1. Version 2 -2/8/13

3. For US Citizens In General – Reduce Medicare spending (to protect program for future generations) For Uninsured or Underinsured – Allow for universal health insurance coverage for all via Medicaid expansion at state level and sliding scale insurance exchanges (market plans) For Insured (via private coverage or employer sponsored health plans) – Allow for transparency in pricing and reduced spending – Expand eligibility/reduce restrictions in coverage – Over time, allow for reduced costs per encounters For Healthcare Providers – Allow for decrease in Medicare reimbursement – Reduce levels of “free” care via universal health insurance coverage – Emphasis on quality management In general, hospitals supported these objectives

4. Reimbursement Scale“Free”“Retail” Medicaid Uninsured/ Underinsured Costs Medicare Commercial and Self Pay Average Rate Estimated 10%+ cuts over a 10 year period for hospitals Medicare Medicaid Expansion New Exchanges Average Rate No Medicaid Expansion Commercial Plans including employer sponsor plans adjusts to lower exchange rates Average Rate CurrentReform “Promise” Partial Reform

5. Private Insurance Policies Employer Sponsored Plans “Commercial” Box from Previous Slide Insurance Paid Patient Paid – Co Pays/Deductibles Historical Commercial Plans Insurance Paid Patient Paid- Co Pays/High Deductibles/Health Savings Plans Reaction to High Costs

6. Impact to Healthcare Providers=The Volume Bubble Has Burst Decreased volume from high paying insured populations Covered Insured Reaction to Increase Share=Consumerism Rethinking and/or foregoing of healthcare services. Self directed or insurer redirected services to less expensive niche providers (stand along labs, imaging centers) that hospitals simply can not match

7. So..what do hospitals do to control the financial hemorrhage from partial healthcare reform and volume erosion? 4 Basic “Business 101” Options (In Order of Ease) Decrease Margin Expectations Eliminate or Relinquish Unprofitable Service Lines Generate Additional Volume (“steal” market share) Produce Expense Savings

8. Increased competition against each other (to steal market share….friendly neighbors era is over) Competitive pricing on key lab and radiology ancillary services to combat niche providers. Short term participation in Exchange/Market Plans and other key narrow network plans to protect volume. Long term creation of regional insurance network plans (ACOs and ACCs) to redirect volume, better manage care and save the middleman premium charged by insurers. Short term fierce physician integration steps followed by long term re-evaluation of physician specialty needs and compensation…simply can not afford to carry too high of a level of subsidization for employed physicians. Unavoidable focus on decreasing labor costs while still meeting regulatory requirements. Potential elimination of non-core services lines that are subsidized…causing a movement towards specialty centers and a general decrease in access to care Significant list of other expense control initiatives (supplies, outsourcing, etc) Paradigm shift from fee for service (FFS) reimbursement to fixed capitated payment where lower volume equates to higher financial reward (less is better).