residential | education | commercial | arts & entertainment SPOTLIGHT ON MARKET STRENGTH

WISCONSIN OFFICE OF RURAL HEALTH Agenda National Trends Hospital Strength Index Market Strength Pillar WI Hospital Performance Market Snapshots Market Case Study Market Assessment

A CALL TO ARMS Pay for Performance (Value Based Purchasing) Cutting Costs - $76.4 Billion proposed cuts to DHHS Flex, SHIP, Cost Plus, CAH Distance, Necessary Provider Status, Increasing Productivity Reducing Cost Increasing Revenue ACO Development “…critical access hospitals (need) to strategically plan on three years to be off the cost-plus model.” ~ James Orlikoff “American health care system is transitioning from a “Pay for Volume” system to a “Pay for Value” system. In the years ahead, CAHs will be challenged to maximize and document their value, as well as calculate where they fit into the new value-based reform models.” ~ HRSA Financial Summit (June 2012)

CHANGING LANDSCAPE?

MARKET STRENGTH STATES WITH EXPECTED MARKET GROWTH Top 10 Growth States DCNVCACOAZNDUTFLWATXMOMDGAMNORSCNYNETNNCDEVAAKMA # Hospitals with Top Quartile Growth Percentage of Hospitals in State 88%64%52%48%47%45%43%42% 35%34% 33%32%31%30%29% 27% 25% MSOKPAALNMLAILNJKYKSINARIAIDMTOHSDCTWIWVMIWYME # Hospitals with Top Quartile Growth Percentage of Hospitals in State 20% 19% 18%17%16% 15%13%12% 10%9%4% 3%0%

How Can Hospitals Weather the Storm? Hospital Strength Index Know your market What services are impacting your margin (+ and -) Understand how changes in reimbursement could potentially impact you if it happened today Value = Quality / Cost Capital planning for the future PREPARATION

THE INDEX: “ROLL-UP” AND DETAIL

SPOTLIGHT ON MARKET STRENGTH Market Strength What is the hospital’s market position, level of competition and the future healthcare demand of its service area? Competitive Strength Index Competitive Intensity Index Market Size and Growth Index ++ Index Score Rates: Market position (share) based on your facility’s HHI* Market competition based your competitors’ HHI* Market potential based on healthcare demand projections Data Source: Medicare Service Area File Esri Demographics, Proprietary Demand Models How to Interpret: Higher scores reflect a dominant market position Higher scores reflect lower direct competition levels Higher scores reflect stronger future market growth

MARKET STRENGTH WISCONSIN OVERALL PERFORMANCE

Competitive Strength IndexCompetitive Intensity IndexMarket Size & Growth Index Index Score Rates: Market position (share) based on your facility’s HHI* Market competition based your competitors’ HHI* Market potential based on healthcare demand projections Data Source: Medicare Service Area File Esri Demographics, Proprietary Demand Models How to Interpret: Higher scores reflect a dominant market position Higher scores reflect lower direct competition levels Higher scores reflect stronger future market growth

MARKET STRENGTH MARKET SNAPSHOT

MARKET STRENGTH MARKET DEMOGRAPHICS Service and Strategic Plans in line with expected demographic changes?

MARKET STRENGTH MARKET SHARE Medicare Inpatient Market Share Typically see CAHs with 35% Even distribution of share among competition Unless “System Affiliate” Visiting Provider Referrals

MARKET STRENGTH MARKET ASSESSMENT – CASE STUDY

residential | education | commercial | arts & entertainment FOR MORE INFORMATION design General Information Troy Brown, Client Relations Manager Market Assessments Hunter Clark, Account Executive