Structuring AMC Partnerships with Community Health Systems Presented by: James J. Kelly, Jr. – Sr. VP & CFO UF Health Shands Gainesville, FL AMC CFO Council June 27, 2016 Las Vegas, NV

Current: – Senior Vice President and Chief Financial Officer – UF Health Shands Prior: – Corporate Controller – Partners HealthCare System, Inc. – Boston, MA – Senior Manager – PricewaterhouseCoopers, LLP – Boston Always: – New York sports fan Have Become: – Fan of all UF teams – Go Gators! Intro 2

Dude, where’s my car? Why Florida? 3

UF Health Shands Facts and Figures UF Health Shands includes: –875-bed teaching hospital, with an embedded children’s hospital (188 beds) New 216-bed hospital to house cardiovascular and neuro medicine services (completion date – last quarter of calendar 2017) –Remote ED in NW Gainesville (second remote ED expected to open late this summer in SW Gainesville) –81-bed psychiatric hospital –40-bed rehabilitation hospital –Home care agency –Addiction treatment facility Fiscal 2015 numbers –Revenue = $1.3B –Admissions = 54,156 –Outpatient visits = 893,203 (includes ED and trauma visits) Credit Ratings - Moody’s – A3; S&P – A- 4

Background – Shands Rural Network History The 3 rural hospitals joined Shands in 1996 – Shands Live Oak is a 25 bed facility located in Live Oak, FL – Shands Lake Shore is a 99 bed facility located in Lake City, FL – Shands Starke is a 25 bed facility located in Starke, FL The rural network was seen as valuable to the system as a source of referrals and extension of the brand However, the strategic role of these facilities was not clearly defined – Numerous efforts were made to improve performance (physician support, faculty placement, provision of core services, etc) – Suboptimal operating performance required a consideration of alternatives to the model (FY10 forecasted to be a $7M+ loss) 5

Rural Hospital Locations 6 Rural Hospitals - distance from Gainesville: Shands Live Oak – 71 miles Shands Lake Shore (Lake City) – 48 miles Shands Starke - 28 miles

Identifying a Solution As the strategies of Shands/UF evolved, full ownership of the rural hospitals was not required Various models were considered including: – Total sale – Joint venture – Management contract Potential partners were vetted based on strategic fit, reputation, and history of success Management preferred a JV model that: – Allowed Shands to remain engaged in the communities – Allowed the assets to be monetized – Could be duplicated for all three facilities Health Management Associates (HMA) identified as best partner 7

Strategic Rationale for JV Formal relationship with a proven operator of small community hospitals Maintain the Shands network brand name and historical referral relationships while sharing risks and rewards with a partner Retain the ability to contract with payors on behalf of the community hospitals Limit operating losses and generate positive cash flow Maintain UF faculty arrangements in the community hospitals 8

Governance Structure of JV Shands and HMA formed 3 separate LLCs to act as the operating entity for each of the community hospitals The LLCs are governed by a board of 6 directors, equally divided between Shands and HMA – Board meets on a quarterly basis – Standing agenda items include: Clinical Quality and Other Metrics Finances (operating results, balance sheet, cash flows, capital proj/requests) Physician Recruitment HMA employee serves as the manager for each LLC and the underlying hospital Each hospital retained the Shands name NOTE: Community Health Systems (CHS) acquired HMA in Jan

Operating Aspects of JV Partnership investment opportunities are evaluated by the LLC Board Allocation of capital follows the LLC membership % - CHS 60%/ UF Health Shands 40% Financial, clinical quality, and patient satisfaction information is collected at each of the community hospitals and reported at the quarterly Board meetings – Best practices shared at these meetings Joint managed care contracting is in place; no joint contracting on the supply chain side NOTE: In April 2014, UF Health Shands acquired a 5% interest with CHS in Munroe Regional Medical Center in Ocala, FL (39 mi. from Gainesville) 10

JV Performance to Date Initial investment in the JV amounted to $14.1M Our 40% share of net cumulative losses amounts to approximately $8M (projected through June 2016) – JV structure has significantly lowered the annual P&L impact – No cash calls needed to fund working capital H to H transfers for tertiary/quaternary care allow for effective coordination of patient care Going forward – Continue to support the rural hospital’s MD recruitment efforts – Continue to build our relationship with CHS – Explore more strategic opportunities 11