Cardiovascular Market Trends Health Care Industry Committee Cardiovascular Market Trends Ready-to-Use Presentation Slides

Examining Five-Year CV Growth Trajectories Forecasting Growth in CV Outpatient, Medical Services All-Payer Volume Growth Projections CV Volume Growth Projections by Sub-Service Line 2012-2017 2012-2017 Cardiac Services Vascular Services Outpatient EP1 Outpatient Medical Vascular Outpatient Vascular Cath Outpatient Medical Cardiology Inpatient Cardiac Surgery Outpatient Cardiac Cath Inpatient Cardiac EP Inpatient Medical Cardiology Inpatient Cardiac Cath Electrophysiology. Source: The Advisory Board’s Inpatient and Outpatient Market Estimator tools; Advisory Board research and analysis.

Five Year Growth Trajectories Inducements and Barriers Assessing Drivers of CV Subspecialty Growth Five Year Growth Trajectories Inducements and Barriers Inpatient and Outpatient, 2012-2017 Demographic Poor patient compliance with lifestyle and prevention options Increasing prevalence of obesity, high cholesterol, diabetes and hypertension Aging population Clinical Treatment advancements shift care to outpatient setting Improved ambulatory disease management reduces HOPD volumes Market Increased market competition RAC audits discourage inappropriate utilization Emphasis on readmission prevention Rising costs disincentivize premium device use, spurring more downward innovation Coronary artery bypass graft Percutaneous coronary intervention Cardiac resynchronization therapy with defibrillation Peripheral vascular intervention Source: The Advisory Board’s Inpatient and Outpatient Market Estimator tools; Advisory Board research and analysis.

Numerous Forces Placing Pressure on CV Margins Federal Policies, Demand Transformation Taking Their Toll Forces Impacting Future CV Margins Decelerating Price Growth Continuing Cost Pressures Increasing Patient Acuity Increasing Spend Scrutiny Federal, state budget pressures constraining public payer price growth Payments subject to quality, cost-based risks No sign of slower cost growth ahead Drivers of new cost growth largely non- accretive Incidence of chronic disease, multiple comorbidities rising RAC1, payer scrutiny for over-utilized services AUC2 adoption Shifting Payer Mix Deteriorating Service Mix Continuing Outpatient Shift Proliferating Risk- Based Contracts Baby Boomers entering Medicare Most demand growth over the next decade comes from publicly insured patients Medical demand from aging population threatens to crowd out profitable procedures Substantial shift from inpatient to outpatient setting Typically carries substantial profit risk Expected growth in federal, commercial contracts Recovery Audit Contractor. Appropriate Use Criteria. Source: Advisory Board research and analysis.

Payers Linking CV Payments with Quality, Costs CV Heavily Impacted by Expansion to Pay-for-Performance Programs Medicare Pay-for-Performance Programs Low Magnitude of Impact on CV Services High Hospital-Acquired Condition (HAC) Penalty Program Updates to Quality Reporting Programs VBP, Readmissions Penalty Program Expansions New program with payment impact beginning FY 2015 (October 1, 2014) Assesses HAC performance for patient safety and CDC NHSN1 measures Penalty only, 1% maximum cut to Medicare rates to only lowest performing quartile Unlikely to significantly impact CV services Annual updates to traditional quality reporting programs: Inpatient Quality Reporting (IQR) Outpatient Quality Reporting (OQR) Physician Quality Reporting System (PQRS) Value-Based Purchasing Modifier Value-Based Purchasing Performance metric changes Inclusion of new domains Percentage withhold increase Hospital Readmissions Penalty Program New conditions added Penalty increase National Healthcare Safety Network. Sources: CMS; Advisory Board research and analysis.

Major Forces Shaping Care Quality Forces Impacting Future CV Care Quality Utilization Scrutiny Aging Population Appropriate use scrutiny, service utilization drive quality imperatives Growing elderly patient population increases CV disease burden Chronic Disease Prevalence Care Coordination Emphasis Patient Centeredness Rising chronic disease, multiple comorbidities Long-term patient needs demand care coordination, full continuum management Continued emphasis on patient experience, multidisciplinary care Source: Advisory Board research and analysis.

Examples of Common CV Disease Centers Leveraging Disease-Centered Models of Care Tying Sets of CV Services Together for Cross-Continuum Management Examples of Common CV Disease Centers Heart Failure Center Represents one of the pioneer CV centers Requires collaboration between medical cardiology, EP2, and HF3 specialists Targets HF patients and multimorbid disease AF1 Center Serves as a more advanced CV disease center Requires EP, HF, and surgical collaboration Targets EP and HF patients, as well as structural heart Valve Center Represents progressive CV center, especially with structural heart focus Requires interventional and surgical collaboration Targets aortic and mitral valve disease patients and other structural heart Key Advantages of Disease-Centered Care Delivery: Greater efficiency Improved quality Improved capture of downstream business Shared learning across specialty lines Stronger physician and staff knowledge Increased patient satisfaction Atrial fibrillation. Electrophysiology. Heart failure. Source: Advisory Board research and analysis.