The BayCare Experience: Physician Joint Ventures

1. The BayCare Experience:Physician Joint Ventures Paul R. Summerside, MD Chief Medical Officer BayCare Clinic, LLP President, Board of Managers BayCare Aurora, LLC

2. Aurora BayCare Medical Center (ABMC) • ABMC is an acute care hospital that opened in 2001 • Joint Venture of BayCare Clinic (a physician partnership) and Aurora Health Care (a not-for-profit organization) • 40% Physician ownership • 167 Beds including the following services: - General Medical and Surgical - Women’s Health - Adult ICU/eICU - Obstetrics - Cardiovascular - Level III Neo-natal ICU - Neuroscience - Pediatric Inpatient - Orthopedic - Inpatient Rehabilitation - Emergency Services including a Level II Trauma Center - Oncology • Located in Green Bay, Wisconsin • 1,100 employees • Operates under the Planetree philosophy: patient centered care in a healing environment

3. BayCare History • 1996 - Independent Specialty Practices Form MSO • 1998 - Letter of Intent w/ AHC • 1999 - Integration of MSO to BayCare Clinic • 1999 - Finalize JV Operating Agreement • 2000 - Break Ground on ABMC Hospital • 9/01 - Opening ABMC Tertiary Hospital • 2003 - ABMC Reaches Calendar Year Profitability • 2004 - ABMC Pays off Operating Line and Accumulates Cash Reserve • 2007 - ABMC 5th Consecutive year w/ > 12% margin and begins seventh expansion

4. Joint Ventures….Why? • Am I in trouble? • Am I at risk? • Will I be at risk? Risk Avoidance = 10x Pleasure Pursuit

5. Change

6. Hospital System Anxieties • Fixed Costs • Physician Loyalty • Capital Needs • Regulatory Concerns • Safety/Quality • Payor Mix Risk

7. Understanding Motivation Maslow’s Hierarchy of Needs

8. Physician Fears/Needs • Loss of lifestyle • Loss of Control • Loss of Colleagues • Loss of Respect

9. Hospital Finance PROFIT COST $ Millions LOSS REVENUE 0 Volume

10. Physician Finance REVENUE $ Thousands PROFIT COST LOSS 0 Volume

11. Physician I Move I Stay Risk Corridor $ Thousands REVENUE PROFIT COST LOSS 0 Volume

12. Hospital Finance Fears Ortho Sad Ortho Happy PROFIT RiskCorridor COST $ Millions LOSS REVENUE 0 Volume

13. Clash of Cultural Values Institutional: Greatest Good for the Greatest Number (Missions) Physician: My Income, My Overhead, My Time, My Patients (Goals)

14. Physician Fears… Reliance on benevolent dictatorships w/ a “Mission” Psst… remember RESPECT and Control!

15. The Renter vs. Owner

16. Neurological Spine Costs Among Six Centers

17. Keys to Successful Join Ventures • Key personnel like each other; • Understanding partner’s cultural values; • Respect of partner’s value; • Willingness to relinquish control. (If you love them, set them free!)

18. If you want to be a lion tamer…. you better at least like the animals.

19. Aligning Incentives (Fears!) Hospital System Anxieties • Fixed Costs • Physician Loyalty • Capital • Regulatory • Safety/Quality • Payor Mix Risk • Loss of Profitability and Mission • Physician Anxieties • Loss Lifestyle • Loss of Control/Quality • Loss of Colleagues • Loss of Respect

20. BayCare Aurora Experiment • Ownership • 40% BayCare Physicians • 60% Aurora • All Stark Controlled Revenues in the JV • Governance (MAD) Board • Five Aurora and Five BayCare • 70% Super Majority Rule • Partner Veto all Self-Dealing • Non-competition

21. BayCare Aurora Experiment • Results: • BayCare Clinic • 1999 – 53 specialists • $44 million net collections • 2007 – 100 specialists • 40 physician extenders • $105 million net collections

22. BayCare Aurora Experiment • BayCare Aurora LLC • 1999 – Two Surgery Centers • $8 million gross revenues • 2007 – Tertiary Hospital System • $200 million gross revenues • Largest Taxpayer in County

23. IP and OP Discharges Since 2002

24. Patient Satisfaction – Inpatient Services * Source: Aurora Loyalty Index Data Through Q2 2007

25. Patient Satisfaction – Outpatient Ambulatory * Source: Aurora Loyalty Index Data Through Q2 2007

26. “In the Absence of a Great Dream… Pettiness Prevails.” --Peter Senge