1. Going for the Green “E”Payment’s service helps you move from paper to electronic payments Vanessa Taggart Paula Strollo Supply Chain Managememt Vanessa Taggart Paula Strollo Supply Chain Managememt

2. Who We Are ■ Largest academic community hospital in PA ■ Largest Level 1 Trauma Center in PA ■ Certified Stroke Center ■ Employees – 9,500 Medical Staff – 1,100+ Nurses – 2,334 ■ Largest academic community hospital in PA ■ Largest Level 1 Trauma Center in PA ■ Certified Stroke Center ■ Employees – 9,500 Medical Staff – 1,100+ Nurses – 2,334 ■ Magnet Hospital ■ 143,850 ED visits / 49,300 admissions ■ 988 acute care beds ■ 3 hospital campuses ■ Revenues over $1 Billion ■ Magnet Hospital ■ 143,850 ED visits / 49,300 admissions ■ 988 acute care beds ■ 3 hospital campuses ■ Revenues over $1 Billion

4. Supply Chain Management ■ Synergies between Supply Chain and Accounts Payable –There is significant overlap between Supply Chain Mgmt & Accounts Payable –Typically work with the same suppliers and internal customers ■ Synergies between Supply Chain and Accounts Payable –There is significant overlap between Supply Chain Mgmt & Accounts Payable –Typically work with the same suppliers and internal customers

5. Supply Chain Management ■ Value in tight connections within the P2P process –Accountability for entire P2P cycle –Shared Vision – Goals aligned –Leverage relationships to bring overall value to contracting Pricing/Terms/Compliance/EDI/Payment –Accounts Payable has access to vendors ■ Value in tight connections within the P2P process –Accountability for entire P2P cycle –Shared Vision – Goals aligned –Leverage relationships to bring overall value to contracting Pricing/Terms/Compliance/EDI/Payment –Accounts Payable has access to vendors

6. Supply Chain Management ■ Value in tight connections within the P2P process –Accounts Payable “owns” the vendor master Assures compliance to government regulations –Internal Audit findings addressed with full continuum of Supply Chain for process improvements ■ Value in tight connections within the P2P process –Accounts Payable “owns” the vendor master Assures compliance to government regulations –Internal Audit findings addressed with full continuum of Supply Chain for process improvements

7. Supply Chain Management  100% of Supply Chain mission ends in a payment… contracting, purchasing, inventory etc… ■ 89% of AP’s workload is directed by Supply Chain processes –54% Purchase Order –18% Contracts –17% Direct Procure (VISA)  100% of Supply Chain mission ends in a payment… contracting, purchasing, inventory etc… ■ 89% of AP’s workload is directed by Supply Chain processes –54% Purchase Order –18% Contracts –17% Direct Procure (VISA)

8. Supply Chain/AP Connection

9. LVHN Credit Cards ■ In place >10 years –Significant growth over time –Average transaction amount = $398 –77,000 transactions annually = 77,000 less invoices –5-6 FTE’s needed for that many invoices –77,000 @ $3.18/per invoice $245k additional costs ■ In place >10 years –Significant growth over time –Average transaction amount = $398 –77,000 transactions annually = 77,000 less invoices –5-6 FTE’s needed for that many invoices –77,000 @ $3.18/per invoice $245k additional costs

10. Rebate ■ Rebate for FY 09 was only on credit card transactions ■ FY 10 we will realize additional rebates thanks to “E”Payment’s ■ Rebate for FY 09 was only on credit card transactions ■ FY 10 we will realize additional rebates thanks to “E”Payment’s

11. LVHN Accounts Payable ■ FY 2009 –48,000 checks issued –522 “E”Payment’s –2.3 average invoices per payment –$12,200 per payment (“E”Payments’s & Checks) –112,000 invoices processed –74,000 credit card transactions –$0.47 processing cost per invoice ■ FY 2009 –48,000 checks issued –522 “E”Payment’s –2.3 average invoices per payment –$12,200 per payment (“E”Payments’s & Checks) –112,000 invoices processed –74,000 credit card transactions –$0.47 processing cost per invoice

12. LVHN Accounts Payable ■ Rebate received annually –Helps pay for wages –Helps pay for benefits & overhead –Helps pay for supplies and other expenses ■ Without the rebate –Our invoice cost was around $3.18 ■ Benchmarks range from $3.58 to $35* *Aberdeen Group ■ Rebate received annually –Helps pay for wages –Helps pay for benefits & overhead –Helps pay for supplies and other expenses ■ Without the rebate –Our invoice cost was around $3.18 ■ Benchmarks range from $3.58 to $35* *Aberdeen Group

