Forecasting the Impact of Healthcare Reform Forecasting the Impact of Healthcare Reform Presented by: Richard L. Rollins Rollins Capital Strategies for West Virginia HFMA, January 23, 2014

AGENDA Change in Uninsured PopulationChange in Uninsured Population Expansion of MedicaidExpansion of Medicaid Change in Gross RevenueChange in Gross Revenue Bad Debts and Charity CareBad Debts and Charity Care Medicare Payment UpdatesMedicare Payment Updates 2Rollins Capital Strategies

AGENDA (CONTINUED) Other AdjustmentsOther Adjustments Disproportionate ShareDisproportionate Share Exchange ReimbursementExchange Reimbursement Commercial and Other Payor ContractualsCommercial and Other Payor Contractuals SummarySummary 3Rollins Capital Strategies

PATIENT PROTECTION AND AFFORDABLE CARE ACT Signed Into Law Signed Into Law The Anticipated Impact of PPACA is Profound and Far ReachingThe Anticipated Impact of PPACA is Profound and Far Reaching In Order to Plan for Impact, You Must Understand the Specific Changes That Will OccurIn Order to Plan for Impact, You Must Understand the Specific Changes That Will Occur 4Rollins Capital Strategies

CHANGE IN UNINSURED POPULATION Based on March, 2012 Congressional Budget Office Estimates, Prior to Supreme Court DecisionBased on March, 2012 Congressional Budget Office Estimates, Prior to Supreme Court Decision Assumes That Medicaid Will be Expanded Per PPACA RequirementsAssumes That Medicaid Will be Expanded Per PPACA Requirements 5Rollins Capital Strategies

CHANGE IN UNINSURED POPULATION Projected Population Medicaid/CHIP 34,000,00035,000,00034,000,00032,000,000 31,000,000 Employer 156,000,000157,000, ,000,000160,000,000 Non-Group/Other 25,000,000 27,000,00028,000,000 31,000,000 Uninsured 56,000,000 57,000,00058,000,000 Total 271,000,000273,000,000274,000,000275,000,000277,000,000280,000,000 Source: March, 2012 CBO estimate on the impact on uninsured (Prior to Supreme Court decision) Assumes that State will expand Medicaid per PPACA Requirements Projected Change in Uninsured Medicaid/CHIP- 13,000,00015,000,00017,000,00016,000,000 Employer- (2,000,000) (4,000,000)(5,000,000) Non-Group/Other- (1,000,000) (2,000,000) (3,000,000) Exchange- 8,000,00012,000,00020,000,00022,000,00023,000,000 Uninsured- (18,000,000)(24,000,000)(30,000,000)(31,000,000)

REALLOCATION OF UNINSURED Medicare0.00% Medicaid0.00%72.22%62.50%56.67%51.61% Blue Cross0.00%-9.55%-7.17%-13.38%-12.95%-14.79% Commercial0.00%-2.01%-1.51%-2.81%-2.72%-3.11% Other Government0.00%-3.54%-2.65%-4.95%-4.79%-5.48% Other0.00%-1.56%-1.17%-2.19%-2.12%-2.42% Self Pay0.00% % Exchange0.00%44.44%50.00%66.67%70.97%74.19% Total

CHANGE IN GROSS REVENUE Assumes That Gross Revenue Will be Reallocated But Will Not Change in TotalAssumes That Gross Revenue Will be Reallocated But Will Not Change in Total Assumes No Change in Historical Use RatesAssumes No Change in Historical Use Rates 8Rollins Capital Strategies

INPATIENT GROSS REVENUE Before Reform Medicare$62,743,146$67,468,549$72,471,595$77,766,935$83,369,948$89,296,774 Medicaid6,459,7066,733,8827,019,1997,316,5677,626,4947,949,508 Blue Cross13,648,39914,227,69114,830,52415,458,81916,113,64816,796,130 Commercial2,868,0052,989,7353,116,4113,248,4373,386,0403,529,453 Other Government5,055,1445,269,7045,492,9845,725,6945,968,2326,221,012 Other2,235,4222,330,3022,429,0382,531,9442,639,1962,750,977 Self Pay4,961,7215,172,3165,391,4695,619,8795,857,9346,106,043 Total$97,971,543$104,192,179$110,751,219$117,668,274$124,961,492$132,649,898 9

