Duke Beijing Healthcare Leadership Forum DURHAM, NORTH CAROLINA APRIL 26, 2007 USING THE U.S. EXPERIENCE TO IMPROVE H.I.T. INVESTMENT RESULTS IN CHINA

AGENDA THE DORENFEST GROUP AND ITS CHINA BUSINESS APPROACH THE U.S. HEALTHCARE INDUSTRY AND ITS USE OF INFORMATION TECHNOLOGY CHINA CAN BENEFIT FROM THE U.S. H.I.T. EXPERIENCE A GOOD APPROACH FOR SUCCESSFULLY IMPLEMENTING MAJOR I.T. SYSTEM UPGRADES AND CHANGES DISCUSSION

THE DORENFEST GROUP HEALTHCARE CONSULTING AND INVESTMENT FOCUS OFFER HEALTHCARE IMPROVEMENT SERVICES TO SUPPORT A MORE POSITIVE WORLD FUTURE HELP HEALTHCARE ORGANIZATIONS TO IMPROVE HEALTHCARE SERVICES WHILE REDUCING COSTS BY IMPROVING WORK PROCESSES, MANAGEMENT SYSTEMS, SERVICES TO PATIENTS, AND QUALITY OF MEDICAL CARE IN 2006 THE DORENFEST GROUP FORMED THE DORENFEST CHINA HEALTHCARE GROUP, BASED IN SHANGHAI, TO BRING OUR SKILL, TECHNOLOGY, AND CAPITAL TO CHINA IN A TWO-PHASE PROGRAM WE ARE NOW OPERATING IN PHASE 1 OF THIS PROGRAM, OFFERING A VARIETY OF CONSULTING, TRAINING, AND EDUCATION SERVICES TO THE CHINA HEALTHCARE SYSTEM WE EXPECT TO ENTER PHASE 2 OF OUR ACTIVITIES IN CHINA IN 2008 WHEN WE WILL BEGIN TO MAKE INVESTMENTS IN WELL-DEFINED, GOOD BUSINESS PROJECTS, IN PARTNERSHIP WITH CHINESE HEALTH BUREAUS AND HOSPITALS

BRIEF SUMMARY OF SHELDON’S PAST EXPERIENCE IN H.I.T. FORMED COMPUCARE 1969; CEO 1969-1976 FORMED SHELDON I. DORENFEST & ASSOCIATES, LTD. IN 1976; CEO 1976-2004 LONG, RICH HISTORY OF MAJOR CONTRIBUTIONS TO HEALTHCARE I.T. UNDERSTANDING AND PROGRESS WAS RECOGNIZED AS THE LEADING SOURCE OF INFORMATION ABOUT HEALTHCARE I.T. AND A LEADING HEALTHCARE CONSULTING FIRM KEY BUSINESS UNITS INCLUDED THE DORENFEST INTEGRATED HEALTHCARE SYSTEM DATABASE™ AND HOSPITAL OPERATIONS IMPROVEMENT AND MEDICAL SUPPLIER CONSULTING SOLD THE DORENFEST INTEGRATED HEALTHCARE DELIVERY SYSTEM+ (IHDS+) DATABASE™ TO HIMSS ANALYTICS IN JULY, 2004

BRIEF SUMMARY OF SHELDON’S PAST EXPERIENCE IN H.I.T. (CONTINUED) DONATED SHELDON I. DORENFEST & ASSOCIATES, LTD. TO THE HIMSS FOUNDATION TO FORM THE DORENFEST INSTITUTE FOR HEALTH INFORMATION TECHNOLOGY RESEARCH AND EDUCATION THE DORENFEST INSTITUTE CONTAINS A LIBRARY OF HISTORIC DATA AND PUBLICATIONS FROM 1986 THROUGH 2004 WITH HIMSS ANALYTICS DONATING THE NEXT CURRENT YEAR OF DATA ANNUALLY PROVIDES FREE DATA FOR RESEARCH PURPOSES ELECTRONICALLY AND IN PRINT TO UNIVERSITIES, STUDENTS, FEDERAL, STATE, LOCAL GOVERNMENT AS WELL AS GOVERNMENTS OF OTHER COUNTRIES PROVIDES A VARIETY OF FREE REPORTS ON TRENDS IN H.I.T. USE ENCOURAGES ONGOING RESEARCH INTO USING I.T. TO IMPROVE HEALTHCARE

