Hospital/Healthcare Provider Analysis 7/9/15

HCA owns and operates approximately 166 hospitals and approximately 113 freestanding surgery centers in 20 states and London, England. CEO: R. Milton Johnson History: –Founded in 1968 to manage Park View Hospital in Nashville –Quickly expanded the scope of its venture by assembling a group of hospitals, in order to create economies of scale and enhance the quality of care in communities across the country. –Initial Public Offering (IPO) on NYSE in 1969 –1988 completed $5.3B leveraged buyout and took the company private –1992 IPO –2006 again taken private for 33B –2011 IPO – HCA is composed of locally managed facilities that include approximately 165 hospitals and 115 freestanding surgery centers in 20 states and England History and Background 2 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna

Geographic Operations 3 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna

166 Inpatient acute care 113 Outpatient services: PT/OT, speech therapy, laboratory services, prosthetics, free-standing surgery centers Emergency care Rehabilitation facilities Psychiatric hospitals Physician services Primary Products and Services 4 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna

Key Customers: 100% of HCA’s revenue is derived from urban markets –Medicare –Medicaid –Commercially insured –Self/pay (uninsured) Key 2014 changes: Approximately 5% of all US hospital services occur at an HCA facility Uninsured admission dropped 58% Of the 134,000 federal exchange patients, 62% of them had no prior treatment at HCA Key Customers 5 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna

Patient Mix By Payer Type 6 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna

“Highest commitment” (Mission statement?): To deliver superior quality of care throughout our system for every patient, every day. Mission and Priorities 7 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna

Priorities Improvement in both patient outcomes and patient service. –Anticipate reimbursement based on the quality and value of services –New position: Chief Patient Experience Officer –Responsible for leveraging best practices developed across HCA’s hospitals and other providers. Maximize volume metrics –Patient volume, market penetration, breadth of facilities –Leverage size and scale to deploy new technology –Clinical-data warehouse, big data for predictive modeling and personalized medicine. –Patient portal to centralize an individual’s health-care history, and ofer suggestions for personalized care to the provider. Mission and Priorities 8 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna

Priorities Favorable payor mix –Medicaid Cost management. Capital deployment. –$2.2 billion in capital spending –Three hospitals in 2015 –Many surgery centers –Clinics / physician practices –Increase bed and emergency room capacity –Latest in medical equipment. –Infection control –MSO purchase, collaborating with SCCIPA Mission and Priorities 9 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna

Recent Performance around the Five Drivers 10 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna - Significant LT Debt $29.3B – an albatross going back to before Liabilities are $37.7B vs. Assets of $31.2B (-$6.5B) CignaHCAHCA PY Cash$1,420$566$414 Cash Flow$1,994$4,448$3,680 Total Revenues$34,914$36,918$34,182 Operating Profit$3,304$3,481$2,946 Operating Profit Margin9.50%9.42%8.62% Net Profit$2,102$1,875$1,556 Net Profit Margin6.00%5.10%4.55% EPS$7.83$4.16$3.37 ROE19.50%-23.80%-18.81% Revenue Growth7.80%8.00%3.54% Net Income Growth42.40%20.50%-3.05% EPS Growth51.20%23.40%-2.88%

Largest for profit hospital system in US (only the VA is larger) Provide medical care (inpatient, outpatient, surgical, ambulatory, etc.) for customers some of which are Cigna customers. 167 hospitals, 113 free standing surgery centers (in US & UK) with over 42,000 beds Located in 20 states, almost ½ of their locations in FL and TX Large rural hospital population Cigna Relationship We contract with HCA to provide services to our customers. Need to contract individually with each market which can be difficult Working to collaborate with them in several markets (TN) With ACA (and recent Supreme Court decision), clears the way for hospitals to expand into new geographic areas and could lead to consolidation, mergers, etc. Impact on Cigna's financial performance Revenue & Profit –For markets with large HCA presence, we have to have them in our network in order to sell/retain business. Negotiations can be tough when they have leverage over us in certain markets. Based on our contracts with HCA, increased patient utilization can place a downward pressure on profit margin. Role in Healthcare Environment 11 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna

As a large HCP, they are able to leverage their size for significant discounts Expect additional acquisitions to pressure currently negotiated rates Summary 12 Confidential, unpublished property of Cigna. Do not duplicate or distribute. Use and distribution limited solely to authorized personnel. © 2015 Cigna

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