Defending the Case for Philanthropic Support

1. Defending the Case for Philanthropic Support Ready-to-Use Presentation Slides and Talking Points Philanthropy Leadership Council

2. Donor/prospect expresses concern about: • High hospital charges reported in the media • High medical bills, particularly for low-income patients • High costs of health care • Challenge #1: Increasing Transparency into Hospital Finances

3. Hospital Finances Under Pressure Demographic and Market Forces Straining the Current Business Model Source: Health Care Advisory Board interviews and analysis. Continuing Cost Pressure Decelerating Reimbursement Rates • No sign of slower cost growth ahead • One-off cost cutting campaigns will not suffice to alter overall trends • Drivers of new cost growth include virtually mandatory investments in technology, physician practices • Downward pressure on Medicare, Medicaid reimbursement • Payments subject to quality and cost-based performance • Commercial cost shiftingstretched to the limit ShiftingPayer Mix DeterioratingCase Mix • Baby Boomers entering Medicare rolls • Coverage expansion boosting Medicaid eligibility • Most demand growth over the next decade comes from publicly insured patients • Medical demand from aging population threatens to crowd out profitable procedures • Incidence of chronic disease, multiple comorbidities rising

4. Cross-Subsidy Economics on the Brink of Failure Source: Advisory Board interviews and analysis. Projected results for health care industry if hospitals do nothing to alter current course, based on the Health Care Advisory Board’s Margin Improvement Intensive that projects margin performance based on key financial and operational metrics from 158 hospitals. Margin Improvement Analysis Results1 Five-Year Margin Projections Ten-Year Margin Projections 0-5% Decline 5-10% Decline 5-10% Decline 0-5% Decline Greater than 10% Decline Improvement Greater than 10% Decline Improvement

5. Charges Do Not Reflect What Hospitals Are Paid Hospitals Typically Receive Less than Fifty Cents on the Dollar Source: 2012 Almanac of Hospital Financial and Operating Indicators, Optuminsight Inc, 2011; CDC, “National Hospital Discharge Survey,” 2010, available at: www.cdc.gov/nchs; Melnick GA and Fonkych K, “Hospital Pricing and the Uninsured: Do the Uninsured Pay Higher Prices?” Health Affairs, 2008, 27: w116-22; AHA, “Uncompensated Care Cost Fact Sheet,” January 2013, available at: http://www.aha.org; Advisory Board interviews and analysis. Hospital Revenue Received as Percentage of Charges Discounts for Uninsured Patients All Payers, 2010 5% Self-pay percent ofU.S. discharges, 2010 Median difference in collected price between uninsured, commercially-insured patients (28%) $39.3B Uncompensated care provided by U.S. hospitals, 2010

6. Donor/prospect expresses: • Discomfort or dislike of “Obamacare” as a reason for choosing not to give • Confusion about the impact of the Affordable Care Act on health care or the hospital • Challenge #2: Politics of the Affordable Care Act

7. What’s in the Affordable Care Act? Aims to Improve Accessibility, Affordability, and Quality of Health Care Source: Advisory Board interviews and analysis. Main Provisions of the Affordable Care Act 1 2 3 Coverage Expansion Financing Mechanisms Care Delivery Reform Increased access to health insurance and expanded Medicaid coverage Financing for coverage expansion comes from new taxes, Medicare cost-cutting Care delivery reform with increased focus on integrated, coordinated care

8. Reexamining the ACA “Grand Bargain” Source: CBO, “Letter to the Honorable John Boehner Providing an Estimate for H.R.6079, The Repeal of Obamacare Act,” July 24, 2012, available at: www.cbo.gov; CBO, “Effects of the Affordable Care Act on Health Insurance Coverage—February 2013 Baseline,” February 5, 2013, available at: www.cbo.gov; Advisory Board interviews and analysis. Disproportionate Share Hospital. Non-elderly population. ACA Hospital Payment Cuts Projected Cumulative Increase in Newly Insured Population2 2013-2023 DSH1 Payment Cuts 2 Provider “Give”: Lower Payment Provider “Get”: More Paying Patients • Medicaid expansion • Employer mandate • Insurance exchanges • Medicare rate cuts • DSH cuts ?

9. Medicaid Expansion No Sure Bet States Diverge Over Choice to Expand Medicaid Eligibility Source: Advisory Board interviews and analysis. State Participation in Medicaid Expansion Participating Undecided Will Not Participate

10. Some Employers Dodging the Mandate Employers Cutting Hours, Jobs to Avoid Insurance Requirement Source: Reynolds J and Merin J, “Business Leaders Give 2013 Outlook Mixed Reviews,” International Franchise Association, January 2013, available at: www.franchise.org; Mercer, “Health Reform Poses Biggest Challenges to Companies with the Most Part-Time and Low-Paid Employees,” August 8, 2012, available at: www.mercer.com; Advisory Board interviews and analysis. Full Time Equivalents. n=72franchisees, all industries. n=1,203 employers. Strategies to Avoid ACA Penalties Cut jobs to remain under 50 FTEs1 Hire all new employees at part-time status Convert full-time employees to part-time status Split into smaller companies with fewer than 50 FTEs 31% 32% Franchisees that plan to cut jobs to stay under 50-employee threshold2 Retail and hospitality companies that plan to “change workforce strategy” to avoid penalties3

11. Individuals May Not Shop on the Exchanges Weak Penalties, Technical Problems May Dampen Enrollment Source: Kaiser Family Foundation, “Kaiser Health Tracking Poll,” March 2013, available at: kff.org; PwC, “Health Insurance Exchanges: Long on Options, Short on Time,” October 2012, available at: www.pwc.com; Advisory Board interviews and analysis. Higher of the two values. Sample Penalties Individual Penalties for Non-Compliance Office Worker Real Estate Agent Income: $30,000 Income: $190,000 $4.75K Who Are the Enrollees? $3.8K $1.9K 70% 56% 33 In good to excellent health Employed full-time Median age

12. Donor/prospect expresses: • Confusion or uncertainty over the strategic direction of the hospital • Desire to understand the hospital’s growth strategy • Interest in non-traditional funding priorities • Challenge #3: The Health System “Identity Crisis”

13. The Path to Future Health System Prosperity Source: Advisory Board interviews and analysis. Market Imperatives • Competing on Value • Population health management • Coordination of care for chronic patients • Optimization of care episode Care Transformation Overcoming Immediate Margin Pressure Time

14. The Emerging Landscape at Your Hospital Source: Advisory Board interviews and analysis. Extending the Scale and Breadth of the Organization Medical Home Post-Acute Care Providers HomeMonitoring Hospital Network HomeHealth Physician Practice FQHC1 Ongoing Care Management Acute Care Post-Acute Care Overall Health of Patients

15. Growth Opportunities for Health Care Institutions Source: Advisory Board interviews and analysis. Four Possibilities for the Future of Hospitals Best-in-Class Hospital Patient-Oriented Ambulatory Network • Consistently delivers high-quality care for patients admitted to the hospital • Patient data shared efficiently and securely with other care providers • Extensive network of care sites outside the hospital • Convenient and affordable access to primary care and diagnostic procedures Full Service Population Health Manager Integrated Finance and Delivery System • Health system responsible for overall health of patient population • Focus on keeping patients healthy and out of the hospital • Health system takes on full risk of patient outcomes by offering health plan