DORENFEST ACTIVITIES IN OTHER COUNTRIES CONDUCT MARKET STUDIES AND CONSULTING ASSIGNMENTS ON USE OF INFORMATION TECHNOLOGY IN HEALTH CARE IN A NUMBER OF COUNTRIES CONDUCT WORLDWIDE STUDIES COMPARING THE STATE OF THE ART IN HEALTH CARE I.T. CONTINUOUSLY MONITOR AND UPDATE OUR UNDERSTANDING OF WORLDWIDE HEALTH CARE I.T. THROUGH A VARIETY OF ONGOING ACTIVITIES: IN-PERSON AND TELEPHONE DISCUSSIONS WITH NUMEROUS HOSPITAL EXECUTIVES AND I.T. SUPPLIER PERSONNEL REVIEW OF I.T. IN USE AT HOSPITALS THROUGHOUT THE WORLD WORLDWIDE EDUCATIONAL SERVICES

DORENFEST INVESTIGATION OF HEALTHCARE IN CHINA VISITED 17 CITIES IN CHINA VISITED WITH HUNDREDS OF LEADERS IN THE HEALTHCARE INDUSTRY IN CHINA TO LEARN ABOUT HEALTHCARE REFORM IN CHINA – ITS PROGRESS, ITS PROBLEMS, AND ITS NEXT STEPS VISITED WITH OVER 100 HOSPITALS TO GAIN AN UNDERSTANDING OF HOSPITAL OPERATIONS IN CHINA, THEIR CURRENT STATUS, AND OPPORTUNITIES FOR IMPROVEMENTS VISITED WITH PROVINCIAL AND CITY HEALTH BUREAUS TO LEARN WHAT THEIR GOALS ARE FOR THEIR PROVINCIAL AND CITY HOSPITALS VISITED PRIVATE HOSPITALS TO OBSERVE THE RESULTS OF HEALTHCARE REFORM PRIVATIZATION EFFORTS IN CHINA VISITED WITH COMPANIES SELLING PRODUCTS AND SERVICES TO THE HEALTHCARE INDUSTRY IN CHINA AND WHAT THEY BELIEVE ARE APPROPRIATE NEXT STEPS FOR REFORMING THE CHINESE HEALTHCARE SYSTEM EVALUATED A GROUP OF HOSPITAL MANAGEMENT AND OWNERSHIP OPPORTUNITIES THAT WERE PRESENTED TO THE DORENFEST GROUP TO BECOME MORE FAMILIAR WITH THE ALTERNATIVE WAYS TO PROCEED IN BUILDING A “MODEL HOSPITAL” IN CHINA DEVELOPED A STRATEGY FOR BRINGING DORENFEST SKILL AND EXPERIENCE TO CHINA

A FEW CONCLUSIONS ABOUT THE CURRENT ENVIRONMENT IN CHINESE HEALTHCARE THERE WILL BE RAPID GROWTH IN HEALTHCARE SPENDING AND THERE IS A STRONG DESIRE TO IMPROVE HEALTHCARE SERVICES THERE IS A DESIRE TO MOVE TOWARD INTERNATIONAL STANDARDS FOR SERVING THE GROWING MIDDLE CLASS AND WEALTHY POPULATION THERE IS LIMITED SKILL IN CHINA TO ACCOMPLISH CHINA’S HEALTHCARE IMPROVEMENT OBJECTIVES FOREIGN SKILLS ARE CONSIDERED IMPORTANT AND A FEW UNIVERSITIES AND HOSPITALS, SUCH AS DUKE, ARE HELPING BY BRINGING THEIR SKILLS TO CHINA BRINGING OUR HEALTHCARE SERVICE IMPROVEMENT SKILLS TO CHINA WILL BE VALUABLE TO CHINA AND A GOOD BUSINESS FOR US

