1. AF4Q Sustainability Webinar Pricing, Value & Prioritization December 16, 2013

2. Today’s Objectives 2 Lay the foundation for an actionable path towards: 1.Establishing a price for the value- add products and services alliances provide 2.Identifying who values these products and services and to what degree 3.Focusing efforts on products and services with the greatest opportunity for impact and financial return

3. Six Drivers of Sustainability 3 Economic Viability Economic Viability Capacity to Deliver Capacity to Deliver Focused Business Strategy Focused Business Strategy Impact Articulation Impact Articulation Impact Outcomes Impact Outcomes Partnership Building & Stakeholder Engagement

4. Establishing the Right Price 4

5. Identifying Key Pricing Factors 5 Costs: The fixed and variable costs required to deliver a product or services. Value: The perceived benefit provided to the customer group(s). Competition: The alternative options the customer has to select from to receive the product or service. Positioning: The unique strengths and assets that differentiate you as a provider of these goods and services. While each of these factors impact pricing, it’s critical to first understand your true costs to develop an informed pricing baseline.

6. Creating an Informed Baseline 6 Identify the key products and/or services you provide (or are considering providing) that deliver value to the community. 1. Products & Services Identify and allocate the fixed and variable costs associated with providing these products and/or services. 2. Fixed and Variable Costs Determine the price and the target number of customers needed to break even. 3. Break Even Price & Volume

7. 7 Pricing In Action: Better Health Greater Cleveland Current: PCMH NCQA Recognition Application Process Technical Assistance support for providers Potential: Clinical effectiveness, financial management and operational efficiency Product/ Service Fixed Costs Include: Management time, equipment, training and certification. Variable Costs Include: Consultant time, travel expenses, space rental Costs Identified costs Added 10% margin Provided 50% discount to members Pricing

8. Baseline Lever to Pull: Break Even Price 8 Fixed Costs Variable Costs Per Customer Estimated # of Customers Total Cost Total Costs Estimated # of Customers Break Even Price Two Levers to Pull: Break Even Price & Break Even Volume

9. Baseline Lever to Pull: Break Even Volume 9 Price per Unit Variable Cost per Unit Fixed Costs # of Units to Sell to Break Even Two Levers to Pull: Break Even Price & Break Even Volume

10. Discussion 10 Are you allocating both fixed and variable costs within each of your service lines? Are you covering your full costs? What challenges have there been in doing so? What tolerance is there for raising prices to increase margins when necessary? How have you navigated resistance?

11. Balancing Price with Value 11

12. 12 Market: Who is the specific group you are targeting? Offering: What programs, services and/or products are you delivering to achieve your desired social impact? Benefit: How do your programs/services/products deliver value to the market? Differentiation: How are you different from and better than the alternatives? A value proposition addresses the following: A strong value proposition is a clear statement of the tangible results a customer gets from using your services and/or products. Understanding Your Value

13. 13 Translating Your Value Jobs: What is this stakeholder trying to get done? Gains Pains Value Proposition: How does or might your product or services create gains or relieve pains for this stakeholder? What are the things (e.g., undesired costs, situations, challenges) that this stakeholder most dislikes or fears in pursuit of its “jobs”? What are the things (e.g., benefits, experiences) that this stakeholder most appreciates or hopes for in pursuit of its “jobs”?

14. Value in Action: Better Health Greater Cleveland 14 CUSTOMIZED TECHNICAL ASSISTANCE for Practice/Health System Transformation Target MarketSmall to medium sized providers/health systems in the local community. NeedMany small to medium sized providers lack necessary, internal, subject matter expertise in areas that are critical, as transitioning to PCMH, ACO delivery models and Total Cost of Care reimbursement evolves. Additionally, many can’t afford to secure large, expensive, consulting firms to address this need. BenefitProviders receive customized, and affordable TA support that positions them for success under new conditions. PositioningHighly reputable, customer centric, in-person, cost-effective TA Provider who is invested in their local community health improvement and economic success. Marketing/ Communications Currently targeting provider membership organizations. Opportunity to expand to non-members in the future.

