1. OSI Proprietary and Confidential Information Comparative Reimbursement Analysis and Contract Optimization MCDA Prepared for Tampa General Hospital Tampa, FL July 26, 2000 Managed Care Decomposition Analysis

2. OSI Proprietary and Confidential Information Goal of MCDA: To clearly define and quantify the MCO expected reimbursement process in terms of patient characteristics (master attributes) and related expected reimbursement (reimbursement attributes) so that potential contract modifications can be revealed. Result: Increased net income Introduction Managed Care Decomposition Analysis

3. OSI Proprietary and Confidential Information Clinical Product Lines Marketing Product Lines Hospital Patient Population Charge Master MCO Contract Master Predicted Managed Care Product Lines (MCPL’s) MCO Contract Accepted (Payor Specific) Shift to Managed Care MCO brings in New Patients and Proposed Contract Inherent MCPL’s Market Space

4. OSI Proprietary and Confidential Information MCO Contract Master Patient CharacteristicsReimbursement Characteristics What are the MCPL’s defined by the contracts? How are the MCPL’s reimbursed? A patient or patient group can have more than one characteristic. A patient or patient group can have more than one reimbursement possibility based on characteristics. How Contracts Are Interrelated

5. OSI Proprietary and Confidential Information The Three Theoretical Stages of MCO Management Stage 1: Contract Negotiation Stage 2: Contract Monitoring Stage 3: Contract Optimization

6. OSI Proprietary and Confidential Information Stage 1: Contract Negotiation Predicted Patients Offered Contract Rules Predicted Reimbursement

7. OSI Proprietary and Confidential Information Stage 2: Contract Monitoring Actual Patients Contract Rules Expected Reimbursement

8. OSI Proprietary and Confidential Information Actual Patients Alternative Characterization Possible Net Revenue OSI MCDA Alternative Reimbursement and/or Impacts MCO Contract Modifications OSI evaluates the Financial impact, both gross and net, of all findings. Stage 3: Contract Optimization

9. OSI Proprietary and Confidential Information What is the OSI “MCO Contract Master”? Hospital’s Contract Management System OSI extracts and standardizes MCO contract specifications MCO Contract Master Patient Characteristics Managed Care Product Lines or MCPL’s Reimbursement Characteristics DRG UB-92 REV Code CPT-4 Code ICD-9-CM Code Covered Charges APC’s Age/Sex Percent of Charges Per Diem Time Sensitive Per Diem Discharge Amount Line Item Amount What? How much? Managed Care Decomposition Analysis MCDA

10. OSI Proprietary and Confidential Information Reimbursement Characteristics Actual Patients Contract Rules Expected Reimbursement MCO Contract Master Master Attributes Reimbursement Attributes Managed Care Product Lines MCDA Data Base Patient Characteristics What is being purchased? How is it being purchased? Managed Care Decomposition Analysis

11. OSI Proprietary and Confidential Information Contract 1 Contract 2Contract 3 Contract n Hospital Contract Management System MCO Contract Master MCDA Patient Master Attributes Patient Reimbursement Attributes Process: 1. Standardize the hospital’s MCO contracts to allow for modeling and future comparative analysis 2. Reveal alternative reimbursement scenarios that, if implemented, would increase net income 3. Reveal alternative patient characterizations that, if implemented, would increase net income 4. Quantify all alternative scenarios in terms of net income Managed Care Decomposition Analysis

12. OSI Proprietary and Confidential Information Actual Patients Alternative Characterization Possible Net Revenue OSI MCDA Alternative Reimbursement and/or Impacts MCO Contract Modifications OSI evaluates the Financial impact, both gross and net, of all findings. Managed Care Decomposition Analysis Contract Optimization

13. OSI Proprietary and Confidential Information 25th $800 35th $1040 Median $1250 75th $1400 90th $1550 Hospital Starting Reimbursement per Day $20,000 $32,000 Starting Classification: DRG 370-375, PerDiem=$1040, 500 Cases Example: Aetna Open Choice Change in Net Income Net Income is enhanced by increasing PerDiem rate to the 50 th or 75 th Percentile Normal Distribution for all Payor’s per diem rates for DRG 370-375 Simulations within same payment type across payors Percentile

14. OSI Proprietary and Confidential Information Starting Classification: DRG 370-375, PerDiem=$1040, 500 Cases Simulations within differing payment types across payors Case RateCharges Starting Reimbursement = $2200 per case (Avg.) 35th 42nd 30th Per Diem Simulate each different Payment type at the Median for 500 cases with the same classification, DRG 370-375 Change in Net Income $20,000$15,000 $35,800 Example, Cont.

15. OSI Proprietary and Confidential Information Simulations involving re-classification to new Master Attribute Example, Cont. Starting Classification: DRG 370-375, PerDiem = $1040, 500 Cases 190 Cases DRG 370-371 310 Cases DRG 372-375 New Master Attribute Per Diem 28th 85 Cases of 370@ 1230 per day 105 Cases of 371@ 1145 per day Case Rate 190 Cases of 370-371 @ 3000 per case Median 310 Cases @ 2000 25th32nd Case Rate 60 th Percentile 310 Cases @ 2130 $49,500 $38,988 Change in Net Income Simple DRG un-bundling

16. OSI Proprietary and Confidential Information Aetna Open Choice pays $1040 per day for DRG 370-375, 500 Cases Old Contract Step 6- If DRG 370-375, Per Diem=1040.00 New Contract Step 6- If DRG 370, Per Diem=1230.00 Step 7- If DRG 371, Per Diem=1145.00 Step 8- If DRG 372-375, Case Rate= 2130.00 MCDA Contract Optimization MCDA Alternative 1 Unbundle DRGs and Pay Case Rates DRG 370-371 @ $3000 Per Case DRG 372-375 @ $2000 Per Case CHANGE IN NET=$38,988 *Supported by attributes in Lifeguard HMO MCDA Alternative 2 Unbundle DRGs and Pay Per Diems and Case Rates DRG 370 @ $1230 Per Day DRG 371 @ $1145 Per Day DRG 372-375 @ $2130 Per Case CHANGE IN NET=$49,500 *Supported by attributes in Blue Shield HMO, Cigna HMO, and One Health PPO CHANGE IN NET=$49,500 Example, Cont. Final Simulation Results Simple DRG un-bundling

17. OSI Proprietary and Confidential Information

18. Cigna HMO pays $1155 per day for ICD-9 72.01, 300 Cases Old Contract Step 8- If ICD-9 72.01, Per Diem=1155 New Contract Step10-If REV 173, Line=975.00 MCDA Contract Optimization Managed Care Decomposition MCDA Optimum Alternative Pay 300 Cases Based on Rev Code 173 and Line Item Amount REV 173 @ $975 Per Line Item CHANGE IN NET=$12,620 *Supported by attributes in Blue Shield HMO CHANGE IN NET=$12,620 Final Simulation Results Complete Attribute Optimization DRG Attributes REV Attributes Per Diem Alternatives Case Rate Alternatives Case Rate Alternatives Line Item Alternatives Per Diem Line Item Case Rate Optimization Example, Cont.