INPATIENT GROSS REVENUE With Reform Medicare$62,743,146$67,468,549$72,471,595$77,766,935$83,369,948$89,296,774 Medicaid6,459,7067,934,5988,463,3429,022,6019,270,8269,633,934 Blue Cross13,648,39914,068,83814,664,94015,056,08815,701,22316,313,294 Commercial2,868,0052,956,3543,081,6163,163,8103,299,3753,427,992 Other Government5,055,1445,210,8685,431,6545,576,5295,815,4766,042,178 Other2,235,4222,304,2842,401,9182,465,9822,571,6472,671,896 Self Pay4,961,7213,509,7863,080,8392,609,2292,672,0402,842,468 Exchange0738,9021,155,3152,007,0992,260,9572,421,362 Total$97,971,543$104,192,179$110,751,219$117,668,274$124,961,492$132,649,898 10

OUTPATIENT GROSS REVENUE Before Reform Medicare$91,539,225$95,705,286$100,065,922$104,630,475$109,220,939$114,016,483 Medicaid22,897,53223,939,62725,030,39226,172,16527,320,41928,519,972 Blue Cross47,713,10649,884,58852,157,48854,536,67656,929,36959,428,956 Commercial9,170,5029,587,86310,024,71610,481,99810,941,87611,422,299 Other Government11,821,51512,359,52612,922,66513,512,13914,104,95814,724,262 Other2,894,2883,026,0113,163,8853,308,2083,453,3493,604,975 Self Pay19,446,11020,331,12421,257,47522,227,14423,202,31824,221,058 Total$205,482,278$214,834,025$224,622,544$234,868,806$245,173,228$255,938,005 11

OUTPATIENT GROSS REVENUE With Reform Medicare$91,539,225$95,705,286$100,065,922$104,630,475$109,220,939$114,016,483 Medicaid22,897,53228,659,35230,724,35932,919,69133,833,35135,201,643 Blue Cross47,713,10649,260,17451,504,62452,943,83955,295,82057,513,674 Commercial9,170,5029,456,6529,887,52710,147,28810,598,61111,019,832 Other Government11,821,51512,128,25412,680,85512,922,17813,499,91814,014,873 Other2,894,2882,923,7403,056,9553,047,3233,185,7963,291,277 Self Pay19,446,11013,796,12012,147,12810,319,74610,583,51411,275,320 Exchange02,904,4464,555,1737,938,2668,955,2819,604,902 Total$205,482,278$214,834,025$224,622,544$234,868,806$245,173,228$255,938,005 12

BAD DEBTS AND CHARITY CARE Assumes That the Change in Uninsured Will Translate to a Commensurate Change in Self Pay Gross RevenueAssumes That the Change in Uninsured Will Translate to a Commensurate Change in Self Pay Gross Revenue This Will Then Translate to a Commensurate Reduction in Bad Debt and Charity LevelsThis Will Then Translate to a Commensurate Reduction in Bad Debt and Charity Levels 13Rollins Capital Strategies

BAD DEBTS AND CHARITY CARE (CONTINUED) Assumes That Individuals Purchasing Coverage Through the Exchange Will Continue to Produce Bad DebtsAssumes That Individuals Purchasing Coverage Through the Exchange Will Continue to Produce Bad Debts Primarily a Result of High Deductible/Coinsurance PlansPrimarily a Result of High Deductible/Coinsurance Plans 14Rollins Capital Strategies

BAD DEBTS AND CHARITY CARE Gross Revenue on Self Pay to Exchange-$8,197,534$11,420,976$14,918,048$15,804,699$16,209,373 Net Revenue on Self Pay to Exchange-$2,763,458$3,763,765$4,800,008$4,948,665$4,939,489 Exchange Coinsurance %0.00%30.00% Exchange Coinsurance-829,0371,129,1301,440,0031,484,6001,481,847 Exchange Uncollectible %0.00%25.00% Exchange Bad Debts-207,259282,282360,001371,150370,462 Reduction in Uncollectible Accounts-$7,990,275$11,138,694$14,558,047$15,433,549$15,838,851 Amount Allocated to Bad Debts-$7,239,162$10,091,619$13,189,542$13,982,743$14,349,945 Amount Allocated to Charity Care-$751,113$1,047,075$1,368,506$1,450,806$1,488,906 Bad Debt % Before Reform7.94% Bad Debt % With Reform7.94%5.65%4.91%4.17%4.14%4.22% Charity Care % Before Reform.82% Charity Care % With Reform.82%.59%.51%.43%.44% 15

