Accelerating to Health 2.0

1. Accelerating to Health 2.0 • Addendum 1 – A deeper dive into revenue growth; capital efficiency; modernization and functional excellence. • July 2018

3. Our journey to Health 2.0 Today • March • June • January • December 1 2 3 4 • Accelerating to Health 2.0 New Mission, Vision and Values • 2018 – 2022 • Integrated Strategic and Financial Plan Introduction to Health 2.0

4. Three portfolios of work will enable us toaccelerate to Health 2.0 Capital efficiency Revenue growth Modernization and functional excellence Payor Contracting Strategies Commercial Market Growth Reallocate Capital Divest in non-core assets Partnerships Care Delivery and Operations External Spend Excellence Enterprise Support Services Modernization Digital Transformation Rev Cycle Optimization DiversificationAmbulatory Diversification Pop Health Diversification Services & Digital Enterprise (Xnovate) Clinical Variation

5. Accelerating to Health 2.0Revenue growth

6. Revenue growth portfolio Revenue growth • A closer look at diversification: • Ambulatory Rev Cycle Optimization Payor Contracting Strategies Commercial Market Growth Diversification Pop Health Diversification Services & Digital Solution Diversification Ambulatory Enterprise (Xnovate)

7. Continued Shift from Hospital-Based to Ambulatory Setting Payor and consumer demand for care sites with lower price/cost to the consumer Increased competition from traditional and non traditional sources has increased consumer demand for affordable, accessible and convenient care. Declining inpatient reimbursement pressure and increased expenses Toptrendsindicating shifts toward lower cost outpatient care Evolving population health management models focus on preventing disease and increasing access to care Technology has enabled better care coordination outside of a hospital site Value based care reimbursement models emphasize cost control and appropriate resource utilization

8. Ambulatory network assessment and strategy to become market leader across our markets Phase Deliverables Outcomes Phase I Jan 15 – March 15 Internal Assessment | Market Assessment | Financial Modeling | Governance/Operating Modeling | Shared Services Optimization | Opportunity Roadshow March 15 – June 15 Organizational Alignment 250+ Executive Conversations | Regional Strategy Conversations | Align Current Capital Asks Ambulatory Pivot | Ambulatory Asset P&Ls | Express Care Shared Services | Optimize Existing Assets/Governance Phase II June 15 – Aug 15 $10.7B at risk • Key Action Steps Underway: • Comprehensive evaluation of our assets and opportunities in communities we serve • Defining economic and operational care model for Health 2.0 • Like in acute, aspiring to be #1 or #2 in each area while being sustainable Next step: Apply Return-on-Invested-Capital (ROIC) framework to determine value and alignment

9. Revenue growth portfolio Revenue growth • A closer look at diversification: • Services and Digital • Enterprise (Xnovate) Rev Cycle Optimization Payor Contracting Strategies Commercial Market Growth Diversification Pop Health Diversification Services & Digital Solution Diversification Ambulatory Enterprise (Xnovate)

10. Focus areas • Personalize Health – PSJH Core • Personalize health care for patients across the full care continuum and emerge as leader in industry transformation to patient-centric care. • Xnovate – PSJH Enterprises • Invest in developing existing and emerging digital, health care IT, and data capabilities that strengthen engagement with patients and enhance ability to collect, manage, and analyze health care data across the full continuum of patient care.

11. What intelligent care can provide Insights – Data Aggregation and Analytics Leverage longitudinal data to create offerings that drive insights Care Platforms Building platforms and services that enable better outcomes at lower cost Patient and Digital Solutions Delivering tools to enable patients to be more active in their care

12. Digital transformation is at the core andfour key areas highlight our path forward ENGAGE PATIENTS get and stay healthy • EMPOWER CARE • TEAMS • improve care team productivity OPTIMIZE OPERATIONS AND CARE DELIVERY streamline operations and improve care quality CARE INSIGHTS drive better diagnoses and treatment

13. We are aligning investment areas with key capabilities todrive to Health 2.0 in these four areas Investment Pillars ENGAGEPATIENTS to get—and stay—healthy OPTIMIZEOPERATIONS AND CARE DELIVERY to drive better diagnoses and treatment ENABLETHE CARE CONTINUUM through platforms that provide insight EMPOWERCARE TEAMS to improve care team productivity Investment Areas Increase Digital Interactions & Patient Acquisition Virtual Care Quality Improvement Remote Patient Monitoring Health Scenarios Effective & Continuous Engagement Care Team Collaboration Population Health Precision Health Enhanced Experience Care Coordination Operational & Financial Efficiency Managing Devices & Facilities Technology Platform

14. Accelerating to Health 2.0Capital efficiency

15. Capital efficiency portfolio • A closer look at reallocating capital Reallocate Capital Divest in non-core assets Partnerships Capital efficiency

16. Revenue growth and return-on-invested-capitalwill drive our sustainability Margin Return on invested capital Capital intensity Cash flow Mission Sustainability Revenue growth Cost of capital

17. Return-on-invested-capital (ROIC) calculation

18. Managing ROIC requires a portfolio view Return-on-Invested-Capital • Margin vs Turnover 15% Ambulatory Alaska Automation • Payor mix impact Services • Facilities vs Digital Acute 33% Comm’l Margin Oregon Maintenance 23% Comm’l ROIC = 11% 0% 6 1 Capital Leverage / Turnover

