State of Reform Conference 2016 California Hospital Risk Outlook November 6, 2015 Presented by: David V. Axene, FSA, FCA, CERA, MAAA President & Consulting Actuary Axene Health Partners, LLC To replace this picture, just select and delete it. Then use the Insert Picture icon to replace it with one of your own!

Axene Health Partners, LLC Overview Background of Axene Health Partners, LLC AHP Hospital Risk Outlook Report Series Key Findings Q&A and Wrap-Up 2/15/2019 Axene Health Partners, LLC

Axene Health Partners, LLC Independent health care consulting firm (i.e., actuaries, physicians, and IT experts) Consult with health plans, health systems, governments, etc. Strong managed care focus, emphasis on clinically sound actuarial analysis Started here in California, have expanded nationally, centers of excellence in California, Pacific Northwest and Western Pennsylvania. 2/15/2019 Axene Health Partners, LLC

AHP Hospital Risk Outlook Report Series Focused on efficiency of hospital inpatient services 2016 California Report just released Other states will soon be released Results are useful to project potential overall health care savings based upon the projected inpatient savings opportunity (i.e., Total Opportunity = 1.5 x Inpatient Potential). 2/15/2019 Axene Health Partners, LLC

Potential % Improvement Savings Potential $ Savings (Billions) Key Findings California hospital inpatient costs can be reduced by as much as 25% (i.e., $10 billion from the 275 studied hospitals) Greatest percentage Statewide improvement is with Medi-Cal patients. Greatest dollar potential is with Commercial patients. Commercial carriers pay 60% more than the average net payment rate while Medi-Cal and Medicare pay less than the average (i.e., significant cost shift to private sector). Overall California discharges are coded more complicated than national norms.   Payer Potential % Improvement Savings Potential $ Savings (Billions) Commercial 24.5% $3.7 Medi-Cal 27.7% $3.6 Medicare 23.5% $2.7 Other 26.1% $0.4 Total 25.3% $10.4 2/15/2019 Axene Health Partners, LLC

Key Findings continued Only a very minor correlation between net patient charges and efficiency. 2/15/2019 Axene Health Partners, LLC

Key Findings continued Least efficient care happens in major metropolitan areas with some notable exceptions (i.e., Sacramento, San Diego, Kern County) 2/15/2019 Axene Health Partners, LLC

Key Findings continued The smallest facilities tend to be the most efficient Public hospitals tend to be the least efficient compared to for-profit and non-profit hospitals. Top 20 most efficient hospitals in California 2/15/2019 Axene Health Partners, LLC

Axene Health Partners, LLC Bottom Line There is significant potential for reducing the cost of care in California 2/15/2019 Axene Health Partners, LLC

Q&A and Wrap-Up