CORUS™ Suite Next-Generation Cost Management Technologies June 2017

The Need for Activity-Based Costing Agenda Topic Topic Details Introduction Agenda review The Need for Activity-Based Costing Surviving in both fee-for-service (FFS) and value-based contracting (VBC) The basics of activity-based costing (ABC) Healthcare cost-accounting pain points Why costing matters: operating room (OR) use case How CORUS works CORUS Suite overview Costing the Health Catalyst way UPMC example Conclusion Feedback Actions and next steps $

“The only way to be successful in the new world of value-based healthcare and population health is to understand your true costs and manage them. To get there, we need access to massive amounts of data from across the care continuum to identify all of the resources used in delivering patient care.” Robert A. DeMichiei, executive vice president and chief financial officer, UPMC

Surviving in Both FFS & VBC Get the highest rate you can! (And, later, use data to inform negotiations) Levers for ensuring success once you have already taken risk. Millions of $ Median is 2.6%1 Predicted Utilization of Population Contracted Utilization Actual Utilization Cash Received Cost to Deliver Care Margin 1 Source: Moody's Investors Service, "U.S. Not-for-Profit Hospital 2014 Medians" report, September 2015.

Basic Cost Accounting SERVICES GENERAL LEDGER (COST) Linking expenses from the GL to services delivered is the key to accurate and useful cost data LINKING SERVICES GENERAL LEDGER (COST) EVERYONE’s cost is accurate at a high level – the GL don’t lie!

Healthcare Cost-Accounting Pain Points Current cost accounting systems are outdated Process is time and resource intensive to maintain and update Current cost accounting systems struggle to handle the amount and type of data needed Validation of data and reconciliation of cost is tedious Historically under-invested in Just a person or two checking boxes, which are only used for internal financial reporting Lack of transparency into calculations limits buy-in from key stakeholders

Problems with Existing Solutions/Methods Our Approach Cost data that comes from: Cost data from actual utilization: Procedures Charges Averages & Guesses Procedures EMR Activity Dept. IT Systems Supplies Dept. IT Systems Staff & Payroll

Why Costing Matters: OR Use Case

Why Costing Matters: OR Use Case (cont’d)

The Need for Activity Based Costing Agenda Topic Topic Details Introduction Agenda review The Need for Activity Based Costing Surviving in both fee-for-service (FFS) and value-based contracting (VBC) The basics of activity-based costing (ABC) Healthcare cost-accounting pain points Why costing matters: operating room (OR) use case How CORUS works CORUS Suite overview Costing the Health Catalyst Way UPMC example Conclusion Feedback Actions and next Steps $

Activity-Based Costing Cost Insights and Analytics CORUS Suite Overview Activity-Based Costing Cost Insights and Analytics Cost Engine Web Application Create cost driver queries Link costs to patients/activities System set-up and administration Build and assign cost models Enter activity-based costing allocations Leverage detailed and actionable cost data across your analytics environment Cost Insights, Qlik/Tableau apps, Excel, SQL, etc. CORUS Health Catalyst Data Operating System EMR Patient Accounting General Ledger HR/Payroll Supply Chain Pharmacy Affiliate Data RTLS

Activity-Based Costing: Dashboard

Activity-Based Costing: Data Quality

Costing the Health Catalyst Way Recognized in 2017 as “Best in KLAS for healthcare business intelligence and analytics.” Integration of EMR data, including patient-level clinical and operational data, delivering the first truly comprehensive view of the cost of patient-care. Manufacturing-style activity-based costing that is scalable and maintainable, freeing analysts to focus on identifying variation and cost saving opportunities. Embedded costing knowledge from world-renowned academic medical institutions, accelerating cost management transformation. Integration of EHR data, including patient-level clinical and operational data, as well as departmental and equipment resource-utilization data, delivering the first truly comprehensive view of the cost of patient care Manufacturing-style activity-based costing—with automated and robust data quality and cost validation algorithms—that is scalable and maintainable, freeing analysts to focus on identifying variation and cost-saving opportunities Embedded costing knowledge including best practices, rules, and algorithms from world-renowned academic healthcare institutions, accelerating cost management transformation Dramatically more timely and actionable cost data based on healthcare’s most advanced analytics platform, which supports over 160 source systems including EHR, claims, General Ledger, payroll, supply chain, and patient satisfaction systems Deep experience in costing and analytics More than a new market entrant, the CORUS Suite incorporates costing best practices developed over many years by two recognized leaders in healthcare cost management—UPMC, a $14 billion integrated healthcare delivery and insurance system that includes more than 25 hospitals and 600 doctors’ offices and outpatient sites; and IU Health, Indiana’s most comprehensive health system with 18 hospitals and over 3,700 physicians and allied professionals.   The CORUS Suite also benefits from Health Catalyst’s market-leading technology and services, recognized in 2017 as “Best in KLAS for healthcare business intelligence and analytics,” and proven to advance clinical and financial outcomes for more than 400 hospitals and 4,000 clinics nationwide Dramatically more timely and actionable cost data based on healthcare’s most advanced analytics platform, which supports over 160 source systems.

