AGENDA

1. USING INTEGRATED INFORMATION TO MANAGE HEALTH CARE COST AND IMPROVE EMPLOYEE HEALTH AND PRODUCTIVITY

2. AGENDA • Building Your Business Case • Financial Management • Clinical Management • Getting Started

3. HOW DO YOU MAKE MONEY? • Tuition • General • Continuing Education • Endowments • Restricted • Unrestricted • Grants • State Funds

4. COSTS VERSUS REVENUE* $52.3M $372.9M $138.9M $25.6M $151.8M $11.6M $301.2M $42.3M $33.1M $241.2 Using MarketScan normative data, approximately 15-24% of tuition funds medical and prescription drug claim costs, excluding administrative fees and supplemental program costs. www.michigancollegeguide.com

5. SUSTAINING BELOW MARKET TRENDS Source: Mercer National Survey of Employer-Sponsored Health Plans 2008 and MarketScan MarketScan: Includes all medical, mental health, and drug, benefits for active employees and their covered dependents divided by the number of covered active employees. Fee for Service Only. No employee out-of-pocket expenses are included. MarketScan trend for 2008 is projected based on year to date 2008 experience. National Average: From Mercer National Survey of Employer-Sponsored Health Plans 2008. Includes all medical, prescription drug, mental health, vision, and hearing benefits for active employees and their covered dependents divided by the number of covered active employees. No employee out-of-pocket expenses are included. Health Cost Index (1998=100%) Growth ‘98-’08 Nat. Avg. 122% 78% Thomson Reuters 5

6. INTEGRATED INFORMATION – A BUSINESS CASE • Treat benefits as an investment in NOT a cost to success • Create a long-term healthcare strategy (benefit design, disease management, bargaining, etc.) based on client-specific risk and population characteristics • Determine direct (medical, pharmacy) and indirect (disability, absence, lost time) cost of illness burden • Identify what’s being spent and why on a business unit basis • Maximize ROI by establishing both baseline and ongoing metrics to measure/quantify ROI of health care initiatives (design is based on data not anecdotal information) • Employer Benefits/Value • Reduce/offset fixed administrative expense (immediate return) • Slow the rate of growth in healthcare spend • Spend healthcare dollars more effectively (e.g., “buy smarter”) • Increase profitability “Employers with highly effective health and productivity practices attract and maintain good talent and have higher productivity. They enjoy 57% higher returns to shareholders, a 16.1% premium advantage, and 20% more revenue per employee.”Source: Watson Wyatt, Staying@Work, 2007/2008

7. THE PATH FROM INFORMATION TO ACTION Understand your benefits strategy, as well as the business climate, mission, and vision Humanistic Mission & Vision Demographic Analysis Strategic Alignment Network Analysis Wellness & Prevention Culture & Values Economic Health Risk Profiling FinancialAnalysis Auditing & Payment Integrity Chronic Condition Management Recruiting & Retention Operational Benefits Strategy &Philosophy Employee Health & Productivity Plan Design & Modeling Quality & Efficiency Evidence-Based Treatment Benefit Programs Clinical Consumer Activation Regulatory Compliance Provider Profiling Impact Analysis Benchmark & Success Indicators UNDERSTAND MEASURE & MANAGE RE-EVALUATE SUCCESS MEASURES PEOPLE PROGRAMS VENDORS CARE • Define the analyses to support programs and to inform your multi-year business plan • Promote collaboration to further develop the long-term objectives established for your integrated health and wellness strategy 7

8. FINANCIAL MANAGEMENT

9. CLIENT EXPERIENCE: INTEGRATED FINANCIAL REPORTING

10. CLIENT EXPERIENCE: INTEGRATED FINANCIAL REPORTING

11. Financial Management • Monthly Financial and Eligibility Reporting • Quarterly Management Reports • Trend Analysis • Vendor Payments • IBNR Development • Trust Funding • Vendor Performance & Quality Management • Monthly Vendor Reports • Dashboard Development • Claim Level Reporting • Program Evaluation • Benchmarking • Auditing • Benefit Planning & Design • Contribution Strategy Support (budgeting, forecasting and rate setting) • Retiree Strategy Support • Provider Overlap Analysis • Cost & Use Driver Analysis • Clinical Evaluations • Program Management • Demographic Reporting • Operating Company Requests • Acquisition/Divestiture Analysis • Health Risk Analysis • Disease Management • ROI Studies • Health & Productivity • Management • Cross Program Analysis • Return to Work Opportunities • Policy Review • Intervention Studies • Health & Wellness • Employee Education • Regulatory Compliance • FAS 106 Reporting • FAS112 Reporting • Retiree Cap Projections • 5500 Reporting • OSHA Reports CLIENT EXPERIENCE: INTEGRATED FINANCIAL REPORTING BUSINESS APPLICATIONS

12. CLIENT EXPERIENCE: INTEGRATED FINANCIAL REPORTING • Requirements • Trust Funding • Premium Accounting • Budgeting, Forecasting, Rate Setting • Monthly & Quarterly Management Reports • Trend Analysis • Vendor Payments • IBNR Development • FAS 106 Reporting • FAS112 Reporting • 5500 Reporting • Stakeholders • Senior Management • Finance • Pension Committee • Actuary (Internal & External) • Internal Audit Talking slide TALKING SLIDE ONLY

13. CLIENT EXPERIENCE: INTEGRATED FINANCIAL REPORTING • Results are provided timely and accurately • Disbursements to hourly and salaried trust more reliable • Processes that were previously manual have been automated • Increases in efficiency through “sole source” solution • Consistent reporting

