RHÖN-KLINIKUM AG Proves to be Reliable Regarding Challenges in COVID-19 Pandemic

• Financial year 2020 was characterised by COVID-19 pandemic and takeover of RHÖN-KLINIKUM AG by Asklepios Kliniken GmbH & Co. KGaA
• Net consolidated profit falls drastically to Euro 2.5 million as a result of pandemic
• Operating result continues to be strongly influenced by increasing regulatory interventions, the highly competitive environment and difficult conditions in the recruitment of specialist employees
• Significant increase in material and staffing costs due to corona protection measures
• Call on Federal Minister of Health to keep his promise that no hospital will become deficit as a result of pandemic. The clinics urgently need full compensation for their lost revenue as well as planning security
• Supervisory Board re-appoints Dr Gunther K. Weiss to the Board of Management as of 1st January 2022

RHÖN-KLINIKUM AG, one of the leading healthcare providers in Germany, looks back on a medically and economically challenging year: "Providing the best possible care for all our patients has always been our motivation even in the COVID 19 pandemic and its often difficult conditions. My special thanks go to the entire team at RHÖN-KLINIKUM AG," Dr Christian Höftberger, Chairman of the Board of Management of RHÖN-KLINIKUM AG, stated.

In 2020 occupancy was significantly reduced in many hospitals due to the pandemic. Scheduled procedures and non-urgent medical treatments had to be postponed in order to keep beds free for COVID-19 patients and to implement new, stricter (hygiene) obligations. At the same time staffing and material requirements for the extensive hygiene protection measures increased massively.

Many COVID-19 patients were often cared for over several weeks, even months, at our five sites providing university hospital medical care as well as at those providing maximum and intermediate medical care. The additional strict protective measures had to apply to all of the patients even if they did not all receive intensive medical care.

This expense was and still is not taken into account in the remuneration system of flat rates per case. The higher material and staffing costs are in no way offset by corona-related additional payments received. Likewise, it was not taken into account when clinics could only partially utilise wards due to the isolation of COVID-19 patients and had to postpone treatments for patients with other diseases. "All this has led and continues to lead to a considerable economic burden for our clinics and jeopardises the assurance of satisfactory patient care. The compensation payments for bed capacities that have been kept free, which are subject to bureaucratic and irrelevant hurdles, do not cover our costs at all," Dr Höftberger stated.

In particular the needs of university hospitals as well as those providing maximum and intermediate medical care, to which all RHÖN-KLINIKUM facilities belong, were left completely disregarded. On a supraregional basis we take special care of patients with extremely complex courses of disease. "The criterion for assessing the compensation payments is based on the incidence values for individual areas. It fails to recognise the scope of the corresponding care given by hospitals with large, supraregional catchment areas and is a completely unsuitable means of assessment," Dr Höftberger remarked.

Appeal for a National Policy: Full Compensation for Revenue Shortfalls and Planning Security

In principle we welcome the current commitment of the German Chancellor and the first ministers of the federal states to safeguard hospital revenues for the entire year 2021, but we also wish to emphasise that the value of this declaration of intent must be measured against the criteria of pragmatism, overall commitment and the speed of the actual implementation.

The Board of Management of RHÖN-KLINIKUM AG takes a critical view, however, of the current draft of the "regulation on further measures to safeguard the economic viability of hospitals" (Verordnung zur Regelung weiterer Maßnahmen zur wirtschaftlichen Sicherung der Krankenhäuser) from the Federal Ministry of Health. "We consider this to be an affront in view of the performance by all clinics during the pandemic. The Federal Ministry of Health has not only disappointed the justified expectations of hospitals with regard to measures ensuring adequate medical care, but it has also dealt a considerable blow to hospitals continuing to place their trust in German politics," Dr. Höftberger stated. "For years our staff have endured regulations and increasing bureaucratisation and they have most recently been on the front line in managing the pandemic. We have thus far always relied on the promises given by the central government to ensure the provision of healthcare."

Although the current draft of the regulation foresees further compensation payments for hospitals, these are based on the revenue structures of the pre-corona year 2019. While hospitals‘ revenues for 2020 therefore remain significantly below those of financial year 2019 and the increase in costs that has occurred in the meantime is not taken into account, it is intended for repayments to be made in some cases. Yet there is no compensation for many sources of revenue which have been lost due to the pandemic, such as outpatient revenues, for example.

Hospitals are therefore forced to compensate for lost revenues by drastically cutting costs. "It is unacceptable that hospitals are compelled by the inadequate compensation payments from the central government even to consider staff-reducing measures, such as short-time work (Kurzarbeit) and expiring fixed-term contracts, for example, and that of all times at the height of the pandemic. It is utterly ridiculous in view of the massive shortage of skilled workers", Dr Höftberger stated.