15. Next Steps to Developing a Value Proposition What is the customer trying to get done? What are the gains (e.g., benefits, experiences) that this customer most appreciates or hopes for in pursuit of its “jobs”? What are the pains (e.g., undesired costs, situations, challenges) that this customer most dislikes or fears in pursuit of its “jobs”? 1. Assess Customers What alternative options do your customers have to receive this value? What do your customers value about comparable or competitive products/services? 2. Assess Competitors What is your competitive advantage? What can you offer that is unique and superior to the competition? How does or might your product or services create gains or relieve pains for this stakeholder? 3. Determine Position Conduct Market Research to: 15

16. Discussion 16 What tactics have you used in the past to explore and communicate your value? Is there alignment between the value you see that you are providing to customers and the value they believe they are receiving?

17. Prioritizing Your Efforts 17

18. Feasibility Assessment Clarifies Key Questions 18 1.Overall Strengths: What are the potential strengths and demand for the opportunity? 2.Overall Drawbacks: What are the potential drawbacks or risks of the opportunity? 3.Go/No Go: Is this opportunity more valuable than the other opportunities the organization could be investing in?

19. Feasibility Study Overview Opportunity (1= unattractive, 2= moderate, 3= very attractive) ABC Market Size Market Outlook Customers Competitive Factors Market Profitability Ease of Entry Fit with Mission Fit with Skills/Expertise Fit with Assets and Strengths Ability to Manage Risk OVERALL ATTRACTIVENESS Internal Factors Internal/ External External Factors 19

20. Prioritization in Action: Better Health Greater Cleveland Score of 75-90 points: High Priority Product/Service Score of 60-74 points: Medium Priority Product/Service Score of 59 points or less: Low Priority Product/ Service 20 Criteria Weighting Product/Service Scoring Products/ Services: Criteria (Score each criteria 1[low importance], 2 [medium importance], or 3 [high importance]) Score: Definition/ Measurement (green =3 points, yellow = 2 points, red = 1 points) PCMH NCQA Recognition Alignment Organizational Alignment 3 Vision, mission, and values (high, medium, low) 9 Financial ROI 3 Negative, break-even, or positive/ margin 6 Financial ROI: Timeframe to Achieve 2 0-1 yr, 1-2 yrs, 2(+) yrs 4 Market Demand 2 The current Demand for the product/ service is (high, medium, low) 4 Market Demand : Duration 2 The Demand for the product/ service is (episodic/short duration, moderate duration, ongoing/long term ) 6 Market Competitive Positioning 2 How our org is positioned in the marketplace to compete with others offering the same service or product (high, medium, low) 4 Market Market Share 1 Potential reach; i.e. = 50% of eligible audience 1 Market Barriers to Entry 2 Barriers for BHGC entry may include, but are not limited to political, economic, regulatory,etc. (minimal, moderate, significant) 2 Strategic Scalability 1 Scalability of the Product/Service (high, medium, low) 2 Strategic Population Health /Social Impact 1 Potential impact is : 1.5 mil 2 Strategic Targeted Audience 2 Status of relationship with targeted audience (not started/new, developing, or strong) 4 Strategic Product Development Cycle 2 Complexity of product to be developed(high complexity, medium complexity, low complexity) 6 Strategic Product Value Proposition 3 Value prop rating for targeted audience (high, medium, low) Consider using Rogers’ factors of diffusion of innovation a 6 Strategic Organizational Readiness 2 Internal People, Process, Systems Readiness to deliver the product/service (Ready now, 6 mos-1 yr, > 1 yr) 6 Brand Recognition Visibility Reputation 2 What impact will this product have on BHGC’s reputation in the community/region/national stage? (high, medium, low) 4

21. Closing Questions & Next Steps How may these tools supplement the work you are already doing? What additional support would be helpful as you apply these tools in your specific alliance? 21

22. Contact Information 22