1. ANALYZING YOUR COSTS AND UTILIZATION

2. 2 STEP 1 - ADJUST EXPENSES J Adjust personnel, operating, depreciation & indirect expenses: J Since contract is discounted FFS, certain costs will not be paid to CARE by LifeMet: P e.g.. laboratory, pharmacy, medical specialists, radiology P CARE providers must order these services subject to contract’s UR guidelines J Remove those costs from CARE’s general ledger J Determine Revised Functions P e.g.. hire billing manager; retain all current providers

3. 3 STEP 2 - DETERMINE HOURS PROVIDERS WORK/YEAR FT Employee hrs/year (52 weeks X 40 hrs): 2080 hours Subtract: Vacation (3 weeks): ( 120 ) Paid Holidays (8 days) ( 64 ) Personal Holidays (3 days) ( 24 ) Sick Time (5 days): ( 40 ) Professional Education (5 days) ( 40 ) Hours Available Per Year1,792 hours

4. 4 STEP 3 - DETERMINE NUMBER OF CLINICS/YEAR J Medical Clinics based on 3.5 or 4 hours J FT medical provider works 2 clinics/day totaling 7-8 hr/day (depending on patient scheduling) P CARE uses 2 clinics totaling 7 hrs/day P appointments based on 15 minute increments or units P providers have one a.m. or p.m. off each week for admin. time J 1792 hours/4 hour clinics = 448 clinics per yr J 448 clinics x 90% admin time adjustment = 400 clinics per year

5. 5 STEPS 4 & 5 - DETERMINE HOURS FOR PATIENTS J Step 4: Multiply No. of Clinics x Appointment Scheduled time: 400 clinics x 3.5 hours = 1,400 hours per year seeing patients J Step 5: Apply Units to Available Hours for Patients P CARE schedules appointments in 15 minute increments; level 1 patient is 30 minutes (2 units); level II is 45 minutes ( 3 units) and level III is 1 hour (4 units) 400 hrs/year x 4 units/hour = 5,600 units available to see patients/year

6. 6 STEP 6 - DETERMINE REVENUES J Compare revenues at full & current utilization P LifeMet pays $40.00 per 15 minute unit J Full utilization : Multiply number of units each chargeable provider has available to see patients times rate paid P 5,600 units/yr x $40.00 = $224.000 revenue J Current Utilization : Multiply number of units each chargeable provider actually provides by $40.00 units P Physician A: 5,000 x $40.00 = $200,000 P NP: 3,500 x $40.00 = $140,000

7. 7 STEP 7 - DETERMINE PROFIT/LOSS J Compare Revenues versus fee for service costs to determine whether CARE should accept contract J FULL UTILIZATION P Total Expenses$(746,503) P Total Revenues: 756,000 P Profit/(Loss):$ 9,497 J CURRENT UTILIZATION P Total Expenses$(746,503) P Total Revenues 546,000 P Profit/(Loss)$(200,503)