Applying deductions of 5 % which are currently being discussed compared to the pre-corona year 2019 to the compensation mechanisms which are available for the entire year in 2021 and also deducting other reimbursements is not only unacceptable. It also threatens the existence of many hospitals in Germany. "The urgently required planning security for guaranteeing medical care is thus being thwarted contrary to the promises made. It is even being suggested that hospitals have lined their own pockets during the pandemic. The absurdity of such statements becomes clear in our net consolidated profit of approx. Euro 2.5 million in 2020 with the income in connection with the COVID-19 legislation in the amount of approx. Euro 94 million included in this figure on the balance sheet. The impression inevitably arises that the pandemic is being used for cold shakeouts of the hospital industry. This is neither medically nor morally justifiable," Dr Höftberger stated.

The Board of Management of RHÖN-KLINIKUM AG explicitly endorses the demands of the Federal Association of German Private Hospitals (Bundesverband Deutscher Privatkliniken e.V.) to revise the regulation on further measures to safeguard the economic viability of hospitals. “Hospitals need full compensation for their revenue shortfalls as well as planning security. These compensation payments must urgently be given to all hospitals. The central government had assured the hospitals that the pandemic would not cause any hospital to become deficit. We demand unequivocally that this promise is kept," Dr Höftberger stated.

Strategic Partnership with Asklepios Offers New Possibilities

The takeover by Asklepios made financial year 2020 a year of far-reaching changes for the corporate group. Two large healthcare companies have joined forces in a strategic partnership under the heading #gemeinsamnochstärker to be in a strong position on the German healthcare market. This partnership offers both companies the best preconditions to face together the challenges of the industry, exploit synergies and further develop their range of services for patients. "Our strategy and identity as an independent company in the new alliance with Asklepios will gradually evolve with our sense of belonging together growing and our networks becoming more tightly knitted together. In addition new possibilities are developing for us as an employer. We are very well positioned to be able to offer our existing and future employees a job in an exciting working environment with attractive framework conditions," Dr Höftberger emphasised.

Financial Figures for 2020 – Achieved Targets

In financial year 2020 RHÖN-KLINIKUM AG recorded a decline in EBITDA by € 45.1 million or 36.0 % to € 80.2 million, a decline in EBIT by € 46.2 million or 81.3 % to € 10.6 million as well as a decline in net consolidated profit by € 42.0 million or 94.4 % to € 2.5 million with higher revenues up by € 56.2 million or 4.3 % in comparison with the previous year. 808,655 patients were treated at our five hospital sites in Bad Neustadt, Frankfurt (Oder), the university hospitals in Giessen and Marburg as well as in Bad Berka; this is a corona-related decline of 6.9 % in comparison with the same period last year. The Company currently employs 18,449 staff (2019: 18,142).

The forecast for revenues for 2020 in the amount of € 1.4 billion in a range of +/- 5 % which was stated in the 2019 Group Management Report was achieved with € 1.4 billion. The EBITDA forecast for 2020 in an amount ranging between € 72.5 million and € 82.5 million was also achieved with € 80.2 million.

Dividend

The Board of Management and the Supervisory Board propose that the balance sheet profit be carried forward.

Supervisory Board Re-Appoints Dr Gunther K. Weiss to the Board of Management as of 1st January 2022

The Supervisory Board re-appointed Dr Gunther K. Weiss to the Board of Management in its meeting yesterday.

“With Dr Weiss we have been able to retain a proven specialist in the health sector. We are pleased that he will support us in the coming years with his expertise in order to further develop RHÖN-KLINIKUM AG in a sustainable and stable manner so that it can live up to its role as a provider of excellent medical care," Dr Jan Liersch, Chairman of the Supervisory Board of RHÖN-KLINIKUM AG, stated.

Guidance for 2021

In 2021 our five major sites in four federal states with roughly 5,300 beds and approx. 18,450 employees will again form the economic foundation of RHÖN-KLINIKUM AG. This makes the Company one of the largest hospital operators in Germany.

For the current financial year 2021 the corporate group expects revenues in the amount of € 1.4 billion within a range of +/- 5 %. Earnings before interest, taxes, depreciation and amortisation (EBITDA) are expected to be between € 72.5 million and € 82.5 million.

This guidance reflects the regulatory legislative interventions, such as the German regulation for the threshold for nursing staff (Pflegepersonaluntergrenzen-Verordnung – PpUGV) and the German nursing staff reinforcement act (Pflegepersonal-Stärkungsgesetz – PpSG), for example, which have become even tighter.

The guidance is subject to considerable uncertainties in connection with the course of the COVID-19 pandemic and any regulatory legislation affecting the remuneration structure in 2021.