MEDICARE PAYMENT ADJUSTMENTS Medicare Payments Will be Reduced Regardless of the Change in UninsuredMedicare Payments Will be Reduced Regardless of the Change in Uninsured Adjustments Are Based on IPPS Final RuleAdjustments Are Based on IPPS Final Rule 16Rollins Capital Strategies

MEDICARE PAYMENT UPDATE Inpatient Market Basket Before Reform (1) 3.60%1.50%1.90% Market Basket Adjustment -0.10%-0.30%-0.20% -0.75% Productivity Adjustment (2) -0.70%-0.50%-0.60%-0.70% Market Basket With Reform 2.80%0.70%1.10%1.00%0.45% (1)2013 and 2014 based on IPPS Final Rule is assumed to equal average of last 3 years. (2)Productivity adjustment is based on the ten-year rolling average of the multi-year productivity factor published by the Bureau of Labor and Statistics. Outpatient Market Basket Before Reform (1) 2.60%2.50%2.70% Market Basket Adjustment -0.10%-0.30%-0.20% -0.75% Productivity Adjustment (2) -0.70%-0.50%-0.60%-0.70% Market Basket With Reform 1.80%1.70%1.90%1.80%1.25%

MEDICARE INPATIENT PAYMENT Before Reform Blended Amount (with Capital) $7,138.92$7,246.01$7,383.68$7,523.97$7,666.93$7, Medicare Discharges 3,2223,3313,4413,5503,6603,769 Medicare Case Mix Index Inpatient Payment Before Reform $29,621,473$31,086,686$32,717,622$34,399,310$36,133,092$37,920,339 With Reform Blended Amount (with Capital) $7,083.76$7,133.35$7,211.82$7,283.93$7,316.71$7, Medicare Discharges 3,2223,3313,4413,5503,6603,769 Medicare Case Mix Index Inpatient Payment With Reform $29, $30,603,368$31,956,079$33,301,875$34,482,587$35,673,250 Difference Due to Reform ($228,872)($483,318)($761,542)($1,097,435)($1,650,505)($2,247,089)

MEDICARE OUTPATIENT PAYMENT Before Reform Contractual % Before Reform 75.23%75.59%75.90%76.20%76.49%76.79% Contractuals Before Reform $68,696,270$72,172,417$75,773,976$79,553,541$83,376,319$87,379,660 Inpatient Payment Before Reform $22,842,955$23,532,869$24,291,946$25,076,935$25,844,619$26,636,823 With Reform Contractual % With Reform 75.43%75.97%76.46%76.95%77.56%78.16% Contractuals With Reform $68,873,041$72,535,474$76,333,796$80,344,766$84,542,884$88,938,894 Inpatient Payment With Reform $22,666,184$23,169,812$23,732,126$24,285,709$24,678,055$25,077,589 Difference Due to Reform ($176,771)($363,057)($559,820)($791,225)($1,166,565)($1,559,234)

OTHER ADJUSTMENTS Medicare Readmission Adj Medicare IP Payment With Reform $27,612,531$30,867,491$32,220,203$33,565,998$34,746,710$35,937,373 Readmission Adj. Factor (1) Adjusted Payment With Reform $27,554,545$30,802,669$32,152,540$33,495,510$34,673,742$35,861,905 Difference Due to Reform ($57,986)($64,822)($67,663)($70,488)($72,968)($75,468) Value-Based Purchasing DRG Payments With Reform $27,612,531$28,749,972$30,020,761$31,285,053$32,394,259$33,512,814 Reduction to Fund VBP % % % % % VBP Adjustment Factor (1) % % % % % Net Adjustment % % % % % Difference Due to Reform $690$898$1,125$1,368$1,618$1,674 (1)2013 and 2014 based on IPPS Final Rule assumes the same relationship of adjustment factor to reduction to fund in 2014.

