Financial Outlook for U.S. Not-for-Profit Healthcare Sector Drew Corrigan May 5, 2011

© 2011 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 SEA 1 Generally, rating agencies continue to have a negative outlook for the U.S. Not-for-Profit Healthcare sector. Slow economic recovery Ongoing revenue pressures

© 2011 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 SEA 2 U.S. Quarterly Unemployment Rate Source: United Status Bureau of Labor Statistics

© 2011 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 SEA 3 Slow Economic Growth Adds Pressure to Volume and Payer Mix Measures Patients defer elective healthcare services Rising charity care and bad debt expense Budget pressures at federal and state levels impacting Medicare and Medicaid reimbursement rates Unfavorable changes in payer mix away from commercial payers Increased reimbursement pressures across all payers Financial pressures and decreasing membership at health insurers

© 2011 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 SEA 4 Declining Medicare Reimbursement Rates Source: Centers for Medicare and Medicaid Services

© 2011 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 SEA 5 Hospital Revenues Threatened with Rate Reductions Medicare payment rates declined for first time since 1998 Major hospital revenue sources under pressure Medicaid rates at risk due to state budget deficits and expiring stimulus funds Revenue Source% RevenueFactors Medicare43%RAC reviews, medical necessity, Medicare trust solvency Medicaid12%State budget gaps, expiring stimulus Private insurance43%Industry consolidation, membership losses

© 2011 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 SEA 6 Revenue Growth Declining – Performance Sustained by Cutting Expense Growth Source: Moody’s Not-for-Profit Healthcare Medians for 2009 %

© 2011 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 SEA 7 Expense Management will Likely Become More Difficult Many systems have already done much to contain cost in areas of wages and supply chain Other areas of anticipated increased expense: – Pension expense due to declining interest rates – Interest expense reflecting higher cost from shift to fixed rate bonds – Bad debt expense – Physician related costs due to increased alignment strategies – IT expense of new systems to satisfy “meaningful use” requirements – Strategic expense related to considerations of Accountable Care Organizations

© 2011 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 SEA 8 LOC Expirations/Renewals Source: Citigroup

© 2011 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 SEA 9 Balance Sheets Retain a Number of Heightened Risks Bank LOC renewal risk Pension obligations Exposure to non-cancelable operating leases Negative valuation of swap portfolios Increased capital spending funded with cash reserves Changing views on “quality” of days cash metrics

© 2011 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 SEA 10 Many Uncertainties Remain Regarding Healthcare Reform Risks surrounding the legislation itself (additional management distraction or possible missed opportunities) Legal challenges to the legislation and constitutionality Many questions remain: – How will it be implemented? – How will compliance be defined? – How should organizations proceed?

© 2011 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 SEA 11 Positive Factors for the Not-for-Profit Healthcare Sector Strong management teams respond well to challenges Strong liquidity and stable investment returns Provider fees in many states create short-term relief from Medicaid pressures Generally stronger balance sheets emerging even in challenging environment

© 2011 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 SEA 12 Factors Contributing to Greater Consolidation Within Healthcare Increased need for capital relating to plant modernization and IT systems Greater limitations on access to capital due to wider credit spreads and more expensive bank liquidity Cost of compliance with Medicare audits and new requirements under health care reform Increased reimbursement pressures across all payers Large unfunded pension liabilities Possibility that benefits of tax-exemption will further diminish Benefits of economies of scale, including increased bargaining power with suppliers, payers, and labor