interest/Other (21,934) (22,111) 0.8 % Non-operating Income 287,206 (142,504) % Excess of Revenues Over Expenses $ 463,554 $ (49,803) % Operating Margin 7.6% 4.9 % Operating EBIDA Margin 13.5% 10.9 % Total Margin 17.7% (2.9)% 6

7 Expense Control Driving i Performance Selected Key Performance Indicators YTD 6/30/2009 6/30/2008 % Change Labor % of Revenue 49.1% 52.0% -5.6% Labor Productivity it (FTE/AOB) % 47% Hospital Productivity (FTE/AOB) % Average Salary / FTE $62,346 $61, % Supplies % of Revenue 15.7% 15.9% -1.3 % Supply Exp per Adjusted Admit $1,797 $1, % Labor and supplies account for 70.2% of costs Positive Trend Neutral Trend Negative Trend 7

8 Cost Reductions Yield Significant Savings LABOR SPENDING -Decrease in salary increases -Management salaries frozen -Reduction in paid time off plan -Short term disability changes -Eliminate double shift incentive DISCRETIONARY SPENDING -Limitations on education and travel -Focused management of training -Reduction in other discretionary spending 8

9 Key Improvements Salaries and Benefits As a percent of operating revenue YTD 2009 = 49.1% vs. YE 2008 = 52.4% - Improved 3.3 percentage points Approximately $9M favorable YTD improved Worker Comp & better health plan utilization Contract Labor YTD 2009 vs. YTD 2008 $20.9 million vs. $31.5 million respectively PL/GL = $9M favorable mid year Risk falls attributed in part to IPROB and e-icu Decrease of claims occurring in 2005 through 2008 Bad Debt and Charity As a percent to net patient revenue YTD 2009 = 11.9% vs. YE 2008 = 12.1% - Improved 0.3 percentage points Attribute to softening economy with fewer non-residents seeking care 9

10 Performance Improvement Already Impacting Balance Sheet 12/31/08 6/30/09 Days Cash on Hand Cash to Long Term Debt 50.3% 70.4% Including Swap Collateral Days Cash on Hand Cash to Debt % % Debt to Capital 60.0% 53.2% Debt Service Coverage Preservation of capital Capital freeze initiated in December 2008 Reduced capital spending by 1/3 for Improved operating performance Realized cost savings from Phase I and II Cellular change in way we operate Commercial rates effectively locked in for next three years 10

11 June 2009 Swap Valuation Notional lamount Swap Fixed Variable Rates MTM 06/30/2009 Rates Without Swap Liability (1) 06/30/ /30/ Floating Rate Swap 581,020, % 0. 60% (61,025,551) 2006 Forward Swap 425,000, % -- (39,885,100) 2007 Floating Rate Swap 400,000, % 1.62% (51,153,191) Total 1,406,020, (152,063,843) Note: Collateral posted was $102 million at 06/30/2009. (1) Mark to Market (MTM) is based on estimated LIBOR rates for remaining life of bond. 30 day LIBOR at 06/30/2009 was 0. 31%. Liability is cost to terminate swap. 11

12 Banner Health New Acquisitions and Growth Sun Health September 2008 Banner Del E. Webb New Tower February 2009 Banner Thunderbird d Tower Expansion Tower opened Spring 2009 phases continue until 2011 Banner Baywood Emergency Department October 2009 Banner Heart Hospital Expansion December 2009 Cardon Children s Medical Center Fall 2009 Banner Ironwood Fall 2010 MD Anderson Banner Cancer Center Fall 2011 Banner Medical Group - Ongoing 12

13 Bond Funded Construction Projects Nearly Complete Over/ $ In Millions Budget Spent Remaining (Under) Banner Mesa Campus $133.1 $ 78.8 $ 46.3 $ (8.0) Cardon Children s MC * (4.0) BTMC Tower (11.8) BIMC New Hospital (5.0) Baywood ED (2.6) Total $945.8 $565.3 $349.1 $(31.4) All projects are expected to be completed on schedule All projects are under budget and are expected to be on or under budget at completion Over/(Under) does not include earnings available on project funds of approximately $16M. * The original budget for the Children s hospital was increased from $328M to $356.6M to include the Desert campus plan changes. 13

14 Banner s Market Share including Sun Health Acquisition Change Banner Health (including Sun Health) 42.0% 41.9% -0.1% CHW 11.7% 14.3% 2.6% Scottsdale 10.0% 0% 10.0% 0% 00% 0.0% Vanguard 12.0% 9.8% -2.2% Lincoln 5.6% 6.3% 0.7% Maricopa 4.9% 4.5% -0.4% IASIS 4.5% 3.8% -0.7% Mayo 2.9% 2.8% -0.1% Phoenix Children's 2.7% 2.6% -0.1% Casa Grande 2.0% 1.7% -0.3% AZ Heart Hospital 1.4% 1.0% -0.4% Other 0.3% 1.3% 1.0% * Includes Maricopa and Pinal Counties 14

15 Banner Well-positioned For Clinical IT Stimulus Funds HIMSS EMR Adoption Model SM Stage Cumulative Capabilities Estrella Stage 7 Stage 6 Medical record fully electronic, HCO able to contribute CCD as byproduct of EMR, Data Warehousing Physician documentation, full CDSS, full R-PACS Gateway/ McKee/Page All Others Boswell & Del E. Web Stage 5 Closed loop medication administration Stage 4 CPOE, CDSS (clinical protocols) Stage 3 Stage 2 Stage 1 Stage 0 Clinical Documentation (flow sheets), CDSS (error checking), PACS not available outside radiology Clinical Data Repository, Controlled Medical Vocabulary, Clinical Decision Support Ancillaries Lab/Rad/Pharmacy All installed All three ancillaries not installed 15

16 Questions 16