MEDICARE DISPROPORTIONATE SHARE Source: IPPS Final Rule DSH Reimbursement Before Reform$1,360,948$1,428,267$1,503,200$1,580,464$1,660,122$1,742,237 Estimated Medicare DSH (in Billions) % of Total Factor 1 (Remaining 75% Pool) Assumed Annual Growth0.00% 5.50% Estimated % Uninsured20.66%13.92%11.68%9.45%9.39%9.64% Uninsured as % of Base Year100.00%67.36%56.52%45.75%45.42%46.66% Required reduction0.00%-0.10%-0.20% Factor %67.26%56.32%45.55%45.22%46.46% Factor 3 (Factor 1 * Factor 2) Hospital Specific Factor % % Hospital Portion of Factor 3-676,833597,886510,210534,368579,237 25% of DSH Before Reform-357,067375,800395,116415,031435,559 Medicare DSH (With Reform)-$1,033,900$973,686$905,326$949,398$1,014,796 Difference Due to Reform-($394,367)($529,514)($675,139)($710,724)($727,441) 21

MEDICAID CONTRACTUALS Gross Revenue Before Reform$29,357,238$30,673,509$32,049,591$33,488,732$34,946,913$36,469,480 Gross Revenue With Reform29,357,23836,593,95039,187,70141,942,29243,104,17744,835,577 Contractual % Before Reform84.43%84.84%85.24%85.64%86.04%86.42% Contractual % With Reform84.43%84.66%85.05%85.43%85.84%86.24% Contractual Before Reform24,785,14626,023,89627,320,63828,678,74130,066,97931,518,336 Contractual With Reform24,785,14630,980,73133,328,18135,829,33537,002,04738,665,915 Difference Due to Reform$0$963,606$1,130,568$1,302,967$1,222,196$1,218,518 22

MEDICAID DISPROPORTIONATE SHARE DSH Reimb. Before Reform$2,997,000 Decrease % Due to Reform (1)0.00%5.05%5.94%5.83%17.14% DSH Decrease Due to Reform-151,349178,022174,725513,686 Medicaid DSH With Reform-$2,845,652$2,818,978$2,822,275$2,483,314 Difference Due to Reform-($151,349)($178,022)($174,725)($513,686) 23 (1) DSH decrease % based on AHA estimates

EXCHANGE REIMBURSEMENT Will the Exchange Pay Based on Existing Commercial Rates, orWill the Exchange Pay Based on Existing Commercial Rates, or Discounted Commercial Rates, orDiscounted Commercial Rates, or Rates Similar to Medicare or MedicaidRates Similar to Medicare or Medicaid 24Rollins Capital Strategies

EXCHANGE REIMBURSEMENT Exchange Revenue With Reform -$3,643,349$5,710,488$9,945,365$11,216,238$12,026,264 Medicare Contr. % With Reform (1) 0.00%66.29%67.05%67.82%68.69%69.53% Exchange Contr. With Reform -2,415,1453,828,6056,745,3607,704,2828,361,482 Exchange Net Rev. With Reform -1,228,2041,881,8833,200,0063,511,9563,664,782 Difference Due to Reform -$1,228,204$1,881,883$3,200,006$3,511,956$3,664, (1) For purposes of presentation, it is assumed the Exchange will pay based on Medicare like rates.

COMMERCIAL AND OTHER PAYOR CONTRACTUALS Ability to Cost Shift Will be LessenedAbility to Cost Shift Will be Lessened Commercial Carriers Will Likely Attempt to Lessen Impact of Previous Cost ShiftingCommercial Carriers Will Likely Attempt to Lessen Impact of Previous Cost Shifting 26Rollins Capital Strategies

BLUE CROSS CONTRACTUALS Gross Revenue Before Reform$61,361,505$64,112,279$66,988,011$69,995,494$73,043,017$76,225,086 Gross Revenue With Reform61,361,50563,329,01366,169,56467,999,92770,997,04373,826,969 Payment Incr. Before Reform0.00%3.00% Payment Incr. With Reform0.00%2.00% Contractual % Before Reform8.61%9.49%10.36%11.22%12.07%12.92% Contractual % With Reform8.61%10.37%12.09%13.78%15.44%17.07% Contractuals Before Reform5,282,8306,083,0456,938,8987,853,7448,819,2199,847,861 Contractuals With Reform5,282, ,2358,000,2859,371,17010,961,37712,598,847 Difference Due to Reform$0($1,265,457)($1,879,834)($3,512,994)($4,188,132)($5,149,103) 27