A Service Line Approach to Improving Women’s Health Used Service Line, Procedural and Physician Variability reporting functionality. Developed cross functional team and engaged physicians by sharing data, as well as making them part of developing the change. Opportunity identified with outpatient hysterectomies – Same Day vs Overnight. 90% of patients could go home same day despite standard practice of staying over night Developed clinical protocols that determine a patient’s eligibility to go home same day based upon defined medical status criteria Pilot project resulted in savings up to ~$700 per case, and satisfied patients with same day procedure 20 percent reduction in inpatient LOS for hysterectomies (over a 3 year time period) 34 percent reduction in open hysterectomies 28.3 percent reduction in 30 day readmissions for hysterectomies Costing Tool Goals Understand service line and procedural level P&L Identify potential savings opportunities Share cost data with physicians and identify best practices Utilize cost and quality metrics to align incentives and payment methods

Integration of Clinical and Operational Data Use Case A large academic health system had been using charges as the basis of costing for the operating room. Knowing the organization now had the CORUS Suite, the operating room (OR) director wanted to find out what her true costs were. Finance was able to use the CORUS Suite to quickly identify precise patient times, resources, and true labor costs—plus, they leveraged updated costs for supplies with the link to their supply chain data sources. When they compared the cost for each surgeon, they discovered that the physician with the shortest time was using additional staff. The physician-finance dyad lead worked with the surgeons to determine best practices and reduce clinical variation based on a review of time, resource costs, and clinical outcomes. Integration of clinical and operational EHR patient resource-utilization data, delivering the most complete picture of any procedure’s true cost. A large academic health system had been using charges as the basis of costing for the operating room. Knowing the organization now had the CORUS Suite, the operating room (OR) director wanted to find out what her true costs were. She asked finance to look at the EHR clinical and operational source data to find the specific times and all personnel resources used in the OR during surgeries. Finance was able to use the CORUS Suite to quickly identify precise patient times, resources, and true labor costs. They were also able to leverage updated costs for supplies with the link to their supply chain data sources in the CORUS Suite. Upon comparing the cost for each surgeon with data on labor and supplies, they discovered that the physician with the shortest time was using additional staff. The physician-finance dyad lead worked with the surgeons to determine best practices and reduce clinical variation based on a review of time, resource costs, and clinical outcomes.

Manufacturing-Style Activity-Based Costing Use Case Large, integrated healthcare system decided five years ago to build its own activity-based costing system. The platform wasn’t scalable and could not be cost-effectively maintained. Every month, it took six FTE business days to close out the books, eating into time that the analysts could have devoted to identifying and participating in driving outcomes improvements. After implementing the CORUS Suite, the activity-based cost processes have been automated and now run overnight—and clinicians and physician- financial/operational dyad service line leaders have greater transparency into the cost drivers. The health system has saved millions of dollars through improvements. Manufacturing-style activity-based costing that is scalable and maintainable, freeing analysts to focus on identifying variation and cost-saving opportunities. A large, integrated healthcare system decided five years ago to build its own activity-based costing system. Unfortunately, the platform wasn’t scalable and could not be cost-effectively maintained. End users could not easily add or maintain new cost drivers, add newly acquired hospitals, or add upgraded data sources such as their new inventory system, or ambulatory EHR. Every month, it took six FTE business days to close out the books, eating into time that the analysts could have devoted to identifying and participating in driving outcomes improvements. After implementing the CORUS Suite, the majority of the health system’s activity-based cost processes have been automated and now run overnight. Clinicians and physician-financial/operational dyad service line leaders have greater transparency into the cost driver definitions and algorithms, making data validation and modifications easy to perform. The health system has saved millions of dollars through improvements identified by the CORUS Suite, and has freed their analysts to focus on identifying variation and cost-saving opportunities.

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