THE DORENFEST GROUP VISION FOR CREATING A MODEL HOSPITAL IN CHINA PROVIDES IMPROVED QUALITY OF CARE TO ITS PATIENTS OPERATES AT A HIGHLY EFFICIENT LEVEL THROUGH EFFECTIVE USE OF SYSTEMS AND BETTER WORK PROCESSES OFFERS ITS SERVICES TO PATIENTS AT AN AFFORDABLE COST CREATES A HIGHLY SATISFIED PATIENT POPULATION WITH THE PATIENTS OBSERVING A NOTICEABLE IMPROVEMENT IN THE SERVICES AND TREATMENTS PROVIDED BY THE HOSPITAL UTILIZES APPROPRIATE DIGITAL TECHNOLOGY TO CREATE A STATE OF THE ART “DIGITAL HOSPITAL”

CHINA BUSINESS OPERATIONS HOSPITAL MANAGEMENT CONSULTING OPERATIONS IMPROVEMENT STRATEGIC PLANNING FOR NEW I.T. SYSTEMS I.T. SYSTEM SELECTION I.T. SYSTEM IMPLEMENTATION WORK PROCESS IMPROVEMENT MANAGEMENT TRAINING OTHER SERVICES GENERAL MANAGEMENT CONSULTING FOR HEALTHCARE COMPANIES MARKET ANALYSES PRODUCT STRATEGIES MARKET RESEARCH HOSPITAL CONTRACT MANAGEMENT WORK WITH HOSPITALS NEEDING NEW MANAGEMENT (INTERIM OR LONG TERM) IMPLEMENT NECESSARY MANAGEMENT PERSONNEL AND SUPPORT SYSTEMS HOSPITAL OWNERSHIP AND IMPROVEMENT

CURRENT STATUS OF DORENFEST GROUP CHINA FORMED DE RUI YI LIAO ZI XUN, A WFOE BASED IN SHANGHAI IN 2006 RECENTLY COMPLETED PHASE I PROJECT TO HELP SHENZHEN HEALTH BUREAU PLAN ITS REGIONAL HEALTH NETWORK AND DIGITAL HOSPITAL PROJECTS DEVELOPING OTHER PROJECT ACTIVITIES REVIEWING CANDIDATES TO IMPLEMENT MODEL HOSPITAL VISION NOW BUILDING A MANAGEMENT TEAM DEVELOPING PARTNERING RELATIONSHIPS TO DELIVER SERVICES REVIEWING SOFTWARE SYSTEMS IN CHINA AND OTHER COUNTRIES TO DEFINE THE BEST SOFTWARE AVAILABLE FOR IMPLEMENTATION IN CHINA TO PARTNER ON I.T. PROJECTS FOR HOSPITAL CLIENTS

DUKE BEIJING HEALTHCARE LEADERSHIP FORUM THE U.S. HEALTHCARE INDUSTRY AND ITS USE OF INFORMATION TECHNOLOGY

U.S. HEALTHCARE COSTS AS A PERCENT OF GDP ($ IN BILLIONS) 20.0% $4,043.6 20% GDP 1970- 2004 (not ‘75) $ 75.1 245.8 426.8 696.0 990.3 1,299.5 1,877.6 $1,987.7 15% $990.3 $1,299.5 $696.0 $426.8 10% $245.8 $75.1 5% 0% 1970 1975 1980 1985 1990 1995 2000 2005 2015 CMS Forecast SOURCE: CENTERS FOR MEDICARE AND MEDICAID SERVICES

OPPORTUNITIES TO IMPROVE THE HEALTHCARE DELIVERY PROCESS HAVE BEEN PURSUED FOR MANY YEARS GREAT REDUNDANCY OF INFORMATION HIGH ERROR POTENTIAL LACK OF TIMELINESS HIGH COST ORGANIZATION COMPLEXITY

HOSPITALS SEEK THE E.H.R. AS THE HOLY GRAIL THROUGH FOUR GENERATIONS OF I.T. SYSTEMS FINANCE SYSTEMS (1970s) LIMITED CLINICAL SYSTEMS (LATE 1970s AND 1980s) MORE ADVANCED CLINICAL SYSTEMS (1990s) ELECTRONIC HEALTH RECORDS (2000s)