COMMERCIAL CONTRACTUALS Gross Revenue Before Reform$12,038,507$12,577,597$13,141,127$13,730,436$14,327,916$14,951,752 Gross Revenue With Reform12,038,50712,413,00612,969,14313,311,09713,897,98514,447,824 Payment Incr. Before Reform0.00%3.00% Payment Incr. With Reform0.00%2.00% Contractual % Before Reform7.54%8.43%9.31%10.18%11.04%11.90% Contractual % With Reform7.54%9.32%11.06%12.77%14.45%16.09% Contractuals Before Reform907,4491,059,9071,223,1051,397,6901,582,2541,779,036 Contractuals With Reform907,4491,156,3961,434,3781,699,8692,007,9542,325,094 Difference Due to Reform$0($261,081)($383,258)($721,518)($855,630)($1,049,986) 28

OTHER GOVERNMENT CONTRACTUALS Gross Revenue Before Reform$16,876,659$17,629,231$18,415,649$19,237,833$20,073,190$20,945,274 Gross Revenue With Reform16,876,65917,339,12218,112,51018,498,70719,315,39520,057,051 Contractual % Before Reform51.98%52.91%53.81%54.70%55.57%56.43% Contractual % With Reform51.98%52.91%53.81%54.70%55.57%56.43% Contractual Before Reform8,773,0829,327,0829,909,93110,523,24311,155,05611,818,643 Contractual With Reform8,773,0829,173,5959,746,80410,118,93610,733,93411,317,451 Difference Due to Reform$0($136,621)($140,012)($334,818)($336,674)($387,032) 29

OTHER INSURANCE CONTRACTUALS Gross Revenue Before Reform$5,129,710$5,356,313$5,592,923$5,840,152$6,092,545$6,355,952 Gross Revenue With Reform5,129,7105,228,0255,458,8735,513,3055,757,4425,963,173 Payment Incr. Before Reform0.00%2.00% Payment Incr. With Reform0.00%1.00% Contractual % Before Reform41.84%42.95%44.05%45.13%46.18%47.22% Contractual % With Reform41.84%43.51%45.14%46.73%48.26%49.75% Contractuals Before Reform2,146,0632,300,7772,463,7682,635,5122,813,7013,001,131 Contractuals With Reform2,146,0632,274,9102,464,3082,576,1242,778,6772,966,963 Difference Due to Reform$0($102,422)($134,591)($267,459)($300,078)(358,612) 30

SELF PAY CONTRACTUALS Gross Revenue Before Reform$24,407,831$25,503,441$26,648,944$27,847,023$29,060,253$30,327,101 Gross Revenue With Reform24,407,83117,305,90615,227,96812,928,97513,255,55414,117,788 Contractual % Before Reform18.00% Contractual % With Reform18.00% Contractual Before Reform4,394,0284,591,2654,797,4855,013,1705,231,5825,459,647 Contractual With Reform4,394,0283,115,5022,741,4202,327,5432,386,3362,541,560 Difference Due to Reform$0($6,721,771)($9,364,911)($12,232,421)($12,959,453)($13,291,226) 31

SUMMARY Bad Debts-$7,239,162$10,091,619$13,189,542$13,982,743$14,349,945 Charity Care-751,1131,047,0751,368,5061,450,8061,488,906 Medicare Inpatient(228,872)(483,318)(761,542)(1,097,435)(1,650,505)(2,247,089) Medicare Outpatient(176,771)(363,057)(559,820)(791,225)(1,166,565)(1,559,234) Medicare Readmission Adjustment(57,986)(64,822)(67,663)(70,488)(72,968)(75,468) Value Based Purchasing ,1251,3681,6181,674 Medicare DSH-(394,367)(529,514)(675,139)(710,724)(727,441) Medicaid963,6061,130,5681,302,9671,222,1961,218,518 Medicaid DSH-(151,349)(178,022)(174,725)(513,686) Exchange Contractuals-1,228,2041,881,8833,200,0063,511,9563,664,782 Blue Cross Contractuals-(1,265,457)(1,879,834)(3,512,994)(4,188,132)(5,149,103) Commercial Contractuals-(261,081)(383,258)(721,518)(855,630)(1,049,986) Other Government Contractuals-(102,422)(134,591)(267,459)(300,078)(358,612) Other Insurance Contractuals-(136,621)(140,012)(334,818)(336,674)(387,032) Self Pay Contractuals-(6,721,771)(9,364,911)(12,232,421)(12,959,453)(13,291,226) Difference Due to Reform(462,940$238,718$153,101($815,835)($2,585,096)($4,635,052) 32

