1 The BayCare Experience: Physician Joint Ventures Paul R. Summerside, MD Chief Medical Officer BayCare Clinic, LLP President, Board of Managers BayCare Aurora, LLC

Aurora BayCare Medical Center (ABMC) ABMC is an acute care hospital that opened in 2001 Joint Venture of BayCare Clinic (a physician partnership) and Aurora Health Care (a not-for-profit organization) 40% Physician ownership 167 Beds including the following services: - General Medical and Surgical- Womens Health - Adult ICU/eICU- Obstetrics - Cardiovascular- Level III Neo-natal ICU - Neuroscience- Pediatric Inpatient - Orthopedic- Inpatient Rehabilitation - Emergency Services including a Level II Trauma Center- Oncology Located in Green Bay, Wisconsin 1,100 employees Operates under the Planetree philosophy: patient centered care in a healing environment

BayCare History Independent Specialty Practices Form MSO Letter of Intent w/ AHC Integration of MSO to BayCare Clinic Finalize JV Operating Agreement Break Ground on ABMC Hospital 9/01 - Opening ABMC Tertiary Hospital ABMC Reaches Calendar Year Profitability ABMC Pays off Operating Line and Accumulates Cash Reserve ABMC 5 th Consecutive year w/ > 12% margin and begins seventh expansion

Joint Ventures….Why? –Am I in trouble? –Am I at risk? –Will I be at risk? Risk Avoidance = 10x Pleasure Pursuit

Change

1.Fixed Costs 2.Physician Loyalty 3.Capital Needs 4.Regulatory Concerns 5.Safety/Quality 6.Payor Mix Risk Hospital System Anxieties

Maslows Hierarchy of Needs Understanding Motivation

1.Loss of lifestyle 2.Loss of Control 3.Loss of Colleagues 4.Loss of Respect Physician Fears/Needs

0Volume $ Millions LOSS COST PROFIT REVENUE Hospital Finance

0Volume $ Thousands LOSS COST PROFIT REVENUE Physician Finance

0Volume $ Thousands LOSS COST PROFIT I MoveI Stay Risk Corridor REVENUE Physician

0Volume $ Millions LOSS COST PROFIT Ortho HappyOrtho Sad Risk Corridor REVENUE Hospital Finance Fears

Institutional: Greatest Good for the Greatest Number (Missions) Physician: My Income, My Overhead, My Time, My Patients (Goals) Clash of Cultural Values

Reliance on benevolent dictatorships w/ a Mission Psst… remember RESPECT and Control! Physician Fears…

--Eric Berkowitz Physician/Hospital Engagement

The Renter vs. Owner

Neurological Spine Costs Among Six Centers

Key personnel like each other; Understanding partners cultural values; Respect of partners value; Willingness to relinquish control. (If you love them, set them free!) Keys to Successful Join Ventures

If you want to be a lion tamer…. you better at least like the animals.

People will do what you ask if they perceive that doing what you seek will serve what it is that they personally value. --Dwyer The Value Proposition

Hospital System Anxieties Fixed Costs Physician Loyalty Capital Regulatory Safety/Quality Payor Mix Risk Loss of Profitability and Mission Physician Anxieties Loss Lifestyle Loss of Control/Quality Loss of Colleagues Loss of Respect Aligning Incentives (Fears!)

Ownership 40% BayCare Physicians 60% Aurora All Stark Controlled Revenues in the JV Governance (MAD) Board Five Aurora and Five BayCare 70% Super Majority Rule Partner Veto all Self-Dealing Non-competition BayCare Aurora Experiment

Results: –BayCare Clinic 1999 – 53 specialists »$44 million net collections 2007 – 100 specialists »40 physician extenders »$105 million net collections BayCare Aurora Experiment

BayCare Aurora LLC 1999 – Two Surgery Centers »$8 million gross revenues 2007 – Tertiary Hospital System »$200 million gross revenues »Largest Taxpayer in County BayCare Aurora Experiment

IP and OP Discharges Since 2002

* Source: Aurora Loyalty Index Data Through Q Patient Satisfaction – Inpatient Services

* Source: Aurora Loyalty Index Data Through Q Patient Satisfaction – Outpatient Ambulatory

In the Absence of a Great Dream… Pettiness Prevails. --Peter Senge