1 © 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS FOR INTERNAL USE ONLY Healthcare Industry Update The Seven Signs That Convergence Is Coming Carolinas HealthCare System 2013 HealthCare CPE Event – Reshaping Healthcare November 1, 2013

2 © 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS FOR INTERNAL USE ONLY Who Is KPMG?  K stands for Klynveld. Piet Klynveld founded the accounting firm Klynveld Kraayenhof & Co. in Amsterdam in  P is for Peat. William Barclay Peat founded the accounting firm William Barclay Peat & Co. in London in  M stands for Marwick. James Marwick founded the accounting firm Marwick, Mitchell & Co. with Roger Mitchell in New York City in  G is for Goerdeler. Dr. Reinhard Goerdeler was for many years chairman of Deutsche Treuhand- Gesellschaft and later chairman of KPMG. He is credited with laying much of the groundwork for the KMG merger.

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A NSS 3 Current Perspectives on Healthcare Reform and Market Transformation Our view is that there is an ongoing transformation of the healthcare industry – particularly on a local market basis in anticipation of new economic models for financing healthcare and despite the uncertainties at the Federal and State levels. The Four Imperatives Remain The Same  The need to be agile around cost structures  The need for greater size and scale  The need for strong governance and greater transparency around quality and pricing  The need to continue to be vigilant around compliance

© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A NSS 4 Future sustainability of entitlement programs YearRevenuesProfit Profit Margin Uncompensated Care Percent of Expenses 2011$755.30$ %$41.1B6.0% 2010$730.9B$52.9B7.2%$39.3B5.8% 2009$690.5B$34.4B5.0%$39.1B6.0% 2008$650.0B$17.0B2.6%$36.4B5.8% 2007$610.0B$27.8B4.60%$34.0B5.8% Source: American Hospital Association, all U.S. Hospitals Source: AHA Town Hall Webcast, January 15, 2013

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A NSS 5 Distinguishing T from C Today’s transformation is inward looking – assembling the component parts, experimenting with new payment models, monitoring employer and consumer trends and understanding the role of new entrants.  Health plan, physician, or health system-led integrated delivery models through mergers and acquisitions, joint ventures, management agreements, etc.  Alternative payment models coupled with increasing employer and consumer engagement  Emerging role of private equity, retail health, life sciences companies, etc. Tomorrow’s transformation will be defined by collaborating with others, coordinating care across the continuum and developing extended operating models, which we call Convergence.  The next stage in the evolution of the healthcare industry reflects a convergence of interests among providers, payers, and life science companies  Utilizing advanced analytics, enabled by new technologies to change the practice of medicine and the business of healthcare  Convergence is currently expressing itself through data and analytics collaboratives, innovative public private partnerships, and previously siloed stakeholder groups working together in new ways.

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A NSS 6 New Models Are Emerging Every Day Convergence of roles, responsibilities and relationships drive new business models. “[Our] promise will really come to fruition when other great groups, large academic medical practices, research universities, biotech, pharma and device companies, other insurers and health policy groups, all come together and help us use informatics to pull out the data here that will really define value… the potential is almost limitless and really should change the way we design healthcare systems in the future.” – Dr. John Noseworthy, CEO Mayo Clinic, April 2013

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A NSS 7 The Seven Signs Convergence Is Coming  Volume declines and new metrics  Reimbursement reductions coming online  Health insurance exchanges coming online  Strong signals from private payers  Faint but increasing signals from public payers  Frequent questions by health systems on whether to build or buy a health plan  Governance questions on the linkage of strategy and risk

© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved NSS 8 The Key Elements Of An Effective Risk Management Program Source: Expectations of Risk Management Outpacing Capabilities, KPMG International, 2013.

© 2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved NSS 9 Levels of Risk in an Organization Enterprise Level Department, Functional or Business Unit Level Process Level Enterprise Risks are key / top risks of the enterprise and risk information supports: Strategic plan initiatives and objectives Decisions regarding solvency, capital allocation and business initiatives Management and Board Monitoring Next level of risks is more detailed or specific risks but mapped and linked to top enterprise risks Risk detail helps business focus on risks, gaps, mitigation and action plans to remediate Internal Audit Plan is developed from risk information at this level Process level risks are very granular and detailed and may be identified as part of the following: SOX, Privacy, Compliance, etc Understanding operational risks in the process, or application level.

© 2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A NSS 10 The Risks Around Convergence At The Enterprise Level  Acknowledging continuing margin compression in the cost shift  Evaluating the opportunity to disrupt or the risk of being disrupted given the velocity of local market changes, including physician and other provider alignment  Preparing for revenue transformation as new revenue streams emerge around public and private exchanges, narrow networks, and other value-based arrangements  Monitoring employer and consumer attitudes/acceptance  Evaluating “make or buy” decisions on the necessary tools, technology, and talent  Becoming agile around cost structures given declining volumes coupled with clinical transformation  Conducting scenario planning, predictive modeling, and war gaming around market transformation and the impact on financial performance  Assuring the integrity of clinical reporting and developing new metrics for the transition from volume to value  Converting unstructured data into information for decision making to enable clinical, operational and financial benchmarking across the continuum of care along with real-time predictive clinical surveillance systems  Managing increasingly complex compliance regimes and enhancing transparency in reporting

Discussion

Presenter information Ed Giniat National Sector Leader – Healthcare & Life Sciences For more information, visit the KPMG Healthcare & Pharma

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