13. What is “E”Payment’s? ■ Back end credit card –Vendor is given a credit card number –There is no physical card –The card is funded at $0 Can’t decide to use it to pay an invoice –Funding occurs when we transmit the payment –Card is funded for what is payable ■ Back end credit card –Vendor is given a credit card number –There is no physical card –The card is funded at $0 Can’t decide to use it to pay an invoice –Funding occurs when we transmit the payment –Card is funded for what is payable

14. How to run “E”Payment’s? ■ Using ERP system –Identify suppliers who accept “E”Payment’s –Run basically same reports we run for cutting checks –Do not print checks –Create a transaction file that is encrypted and transmitted to the bank –Bank pulls into their web based system ■ Using ERP system –Identify suppliers who accept “E”Payment’s –Run basically same reports we run for cutting checks –Do not print checks –Create a transaction file that is encrypted and transmitted to the bank –Bank pulls into their web based system

15. How to run “E”Payment’s? ■ Bank’s system –Creates a remittance email or fax that is sent to supplier Card is funded instantly –Supplier uses previously communicated credit card number to process payment in their credit card system –Supplier gets payment immediately ■ Bank’s system –Creates a remittance email or fax that is sent to supplier Card is funded instantly –Supplier uses previously communicated credit card number to process payment in their credit card system –Supplier gets payment immediately

16. Projected for FY10 ■ FY 2010 - Projected –43,500 checks –2,600 “E”Payment’s –2.4 average invoices per payment –$11,000 per payment (“E”Payments’s & Checks) –110,000 invoices processed –77,000 credit card transactions – - $0.24 processing cost per invoice ■ FY 2010 - Projected –43,500 checks –2,600 “E”Payment’s –2.4 average invoices per payment –$11,000 per payment (“E”Payments’s & Checks) –110,000 invoices processed –77,000 credit card transactions – - $0.24 processing cost per invoice

17. Team Structure ■ Project Team Resources –Accounts Payable –Supply Chain Analytics –Information Services –Finance –Internal Audit –Bank Personnel ■ Project Team Resources –Accounts Payable –Supply Chain Analytics –Information Services –Finance –Internal Audit –Bank Personnel

18. How are Suppliers Selected ■ Project Steps –Hospital provided file to bank to contact suppliers regarding participation File included contact information, address, annual spend etc. –Bank contacted suppliers with >$50k explained program Supplier makes decision to participate ■ Project Steps –Hospital provided file to bank to contact suppliers regarding participation File included contact information, address, annual spend etc. –Bank contacted suppliers with >$50k explained program Supplier makes decision to participate

19. How are Suppliers Selected ■ Project Steps (cont’d) –Suppliers who chose to participate receive an email confirming their participation –LVHN copied on the email –LVHN is provided credit card numbers by bank –LVHN calls supplier with credit card number (no plastic is issued) Safe because card has $0 value ■ Project Steps (cont’d) –Suppliers who chose to participate receive an email confirming their participation –LVHN copied on the email –LVHN is provided credit card numbers by bank –LVHN calls supplier with credit card number (no plastic is issued) Safe because card has $0 value

20. After the Call ■ Project Steps (cont’d) –On the hospital side Update vendor master –Change payment code to drive payment to “E”Payment’s –Assure contact information is updated Begin paying using “E”Payment’s in next payment cycle ■ Project Steps (cont’d) –On the hospital side Update vendor master –Change payment code to drive payment to “E”Payment’s –Assure contact information is updated Begin paying using “E”Payment’s in next payment cycle

21. LVHN Rebates We are confident this will be achieved.

22. Other Savings ■ Interest on cash float – we hold our cash longer –$57,000 annual estimate (first year) ■ Supplies –Fewer checks & envelopes ■ Postage –Supplies & postage savings $3,300 annual estimate (first year) ■ Staff time savings –NO sorting or moving of paper ■ Interest on cash float – we hold our cash longer –$57,000 annual estimate (first year) ■ Supplies –Fewer checks & envelopes ■ Postage –Supplies & postage savings $3,300 annual estimate (first year) ■ Staff time savings –NO sorting or moving of paper

23. Supply Chain Next Steps ■ All areas of Supply Chain participate –Add language regarding payment methods –Extended payment terms for vendors who insist upon a check –Ask vendors who are looking for payment if they participate ■ Go for the green –Push “E”Payment’s NOT paper payments ■ All areas of Supply Chain participate –Add language regarding payment methods –Extended payment terms for vendors who insist upon a check –Ask vendors who are looking for payment if they participate ■ Go for the green –Push “E”Payment’s NOT paper payments

24. Contact Information: vanessa.taggart@lvh.com vanessa.taggart@lvh.com Contact Information: vanessa.taggart@lvh.com vanessa.taggart@lvh.com