19. Accelerating to Health 2.0Modernization andFunctional Excellence

20. Our complex and fragmented organization contributes to our cost growth problem • Fragmented PSJH org structure • Lack of data, process, system integration

21. Modernization and functional excellence portfolio Modernization and functional excellence • A closer look at care delivery and operations External Spend Excellence Enterprise Support Services Redesign Digital Transform-ation Care Delivery and Operations Clinical Variation

22. We see significant variation across our ministries Hours worked / 1000 sf Hours worked / 1000 sf

23. With many roles / capabilities dispersed across multiple departments • Accreditation • 86roles across 29 depts • Clinical Resources • 1016 roles across 123 depts • Quality & safety • 238 roles across 96 depts • Headcount • Headcount • Headcount Only 4 personnel sit in designated home; remaining dispersed across locational HR dept's Proliferation of clinical resource admin across departments with non-standard titles Only 14 personnel sit in designated home; remaining dispersed across locational HR dept's Long tail of single admin per dep't Long tail of single admin per dep't Long tail of single admin per dep't • Case Mgmt • Clinical Resource • mgmt • Quality Assurance • Accreditation and Safety Source: BCG analysis, Combined HRIS Lawson and Workday data sets as of 03/01/2018

24. Operational, Clinical and System teams working together to reduce variation Clinical Administration Support Services Care Delivery Bedside Clinical resource mgmt. Environmental services Pharmacy Facilities & maintenance Medical staff admin Food services Clinical training/education Laboratory Home health, hospice Housekeeping Nursing admin Radiology / Imaging Clinical research Quality mgmt. Designated Work Teams

25. Modernization and functional excellence Modernization and functional excellence $1B+ • A closer look at external spend excellence Care Delivery and Operations External Spend Excellence Enterprise Support Services Redesign Digital Transform-ation Clinical Variation

26. Scale allows us to save ~$250-500M of current $6B external spend, while maintaining care delivery and patient experience • Corp admin • $1.0B • IT Hardware • IT Software • Professional services • Travel • Marketing • Etc. • Regional admin • $0.8B • Laundry • Janitorial • Rent & utilities • Construction • Etc. Care delivery $4.3B Physician preference items (PPI) (High preference) Med / surgical supplies (Commodity) Pharmacy Medical prof fees / purchased services

27. Modernization and functional excellence portfolio Modernization and functional excellence • A closer look at enterprise support services (ESS) modernization Care Delivery and Operations External Spend Excellence Enterprise Support Services Modernization Digital Transform-ation Clinical Variation

28. ESS Modernization takes a comprehensive approach looking across the organization in functionsand regional operations • ESS Cross-functional Initiatives ERP Functions Revenue Cycle Corporate Services Go-to-Market Functions • CCPH • Pop Health • Digital Innovation • Mission • Risk • Strategy • Community Partnerships • Legal • MarComm • Service Centers • Data and Analytics • Additional initiatives TBD • Finance • Human Resources • Resource Engineering and Hospitality

29. Modernization and functional excellence portfolio Modernization and functional excellence Care Delivery and Operations External Spend Excellence Enterprise Support Services Redesign Digital Transform-ation • A closer look at clinical variation Clinical Variation

30. System Wide Variation Across Select Cohort Strata

31. Translating variation into cost improvement goals Example: Direct Variable Cost for Elective Total Knee Replacements over time Estimate of direct variable costs coverage for Medicare At right: Average cost per case distribution if each provider moved 25% closer to the PSJH benchmark cost-effective practice each year 2021 2017 2018 2019 2020 $5M $9M $12M $14M Cumulative Margin Differential* *Includes only legacy Providence; St. Joseph adds roughly 40% more

32. Accelerating to Health 2.0Leadership Principles

33. We are grounding all our leaders in the Mission and values in accelerating Health 2.0 MISSION As expressions of God’s healing love, witnessed through the ministry of Jesus, we are steadfast in serving all, especially those who are poor and vulnerable VALUES Compassion · Dignity · Justice · Excellence · Integrity Challenge to think differently, act differently Know we will need to make hard choices Provide honest and candid feedback - and be constructive Leader’s Role Leading our teams through this journey How we will accelerate to Health 2.0 • Deliver Excellence Focus on the Future • Remain Faithful • Stay Sustainable Be Affordable • Modernize

34. Today, we continued diving deeper into what Health 2.0 means and how we will accelerate our way to the future: • Remaining true to our heritage, while responding to the signs of the time • Acting with urgency to prepare ourselves for the future and begin taking steps to achieving our aspirations • Looking holistically at mission sustainability through financial stability • Remaining optimistic, hopeful and confident as we lead this organization and support this mission together

35. Accelerating to Health 2.0Communicationand Change Management

36. What is expected? • Engage core leaders and caregivers • Share the Health 2.0 journey and how we are accelerating our efforts with core leaders and caregivers. Our culture is one of continuous improvement. Health 2.0 is a journey, not a destination. • Two-way communication; conversations with trusted leaders, closest to the source • Feedback • Empowering caregivers to act • Capturing and implementing ideas