CHANGE IN UNINSURED POPULATION Question: What Happens if Commercial Insurance Cancellations are Higher and the Change in Uninsured is Lower Than CBO Estimate?Question: What Happens if Commercial Insurance Cancellations are Higher and the Change in Uninsured is Lower Than CBO Estimate? Answer: Train WreckAnswer: Train Wreck 33Rollins Capital Strategies

CHANGE IN UNINSURED AND EXCHANGE IF CBO ESTIMATES ARE INCORRECT Assumptions Assumed Increase in Commercial Insurance Cancellations -100% Assumed Decrease in CBO Estimate of Change in Uninsured -75% Adjusted Change in Uninsured Medicaid/CHIP- 13,000,00015,000,00017,000,00016,000,000 Employer- (4,000,000) (8,000,000)(10,000,000) Non-Group/Other- (2,000,000) (6,000,000)(4,000,000)(6,000,000) Exchange- 5,000,0006,000,00012,000,00012,500,00013,750,000 Uninsured- (12,000,000)(15,000,000) (14,500,000)(13,750,000) Total

REALLOCATION OF UNINSURED Medicare0.00% Medicaid0.00%108.33%100.00%113.33%110.34%116.36% Blue Cross0.00%-28.66%-22.93%-53.51%-55.35%-66.71% Commercial0.00%-6.02%-4.82%-11.24%-11.63%-14.02% Other Government0.00%-10.62%-8.49%-19.82%-20.50%-24.71% Other0.00%-4.69%-3.76%-8.76%-9.07%-10.93% Self Pay0.00% % Exchange0.00%41.67%40.00%80.00%86.21%100.00% Total

INPATIENT GROSS REVENUE With Reform Medicare$62,743,146$67,468,549$72,471,595$77,766,935$83,369,948$89,296,774 Medicaid6,459,7067,934,5988,463,3429,022,6019,270,8269,633,934 Blue Cross13,648,39913,909,98514,499,35614,653,35815,288,79715,830,458 Commercial2,868,0052,922,9733,046,8213,079,1823,212,7103,326,532 Other Government5,055,1445,152,0315,370,3255,427,3645,662,7215,863,343 Other2,235,4222,278,2662,374,7972,400,0212,504,0972,592,814 Self Pay4,961,7214,063,9633,947,3264,114,5544,367,7584,658,490 Exchange0461,814577,6571,204,2601,284,6351,447,553 Total$97,971,543$104,192,179$110,751,219$117,668,274$124,961,492$132,649,898 36

OUTPATIENT GROSS REVENUE With Reform Medicare$91,539,225$95,705,286$100,065,922$104,630,475$109,220,939$114,016,483 Medicaid22,897,53228,659,35230,724,35932,919,69133,833,35135,201,643 Blue Cross47,713,10648,635,76150,851,76051,351,00253,662,27155,598,393 Commercial9,170,5029,325,4419,750,3379,812,57710,255,34510,617,364 Other Government11,821,51511,896,98112,439,04512,332,21712,894,87913,305,484 Other2,894,2882,821,4702,950,0252,786,4382,918,2432,977,580 Self Pay19,446,11015,974,45515,563,50816,273,44517,299,97418,478,997 Exchange01,815,2792,277,5874,762,9605,088,2285,742,061 Total$205,482,278$214,834,025$224,622,544$234,868,806$245,173,228$255,938,005 37

BAD DEBTS AND CHARITY CARE Gross Revenue on Self Pay to Exchange-$5,465,023$7,138,110$7,459,024$7,392,520$7,189,614 Net Revenue on Self Pay to Exchange-$1,842,305$2,352,353$2,400,004$2,314,698$2,190,902 Exchange Coinsurance %0.00%30.00% Exchange Coinsurance-552,692705,706720,001694,409657,271 Exchange Uncollectible %0.00%25.00% Exchange Bad Debts-138,173176,426180,000173,602164,318 Reduction in Uncollectible Accounts-$5,326,850$6,961,683$7,279,024$7,218,918$7,025,297 Amount Allocated to Bad Debts-$4,826,108$6,307,262$6,594,771$6,540,315$6,364,895 Amount Allocated to Charity Care-$500,742$654,422$684,253$678,603$660,402 Bad Debt % Before Reform7.94% Bad Debt % With Reform7.94%6.41%6.04%6.05%6.16%6.29% Charity Care % Before Reform.82% Charity Care % With Reform.82%.67%.63%.64%.65% 38

