1. How Hospital Consolidations Are Affecting the Cost of Health Care
Dennis Laraway, Chief Financial Officer, Banner Health
Chuck Lehn, President, Banner Health Network
April 13, 2018

2. Market Consolidation / Convergence

3. Insurance in Arizona Trending Toward Government Coverage
Government and Employer pressures on price; curtail healthcare spending to slow-down consumption ~ 20% GDP
Sources: Kaiser Family Foundation; Estimates based on the Census Bureau's March 2014, March 2015, and March 2016 Current Population Survey (CPS: Annual Social and Economic Supplements).

4. Banner Health – at a Glance

5. The Value of Integration, and Scale
Unit Costs Declining
Imaging
Care Delivery
Home Care & Hospice
Banner Del Webb

6. Banner Offers Urgent Care in its Major Markets
40+ current locations in Arizona
Offering convenient care in our neighborhoods
Patients with interest can be referred to a BHN PCP
Direct access with Banner hospitals when needed
Connected EMR
Phoenix Locations

7. Enhanced Care Management Utilization Optimization
Banner Health – As a Payer: Premium Differentiation Behind a Performance Network
8 to15%
premium savings
Lower Unit Costs
Enhanced Care Management
Utilization Optimization 7

8. Measuring Value and Unit Price
Consolidation may affect unit price (troubled systems are often acquired)
Unit price does not equal total cost of care
Commercial experience
Medicare experience
Medicaid experience
Market desires total value
Total value requires scale
VALUE
PRICE

9. Examples of Investments that Drive Purchaser and Consumer Value
Replacing emergency room visits with lower cost of care
More affordable insurance products
Investing in home health to reduce institutional care
Redesigning care to improve outcomes and lower costs – at an academic medical center, really?

10. Aetna Whole Health Commercial Results
24% decrease in avoidable surgical admissions/1000
5% improved monitoring of patients medication therapy after a heart attack
RESULTS
4% more generic prescribing
11.5% overall reduction in medical costs vs. expected costs for the market
11% improved Intervention of pediatric patients with recurring ear infections
$9.9M shared savings on Aetna Whole Health fully-insured membership over 3 years
Medical cost-savings and quality performance measures based on Aetna Whole Health product and attribution data. January – September 2016.
Medical cost-savings based on a comparison of Aetna Whole Health product to broad network Aetna plans

11. Executive Summary – Highlights
Strengths
Opportunities
TMC PPPM PI dropped from 0.99 to 0.97
OON Costs are 8% above the market
Strong TMC Performance in both trend and comparison to the market
Out-of-Network costs are above the market
5 quality measures missed by only a few successes
Excellent improvement in Inpatient utilization and cost
5 Quality Measures missed by less than 9 success
IP PPPM PI dropped from 0.99 to 0.96
Potentially avoidable ER visits are still elevated in relation to the market
Showing progress in ER cost particularly in ACSC and Potentially Avoidable visits
ER Cost per Visit PI dropped from 1.00 to 0.93
Potentially avoidable ER Visits per 1000 PI is 1.17
Advanced imaging remains favorable to the market
Recommendations
Review ED steerage strategy in the Banner-Cigna Workgroup with a focus on non-Banner Free Standing ERs.
Explore opportunities to co-brand w/ Cigna outreach to ACS diagnoses customers.

12. BHN Pioneer Performance
PY1
2012
PY2
2013
PY3
2014
PY4
2015
PY5
2016
Providers
448
907
1413
1857
931
Beneficiaries Jan 1
50,505
55,483
61,241
86,704
63,024
Percent Savings & Aggregate Savings
4.0%
$19,098,858
2.8%
$15,148,274
5.0%
$29,047,735
5.5%
$35,113,328
$16,203,794
Quality Score
62.19%
81.18%
87.50%
95.23%
91.86%
Shared Savings to BHN
$13,369,201
$9,038,408
$18,698,004
$24,578,369
$10,940,821

13. Targeting Prevalent Conditions
Conservative Back Health Program Spine Center at Banner University Medical Center – Phoenix
You’ll see a theme of member experience throughout all of our enhancements, from customer service, to care management to technology. We’ve put the member first in all aspects.
LISA FRANK

14. Variation in the Management of Back Pain
Onset of uncomplicated back injury
Patient makes appt with PCP, TIME ELAPSE: 2 days
PCP visit occurs - Recommends 2 wks rest+meds, TIME ELAPSE: 14 days
PCP follow-up visit - may order imaging, TIME ELAPSE: 5 days
Specialist visit - may order imaging, TIME ELAPSE: 2 days
Specialist follow up - Reviews imaging, prescribes physical therapy, TIME ELAPSE: 5 days
Physical therapy treatment plan of care, TIME ELAPSE: 21 days
Variation in the Management of Back Pain
Traditional Management:
Time Elapsed to initiation of therapy treatment: 28 days
Results:
Delayed initiation of care
Lack of clear patient education
High utilization rates of imaging + meds
Delayed or lack of appropriate utilization of therapy services
Increased patient stress, anxiety, fear, pain behavior
Minimal provider to provider communication
McDonald, Patricia, Mecklenburg, Robert, Martin, Lindsay. The Employer-Led Health Care Revolution. Harvard Business Review July-Aug

15. Standardized Management of Back Pain
Onset of uncomplicated back injury
Patient makes appt with Back Health, TIME ELAPSE: 0 days
Screening Q’s determine appropriate care pathway, TIME ELAPSE: 0 days
Nurse Navigator provides education to patient & family re: expectations, TIME ELAPSE: CONCURRENT
Physical therapy treatment plan of care, TIME ELAPSE: 21 days
Specialist follow up if not improving as expected, TIME ELAPSE: 5 days
Evaluation with PM&R and physical therapy occurs, therapy initiated upon 1st visit, TIME ELAPSE: days
Coordinated Approach:
Nurse Navigator provides education to patient & family re: expectations, TIME ELAPSE: CONCURRENT
Time Elapsed to initiation of therapy treatment: 1-2 days

16. Banner Insurance Division Membership: Growth Results from Delivering Value to the Market

17. Summary
All healthcare purchasers are
requiring increased value
Value and unit price are not always the same
Creating value often requires scale and integration between payer & provider
Industry seems to be rapidly consolidating to be better positioned for value creation