HEALTHCARE REFORM BROUGHT INTEGRATED DELIVERY AND MANAGED CARE Hospital A Doctor’s Office Government Reimbursement Blood Bank Home Health Agency Hospital B Patient Data Insurance Payor Nursing Home Outpatient Clinic

H.I.T. MARKET TRENDS ($ IN BILLIONS) $30.5 $28.0 $25.8 $23.6 $21.6 $20.0 $19.0 $18.5 $16.0 $13.6 $11.6 $10.0 $8.5 $7.5 Actual Forecast 2006 ANNUAL GROWTH RATE: 6.7% 13.3% 17.6% 16.0% 17.2% 17.6% 15.6% 2.7% 5.2% 8.0% 9.3% 9.3% 8.9% 8.9% SOURCE: SHELDON I. DORENFEST & ASSOCIATES, LTD.

1990's Systems and Surrounding Integration POORLY IMPLEMENTED CHANGE HAS LAYERED REDUNDANT WORK STEPS ON TOP OF ORIGINAL INEFFICIENCY GROWTH IN REDUNDANCY 4x Legacy I.T. Systems Manual New Thrusts of the 2000's NOW 3x 1990's Systems and Surrounding Integration 2x BEFORE I.T.=1x TOTAL HOSPITAL WORK PROCESS

U.S. HAS MADE MUCH MORE PROGRESS RECENTLY TODAY OVER 100 HOSPITALS HAVE IMPLEMENTED CPR WITH CPOE MANY OTHERS ARE IMPLEMENTING CPR AND CPOE RIGHT NOW I.T. IS A MAJOR TOOL FOR IMPROVING HOSPITAL PERFORMANCE

BUT U.S. HOSPITALS HAVE BEEN INEFFICIENT INVESTORS OVERSIMPLIFICATION OF I.T. INVESTMENT CONSIDERATIONS (I.E., DID NOT KNOW WHAT THEY DID NOT KNOW) POOR PROJECT PLANNING IMPROPER ASSESSMENT OF SOFTWARE PRODUCT CAPABILITIES IMPLEMENTED A SERIES OF “1/2 SYSTEMS” WITHOUT PROPERLY REDESIGNING THE WORK PROCESS INDUSTRY MANAGEMENT DID NOT LEARN ENOUGH FROM PAST MISTAKES, AND THEREFORE, CONTINUED TO REPEAT THE SAME MISTAKES THIS LEFT THE NATION WITH REDUNDANT, CONVOLUTED, EXPENSIVE, ERROR PRONE WORK PROCESSES THAT PRESENTLY CRIPPLE THE COUNTRY’S HEALTHCARE SYSTEM

DUKE BEIJING HEALTHCARE LEADERSHIP FORUM CHINA CAN BENEFIT FROM THE U.S. H.I.T. EXPERIENCE

INTRODUCTION TO CHINA WHEN I FIRST CAME TO STUDY THE HEALTHCARE INDUSTRY IN CHINA IN LATE 2004, ATTITUDES TOWARD H.I.T. WERE VERY CONSERVATIVE: HOSPITAL MANAGEMENT WAS NOT HAPPY WITH I.T. SYSTEMS IN USE FUNCTIONALITY OF APPLICATION SOFTWARE AVAILABLE FOR PURCHASE IN CHINA WAS VERY LIMITED AND THE MOST FUNCTIONAL SYSTEMS WERE SELF- DEVELOPED THE SKILLS TO MANAGE MAJOR I.T. UPGRADES WERE FELT TO BE IN SHORT SUPPLY AS A RESULT, HOSPITAL MANAGEMENT WAS HESITANT TO MAKE MAJOR UPGRADES TO I.T. SYSTEMS AT THAT TIME, THERE WAS VERY LIMITED BUYING OF MAJOR NEW I.T. SYSTEMS IN CHINESE HOSPITALS DURING THE PAST 2 YEARS, THE SITUATION HAS CHANGED MANY HOSPITALS ARE CONSIDERING MAJOR UPGRADES OF I.T. SYSTEMS BIG BUDGETS ARE STARTING TO BECOME AVAILABLE TO MOVE TOWARD DIGITAL HOSPITALS WITH ELECTRONIC MEDICAL RECORDS, PACS AND OTHER SYSTEMS BUT WEAK APPLICATION SOFTWARE AND IMPLEMENTATION SKILLS ARE DELAYING PROGRESS