EXCHANGE REIMBURSEMENT Exchange Revenue With Reform -$2,277,093$2,855,244$5,967,219$6,372,862$7,189,614 Medicare Contr. % With Reform 0.00%66.29%67.05%67.82%68.69%69.53% Exchange Contr. With Reform -1,509,4661,914,3034,047,2164,377,4334,998,712 Exchange Net Rev. With Reform -767,627940,9411,920,0031,995,4292,190,902 Difference Due to Reform -767,627940,9411,920,0031,995,4292,190,902 39

BLUE CROSS CONTRACTUALS Gross Revenue Before Reform$61,361,505$64,112,279$66,988,011$69,995,494$73,043,017$76,225,086 Gross Revenue With Reform61,361,50562,545,74665,351,11666,004,36068,951,06871,428,851 Payment Incr. Before Reform0.00%3.00% Payment Incr. With Reform0.00%2.00% Contractual % Before Reform8.61%9.49%10.36%11.22%12.07%12.92% Contractual % With Reform8.61%10.37%12.09%13.78%15.44%17.07% Contractuals Before Reform5,282,8306,083,0456,938,8987,853,7448,819,2199,847,861 Contractuals With Reform5,282, ,0357,901,3309,096,15810,645,49512,189,599 Difference Due to Reform$0($1,967,523)($2,599,327)($5,233,549)($5,918,225)($7,137,973) 40

SELF PAY CONTRACTUALS Gross Revenue Before Reform$24,407,831$25,503,441$26,648,944$27,847,023$29,060,253$30,327,101 Gross Revenue With Reform24,407,83120,038,41819,510,83420,387,99921,667,73223,137,487 Contractual % Before Reform18.00% Contractual % With Reform18.00% Contractual Before Reform4,394,0284,591,2654,797,4855,013,1705,231,5825,459,647 Contractual With Reform4,394,0283,607,4233,512,4443,670,3563,900,7414,165,334 Difference Due to Reform$0($4,481,180)($5,853,069)($6,116,211)($6,061,679)($5,895,302) 41

SUMMARY Bad Debts-$4,826,108$6,307,262$6,594,771$6,540,315$6,364,895 Charity Care-500,742654,422684,253678,603660,402 Medicare Inpatient(228,872)(483,318)(761,542)(1,097,435)(1,650,505)(2,247,089) Medicare Outpatient(176,771)(363,057)(559,820)(791,225)(1,166,565)(1,559,234) Medicare Readmission Adjustment(57,986)(64,822)(67,663)(70,488)(72,968)(75,468) Value Based Purchasing ,1251,3681,6181,674 Medicare DSH-(394,367)(529,514)(675,139)(710,724)(727,441) Medicaid963,6061,130,5681,302,9671,222,1961,218,518 Medicaid DSH-(151,349)(178,022)(174,725)(513,686) Exchange Contractuals-767,627940,9411,920,0031,995,4292,190,902 Blue Cross Contractuals-(1,967,523)(2,599,327)(5,233,549)(5,918,225)(7,137,973) Commercial Contractuals-(410,339)(536,221)(1,087,305)(1,223,445)(1,472,817) Other Government Contractuals-(174,887)(208,127)(441,585)(473,452)(555,964) Other Insurance Contractuals-(273,243)(280,025)(669,636)(673,348)(774,064) Self Pay Contractuals-(4,481,180)(5,853,069)(6,116,211)(6,061,679)(5,895,302) Difference Due to Reform(462,940($1,705,104)($2,539,013)($5,853,936)($8,026,435)($10,522,647) 42

SUMMARY Potential Impact of PPACA is Profound and Far ReachingPotential Impact of PPACA is Profound and Far Reaching To Cope With Impact, Hospitals Will Need to Change the Way They OperateTo Cope With Impact, Hospitals Will Need to Change the Way They Operate To Plan for the Needed Changes, a Hospital Must Understand the Impact That PPACA Will Have on Their OperationsTo Plan for the Needed Changes, a Hospital Must Understand the Impact That PPACA Will Have on Their Operations A Hospital Will Need to Plan Strategies and Operational Changes to Mitigate ImpactA Hospital Will Need to Plan Strategies and Operational Changes to Mitigate Impact 43

Questions & Answers 44Rollins Capital Strategies

Richard L. Rollins Rollins Capital Strategies Roswell, Georgia (919) Rollins Capital Strategies