1. Stephen N. Flood New Orange Hills, Inc. Orange, CA

2. 1.We have reason to believe that the next 2-5 years will see a complete shift away from government controlled delivery systems. The following MCO systems are here or at our doorstep.  Accountable Care Organizations  Bundling  Dual Eligible Programs  Senior Advantage Programs  County Run Medi-Cal Organizations 2. The previous ownership of New Orange Hills anticipated this type of change and pushed forward toward systems that would be rewarded by MCO’s.

3. 1. History  Opened in 1987  Integrated Health Services – Bought in 1992  Owned Between 1992-2002  Contracted: Kaiser, St Joseph’s, Others  Sub-Acute with Piped Oxygen – 1996  Sold to Facility Administrator – 2002  Sold to Current Ownership – Dec. 2006

4. A. Percentages by Payer Type  Managed Care – 50%  Medicare – 10%  MCAL Subacute – 30%  Custodial – 10% B. Programs – Diagnosis/Disease Based  TBI/SCI/CVA & Other Neuro Dx  Orthopedic  Advanced Wound Care  Infectious Disease Dx  Pulmonary and Cardiac

5.  If we want to move to the next level in the managed care environment we have to start with a different philosophy.  The question we must ask is “What will it take (leaders, personnel, experts, resources and practices) to create a managed care relationship that operates on a “Win-Win” basis and adjusts regularly to; ensure progress and maintain equilibrium.

6. PROVIDERPARTNER  Payment: Maximized by Provider and Minimized by Payer  Utilization: Minimized by Provider and Maximized by Payer  Quality: Minimal Efforts to Coordinate Quality Efforts  Utilization/Payment: Optimized through Collaboration  Quality: Regular Efforts to Align Care Systems and Keep Each Other Mutually Accountable

7.  Payment Methodology  Fixed Payments that Represent the Large Percentage of Patients - Predictable and Based on the Mean:  New Orange Hills: 2 Fixed Tiers  Complex Medical Coverage – All Levels  Tier with Ventilator Add-on  Flexible Systems That Adjust for Acuity: PRN  Pharmacy: Exclusions or At-Cost Provision by MCO  DME: Exclusions, Provision or Shared Purchase  Sitters: Provision by MCO for One-on-One Needs  Fee for Service Payment for Transfusions

8.  Census:  The Issue is Not the Number of Patients but the Type of Patients  Higher Acuity, Greater Complexity, and More Flexibility than the Facility down the street – From ER, ICU, Urgent Care, Home  MCO and Facility Works Together to Ensure Hospital refers Right Segment of Patients  Less Complex Patients are Not Admitted  MCO and Facility Continue to Identify Ways to Increase Capacity for Higher Acuity Patients

9.  Effective Utilization – Outcome Based  Average Length of Stay Based on Functional Level at Admission and Admitting Dx  Safe, not Highest, Functional Level Upon Discharge  % Discharged Home based on Admission Criteria  Minimal Rehospitalizations – Risk Adjusted  Controlled Hospital Utilization: ER, Direct Admit  Specialist Utilization on Site - Efficiency  HAC’s: PU’s, HAI’s, Incidents

10.  Managed Care Organization  Share Formularies & Care Pathways  Share Educational Resources  Collaborate on Best Practices  Provide QA Oversight and Feedback  Facility  Commit Resources Outside Contract: ROI  Provide Transparency and Access: Trust and Influence  Become a Champion of MCO Systems in the Facility  Develop Best Practices that Resource the MCO  Become the Expert in your Health Care Segment: Add Value

11.  Necessary Components  Managed Care Organization (MCO)  Commitment of Decision Makers – Find the Leader(s)  Vision, Financial, and Organizational Backing  You Must be Special to Warrant this LT Commitment  Physician and Organizational Involvement in Operations  Trust is based on Control/Relationship  Skilled Nursing Center  Willingness to Do What it Takes  Capacity: Procure/Develop Resources to Stay a Step Ahead  Independent Owners are in a Special Position to Do This  Trust that Resources will be at the right place at the right time on a consistent basis. Owners have capacity for responsiveness and longevity. Care happens locally and is facility based.

12. Contact Information: Steve Flood New Orange Hills sflood@neworangehills.com (714) 997-7090 (office) (714) 612-7984 (cell)