CHINA HEALTHCARE I.T. IS MOVING TO ITS SECOND GENERATION CHINA HOSPITAL WORK PROCESSES ARE REDUNDANT AND ERROR PRONE WITH GREAT OPPORTUNITIES FOR IMPROVEMENT THROUGH APPROPRIATE USE OF I.T. CHINESE HOSPITALS WOULD LIKE TO TAKE A BIG LEAP FORWARD IN IMPROVING WORK PROCESSES AND IN DIGITIZING ITS HOSPITALS THE MINISTRY OF HEALTH’S GUIDELINES FOR HEALTH I.T. DEVELOPMENT (2003-2010) CALLS FOR ELECTRONIC MEDICAL RECORDS AND REGIONAL HEALTH NETWORKS TO BE IMPLEMENTED PROVIDING MUCH MOMENTUM FOR HOSPITALS AND HEALTH BUREAUS TO INVEST MORE IN I.T. NOW CHINA HAS NOT INVESTED A LOT OF RESOURCES IN I.T. SYSTEMS AND INFRASTRUCTURE TO GET TO ITS PRESENT LEVEL OF I.T. USE. WHILE CHINA WOULD LIKE TO CONTINUE THIS APPROACH AS IT TAKES ITS NEXT STEPS FORWARD, CHINA’S I.T. GOALS WILL REQUIRE GREATER INVESTMENT

CHINA HEALTHCARE I.T. IS MOVING TO ITS SECOND GENERATION (CONTINUED) THERE IS CONCERN AMONG H.I.T. EXPERTS IN CHINA ABOUT THE READINESS OF H.I.T. SOFTWARE PRODUCTS, HARDWARE PLATFORMS, AND INTEGRATION TOOLS TO FACILITATE THE ACCOMPLISHMENT OF CHINA’S GOALS THERE IS ALSO CONCERN AMONG H.I.T. EXPERTS IN CHINA ABOUT THE IMPLEMENTATION SKILL AND EXPERIENCE AVAILABLE IN CHINA TO TAKE THIS BIG LEAP FORWARD THAT IS NOW UNDERWAY SO CHINESE HOSPITALS AND HEALTH BUREAUS ARE CAREFULLY CONSIDERING HOW TO TAKE THEIR NEXT STEPS SUCCESSFULLY FOR CHINA TO ACCOMPLISH ITS OBJECTIVE SUCCESSFULLY REQUIRES THE FOLLOWING: OVERCOMING RESISTANCE TO CHANGE KNOWING HOW TO MANAGE CHANGE LEARNING FROM THE U.S. EXPERIENCE DOING MORE OF WHAT THE U.S. DID RIGHT AND NOT MAKING U.S. MISTAKES DEVELOPING EXPERTISE IN AREAS OF NEED

DUKE BEIJING HEALTHCARE LEADERSHIP FORUM A GOOD APPROACH TO SUCCESSFULLY IMPLEMENTING MAJOR I.T. UPGRADES

THE I.T. UPGRADE PROJECT SHOULD BE DONE IN PHASES STRATEGIC PLAN SYSTEM SELECTION WITH FINAL IMPLEMENTATION PLAN SYSTEM IMPLEMENTATION

