Wage Index Expert Review Program for Houston-Baytown-Sugarland, TX By R-C Healthcare Management Services, Inc.

Wage Index Expert Review Program for the Houston-Baytown-Sugarland, TX CBSA Wage Index Group By R-C Healthcare Management Services, Inc. July 21, 2005 For further information, please contact Arnold Silver, Mike Webdale or Ken Webdale at (800) or (602)

About R-C Healthcare Management Company’s Background and Experience #1 in wage index consulting since 1990 Clients include 24 hospital associations and 41 hospital groups over the years Ongoing consultants to hospital associations in NY (GNYHA), CA (HASC), Kansas City, CT and WI We have worked with over 50% of U.S. hospital payroll dollars Estimated savings to clients – over $2 billion (and counting!) Principals are two former hospital CFO’s with 26 years of experience in wage index consulting and analysis

Company’s Principals Arnold P. Silver, CPA, FHFMA – President 46 years in hospital financial management CFO of three major medical centers National President of HFMA, Frederick C. Morgan Award, 1978 Kenneth M. Webdale, CPA, FHFMA – Senior VP 36 years in accounting and finance 10 years as Assistant Administrator and CFO Public accounting, including Partner for 13 years

Wage Index Expert Review (WIER) Team of Experts Arnold P. Silver, CPA, FHFMA Kenneth M. Webdale, CPA, FHFMA Raymond J. Cisneros, CPA, FHFMA, CMCP K. Michael Webdale, CPA Daniel M. Silver, CHE, MHSA Theodore N. Giovanis, FHFMA, MBA

Short Biographies of WIER Team Experts Raymond J. Cisneros, CPA, FHFMA, CMCP Retired partner of Deloitte & Touche and former National Health Care Practice Director CFO & COO at three major medical centers Past National Chairman of HFMA, K. Michael Webdale, CPA Experienced healthcare industry CPA Specialist in calculating and projecting area wage indices, training hospital staff in wage index optimization techniques and providing assistance to hospitals filing appeals with FI’s or CMS Active member of HFMA, HAF and ASCPA

Short Biographies of WIER Team Experts Daniel M. Silver, CHE, MHSA Specialist in hospital revenue cycle and reimbursement issues including the Medicare wage index and bad debt, analysis of specific hospital payment factors and validation of expected payments, regulatory updates and database analysis and reporting Certified Diplomate in the American College of Healthcare Executives (ACHE), past president of Healthcare Administrators Forum of Arizona (HAF) and active member of HFMA Theodore N. Giovanis, FHFMA, MBA CEO of one of the country’s top regulatory consulting firms Former CFO at two major medical centers Washington representative for a big-six accounting firm Director of the Regulatory Affairs Agenda for the Washington, D.C. office of HFMA

Company’s Resources Massive database of past wage index history for all U.S. hospitals Modeling capability for strategic planning purposes Database of new (PPS 20) wage index filings for all hospitals

Company’s Regulatory Practice Associates T. Giovanis & Company, Baltimore, MD – premier regulatory consulting firm MC AnalyTXs, Inc., Houston, TX – Medicare expert consulting firm

Texas Hospitals and R-C Healthcare Management Wage index improvement projects performed in: Amarillo, 1999 Austin, 1999 El Paso, 1999 Houston (The Methodist Hospital), 1999 Lubbock, 1999 Texarkana, 1998 Waco, 1999

History of National vs. Houston & Dallas AHW

Model of Improvement for PPS 20 Impact of 1 Percentage Point Increase in the Wage Index

Optimization Strategies for Houston- Baytown-Sugarland CBSA Hospitals Address the following areas: Dietary, laundry and housekeeping Occupational mix adjustment Houston’s O/M is.0031 and has a very small impact Report salaried and contracted LPN’s, nurse aides, medical assistants and patient transport

Improvement Potential If all of the major hospitals with salaries in excess of $200 million were brought up to at least the national average hourly wage, the CBSA’s wage index would improve by 1 percentage point If all of the major hospitals were brought up to the CBSA average, the improvement would be 3 percentage points If all of the major hospitals were brought up to the level of the highest salaried hospital in the CBSA (St. Luke’s at $32.30), the improvement would be 5 percentage points We estimate WEIR will improve the wage index by 2 – 3 percentage points

Wage Index Expert Review (WIER) Program Overview The Wage Index Expert Review includes the following for each participating hospital: An on-site, detailed review of all of the source data that contributed to the hospital’s Worksheet S-3, Parts II and III with verification and reconciliation of the data and research conducted for any potentially out-of-standard areas; An in-depth review of hospital books and documents to determine if additional items should be included or modified in order to generate increased reimbursement dollars; Preparation of the S-3 refiling and the revision letter for the hospital to submit to its fiscal intermediary;

An exit interview at the completion of the on-site review visit for the purpose of informing hospital personnel of wage index filing findings; Follow-up of the resubmission through the hospital’s fiscal intermediary and CMS as needed, including a verification that all revisions have been updated in each Public Use File to ensure that the proper revisions are used in the calculation of the Area Wage Index for each CBSA; Preparation of a report on the results of the WIER for each hospital; and Strategic assistance with occupational mix filings. Wage Index Expert Review (WIER) Program Overview

WIER Program’s Proven Results The superiority of R-C Healthcare Management’s WIER Program was recently proven in the New York City metropolitan area: The WIER Program goal was an AHW increase of approximately 2.6%. Competition was stiff among R-C Healthcare Management and several large accounting firms that recently entered the wage index consulting field. The market was divided, primarily between R-C Healthcare Management and E&Y.

WIER Program’s Proven Results In approximately two months, R-C Healthcare Management performed the WIER program at 34 major NYC hospitals (in addition to client hospitals in CT, MO and WI). The final results in NYC: R-C Healthcare Management2.7% increase in AHW Nearest competitor1.0% increase in AHW Other competitor(6.6%) loss in AHW

Conclusion Why R-C Healthcare Management? One of the founders of the wage index consulting industry Mature, highly-experienced staff of wage index consulting professionals State-of-the-art knowledge of national wage index issues and accounting protocols based upon: -Position as industry leader in wage index consulting -Longevity of client relationships Broad-based, nationwide experience in assisting all sizes of hospitals and CBSA’s to optimize their Medicare AHW’s and AWI’s

Conclusion Proven results Have impacted the NYC AWI by at least $100 million per year for the past 12 years Developed a teaching hospital plan for the St. Louis area that added $50 million in value Found a 0.2% error in the final national AHW calculation –National impact= $250 million –Client impact= $ 10 million Long-standing, well-developed working relationships with CMS and FI’s throughout the country Industry-wide reputation for honesty, integrity, and effectiveness that has endured for many years

R-C Healthcare Management Services, Inc N. Tatum Blvd., Ste. 132 Phoenix, AZ (800)