Beacon Health Strategies, LLC Medicaid Behavioral Health Presentation Meeting With

1. Beacon Health Strategies, LLC Medicaid Behavioral Health Presentation Meeting With January 25, 2008

2. The commercial health insurance market is contracting… Total commercial insurance enrollment (millions) Note: Employment-based insurance includes CDHPs Source: U.S. Census 2

3. …with companies less likely to offer health insurance, especially small businesses Changes in Employees’ ESI Coverage by Firm Size (2001 vs. 2005) 3 Source: Urban Institute

4. AveragePlan Enrollment: 86K 165K Low growth and margins have driven consolidation Total Privately Insured Lives (2003-5) Total Number of Health Plans N=180 million lives 4

5. Medicaid enrollment has been healthy during the same period www.beaconhealthstrategies.com Medicaid Enrollment (in millions) CAGR 6.1% 2.7% 5

6. With Medicaid managed care growth particularly robust Medicaid Plan Type (in millions) CAGR (1.6%) 17.4% 6 Source: Kaiser Commission on Medicaid and the Uninsured and Urban Institute (2007)

7. States have embraced managed care for more complex population States with Managed Care for ABD 7 Source: National Academy for State Health Policy, June 2005 Report

8. These more complex populations require active care management www.beaconhealthstrategies.com IP Admits/1,000 8

9. Medicaid growth outstrips CPI and remains a cost concern www.beaconhealthstrategies.com Overall Average Annual Total Medicaid Spending Growth 9 Source: Kaiser Commission on Medicaid and the Uninsured and Urban Institute (2007)

10. Employers and governments are pushing MCOs for the next generation of cost containment Managing individuals with chronic disease is the focus U.S. Incidence and Cost of Individuals with Chronic Diseases Average Annual Increase in Medical Costs CPI 10

11. Co-morbidity is frequent in all of the “high-profile” diseases Adult Members (19+) witha Chronic Disease Diagnosis Pediatric Members (18 or under)with a Chronic Disease Diagnosis 11

12. The public segment, especially Medicaid, remains highly fragmented Medicaid Managed Care Enrollment Medicare Advantage Enrollment 12 Source: CMS, 2006

13. Trends suggest continued Medicaid opportunity • Eligibility expansions continue across the states • SCHIP and kids initiatives • Efforts to address the uninsured • Outreach to the “eligible but un-enrolled” is improving and becoming more sophisticated • Willingness by states to place “high risk” populations in Managed care • Traditional limitations in the PCCP, state-run health plan model • IT, up-front investment, staffing, provider capture, role of doctors • Management of chronic conditions is imperative • CMS policy emphasis on “dollars following the individual” favors managed care 13

14. Serving Medicaid members is Beacon’s primary expertise www.beaconhealthstrategies.com 14

15. Beacon Client since ‘99 Beacon Client since ‘01 Beacon Client since ‘03 Beacon’s Medicaid health plan clients are the best in the nation www.beaconhealthstrategies.com 15

16. Beacon’s best results are achieved through our Integrated Partner Model (IPM) www.beaconhealthstrategies.com “Carve-In” not a“Carve Out” • Beacon brings its specialized behavioral health expertiseinto a plan’s organization • Clinical and quality design and protocols • Integrated operational workflows • Local management • Account manager responsible for all activities • Clinical manager runs clinical duties • Absorbs some or all local staff if appropriate • Maintain local/regional office structure if appropriate • All activities supported by the company’s robust expertise and capabilities • Leading clinical and quality department • Specialized care programs, including case management • FlexCare, a fully integrated care management system designed for Medicaid behavioral health • Tailored analysis and reports • Network administration, members services and claims 16

17. Care Management Approach – Member Centric www.beaconhealthstrategies.com • Holistic approach • Consumer and family member participation • Recovery and resiliency • Cultural competency • Coordinated care • Integration and linkage • Consumer rights and responsibilities • Safety of consumers Responsive 17

18. Low Low High High Continuum of Care Model www.beaconhealthstrategies.com Inpatient care Responsive Observation Beds Crisis Stabilization Acute Residential Care Service Intensity Partial Hospitalization FST/CSP Intensive Outpatient Day Treatment Outpatient Behavioral Health Risk / Status 18

19. Integrated Partner Model (IPM) Case Study: Neighborhood Health Plan of Massachusetts www.beaconhealthstrategies.com Neighborhood Health Plan of MA Beacon Integrated Partner Model On-site utilization management Integrated case review teams Aftercare, depression and case management programs Joint disease management programs Network, member and claims management 170,000 members, 85% Medicaid Innovative care management approach Excellent HEDIS and consumer satisfaction results Best in classBH Expertise 19

20. IPM implementation is improving efficiency both in BH and Medical expenditures www.beaconhealthstrategies.com Complex Case Management Behavioral Health PMPM Medical Expenditure PMPM 44% Decrease in BH 13% Decrease in Medical Spend 20

21. Improvement in QARR/HEDIS Measures One Year After Beacon Implementation New York City Implementation Rapidly Improving Quality – Case Study www.beaconhealthstrategies.com • Beacon took over BH operations for a 200,000+ member health plan in Jan ‘06 • Absorbed existing health plan staff under Beacon clinical and process management • 2007 - 7 Day Follow-Up after Hospitalization • Moved from bottom quartile ranking to second quartile (21st to 11th) • Equal to statewide average score • 2007 - 30 Day Follow-up after Hospitalization • Moved from bottom quartile ranking to the second quartile (22nd to 10th) • Equal to statewide average score 21