STRATEGIC PLANNING PHASE ESTABLISH A PLANNING COMMITTEE GAIN THOROUGH UNDERSTANDING OF THE CURRENT OPERATIONS AND WORK FLOW OF THE HOSPITAL IDENTIFY OPPORTUNITIES TO IMPROVE OPERATIONS AND WORK FLOW THROUGH NEW I.T. SYSTEMS DEFINE THE VALUE OF THE OPPORTUNITIES FOR IMPROVEMENT IN TERMS OF THE FOLLOWING AREAS: REVENUE IMPROVEMENT TIME SAVINGS OTHER COST REDUCTION REDUCTION OF ERRORS OTHER QUALITY OF CARE IMPROVEMENTS RAISING LEVEL OF PATIENT SATISFACTION SELECT THE HIGHEST PRIORITY IMPROVEMENTS FOR IMPLEMENTATION DEFINE THE NEEDED I.T. SYSTEMS AND CHANGES IN WORK FLOW PROCESSES TO ACCOMPLISH THE IMPROVEMENTS DEFINE USER ATTITUDES TOWARD AND TECHNICAL LIMITATIONS OF CURRENT I.T. SYSTEMS AND DETERMINE REPLACEMENT REQUIREMENTS

STRATEGIC PLANNING PHASE (CONTINUED) DECIDE WHETHER TO BUY OR DEVELOP THE I.T. SYSTEM UPGRADE PROVIDE THE NECESSARY EDUCATION TO HOSPITAL MANAGEMENT, PHYSICIANS, I.T. USERS, AND I.T. STAFF SO THAT THEY CAN BETTER UNDERSTAND THE REQUIREMENTS TO SUCCESSFULLY MANAGE THE CHANGE CREATE AN ECONOMIC ANALYSIS SUMMARIZING EXPECTED COSTS AND BENEFITS OF THE CHANGE PROGRAM GAIN GENERAL APPROVAL FROM HOSPITAL MANAGEMENT TEAM FINALIZE A STRATEGIC PLAN TO IMPLEMENT THE OPERATIONS IMPROVEMENT PROGRAM

SYSTEM SELECTION AND IMPLEMENTATION PLAN PHASE ESTABLISH A SELECTION COMMITTEE OF KEY USERS, I.T. PERSONNEL, AND MANAGEMENT PREPARE A FUNCTIONAL REQUIREMENTS DOCUMENT DEFINING THE OBJECTIVES, FEATURES, TECHNICAL REQUIREMENTS, AND ANY OTHER KEY CHARACTERISTICS OF THE NEW SYSTEM PREPARE A TENDER REQUEST (REQUEST FOR VENDOR PROPOSALS) DEVELOP EVALUATION CRITERIA AND APPROACH COMPARE AND EVALUATE PROPOSALS FOR LEADING SUPPLIERS: – CONDUCT VENDOR SYSTEM DEMONSTRATIONS USING PREPARED SCRIPTS – CONDUCT TELEPHONE REFERENCE CHECKS – CONDUCT USER SITE VISITS

SYSTEM SELECTION AND IMPLEMENTATION PLAN PHASE (CONTINUED) MAKE FINAL SELECTION BEGIN NEGOTIATING CONTRACT DEVELOP DETAILED IMPLEMENTATION PLAN WITH OVERALL GOALS, ORGANIZATIONAL REQUIREMENTS, SPECIFIC TASKS, TIMETABLE BY TASK, AND STAFFING RESPONSIBILITY FOR EACH TASK DEVELOP MANAGEMENT PROCESS FOR OVERSEEING THE IMPLEMENTATION FINALIZE THE CONTRACT

SYSTEM IMPLEMENTATION START IMPLEMENTING PLAN MONITOR RESULTS MAKE NECESSARY ADJUSTMENTS AND REVISIONS KEEP A CLOSE WATCH ON PROGRESS TO MAKE SURE YOU AVOID MAJOR PROBLEMS

THANK YOU. SHELDON I. DORENFEST FOR MORE INFORMATION CONTACT: THE DORENFEST CHINA THE DORENFEST GROUP HEALTHCARE GROUP NBC TOWER, SUITE 2725 RENMIN ROAD NO. 988 455 N. CITYFRONT PLAZA. DRIVE JINGTIANDI INTERNATIONAL TOWER CHICAGO, IL 60611-5555 SUITE 908 UNITED STATES OF AMERICA SHANGHAI, CHINA PHONE: 312-464-3000 PHONE: 13816109802 FAX: 312-467-0541 WEB SITE ADDRESS: www.dorenfest.com SHELDON’S E-MAIL ADDRESS: sheldon@dorenfest.com E-MAIL ADDRESS: info@dorenfest.com