14. CLINICAL MANAGEMENT

15. FOR EVERY 100 EMPLOYEES • 20% of healthcare expenditures are attributable to preventable illness • 40% of healthcare expenditures are attributable to modifiable risk • 11,500 hours of productivity per year are lost due to health conditions • 24 have high blood pressure • 50 are distressed or depressed • 27 have active cardio disease • 60 are sedentary • 25 smoke • 10 have diabetes • 50 have high cholesterol * Source: National Health Center for Health Promotion and Disease Prevention

16. Define the conditions and service utilization patterns that are driving chronic disease costs. Assess increased health risk for chronic disease patients among the University population. Evaluate services utilization from a clinical perspective focusing on the best practice and recommendations. Identify opportunities for cost containment through disease management and wellness. UNIVERSITY EXPERIENCE:MANAGING CHRONIC CONDITIONS -- OBJECTIVES Talking slide only? 16

17. UNIVERSITY EXPERIENCE:MANAGING CHRONIC CONDITIONS -- OVERVIEW Chronic disease constitutes 38% of University’s total allowed medical and drug expenses for 2008. Five conditions are particularly high burden: Coronary Artery Disease Depression Asthma Hypertension Diabetes 17

18. UNIVERSITY EXPERIENCE:MANAGING CHRONIC CONDITIONS - COST PER PATIENT On average, University spends: $7,281 PMPY on asthma patients; $19,492 PMPY on CAD patients; $6,666 PMPY on depression patients; $11,554 PMPY on diabetes patients; and $9,148 PMPY on hypertension patients. Patients with chronic illnesses are gradually becoming more expensive, as more of these individuals fall into higher net payment categories over time. Total Tuition Faculty & Staff Tuition/Employee $628,000,000 15,474 $40,590 13.7% REVENUE FACTS 18

19. University spent over $11.6 million on medical and prescription drugs to treat episodes of care for coronary artery disease, asthma, depression, diabetes, and hypertension in 2008. This represents 12% of University’s total net costs. The most costly chronic illness, coronary artery disease, represented $3.5 million, or 30% of the chronic condition cost. Diabetes was the second most costly condition at $2.9 million and accounted for 25% of total chronic conditions cost. Hypertension accounted for 20% of chronic condition cost at $2.4 million. Asthma cost made up 14% and cost $1.6 million. The least costly chronic illness per member, depression, represented $1.2 million, or 11% of the chronic condition cost. These amounts does not include the financial impact on productivity. UNIVERSITY EXPERIENCE:MANAGING CHRONIC CONDITIONS – KEY FINDINGS 19

20. UNIVERSITY EXPERIENCE:MANAGING CHRONIC CONDITIONS – KEY FINDINGS • Of the chronic condition patients who completed a Health Risk Assessment, 76% or less identified themselves as a patient on the HRA. • Drug compliance for chronic patient is less than 70% • HRA results do not reflect patients who were potentially diagnosed after completing the HRA. • Prescription drug compliance was based on 300+ days supply for those who had at least 1 script. 20

21. WHAT’S NEXT? • Success Metrics • Increase HRA participation/identifiers • Reduce gaps in care • Increase compliance • Decrease costs associated with modifiable risks and behavior • Control inappropriate use of services • Action Items • Evaluate/modify design changes • Implement more targeted chronic condition management • Institute focused employee messaging and communication • Work with vendors to set goals to improve key service rates • Initiate performance improvement plans • Create vendor metrics and scorecards

22. Sample Company Healthcare Strategy The Strategy Sample Company—2007/2008

23. Sample Company Healthcare Strategy The Strategy Sample Company—2009/2010

24. GETTING STARTED

25. AN ACTION PLAN • Start with information • Understand your requirements • Know your audience • Align to key business results • Take Inventory • Fund for the Future • End with information The significant problems we have cannot be solved at the same level of thinking with which we created them.Albert Einstein

26. USING INFORMATION: WHAT’S RIGHT FOR YOUR POPULATION? Drug Formulary Modification Consumer Driven Health Plans Limited Networks HPM Cost Sharing Consumer Empowerment Modify Plan Design Benefit Design Employee Behavior Demand Management Defined Contribution Employer Coalitions Employee Health Legislation / Regulation Benefit Carve-Out • Employer strategies aimed at influencing cost drivers UM/UR/Prior Authorization Delivery System Disease Management Carrier Management Wellness / Health Promotion Quality Incentives/rewards Centers of Excellence Vendor Consolidation Patient Safety

27. WHO ARE YOUR STAKEHOLDERS? • Trustees • Finance • Pension Committee • Actuary (Internal & External) • Internal Audit • Employees

28. University Employers University Client % Variance from Norm Active Active Active Oct 2006 - Oct 2007 - % Time Period Sept 2007 Sept 2008 Change 2007 2008 % Change Previous Current Allowed Amount PMPY $2,905 $3,137 8% $3,310 $3,453 4% 14% 10% Net Payment PMPY $2,520 $2,727 8% $2,884 $3,052 6% 14% 12% Out of Pocket Cost PMPY $310 $325 5% $352 $337 -4% 14% 4% Coinsurance PEPY Med $264 $255 -3% $363 $311 -14% 38% 22% Copay PEPY Med $203 $209 3% $109 $157 44% -46% -25% Deductible PEPY Med $152 $158 4% $305 $290 -5% 101% 84% Prescription Drug Only University Employers University Client % Variance from Norm Active Active Active Oct 2006 - Oct 2007 - % Time Period Sep 2007 Sep 2008 Change 2007 2008 % Change Previous Current Allowed Amount PEPY $1,659 $1,754 6% $1,879 $1,908 2% 13% 9% Out of Pocket PEPY $348 $306 -12% $411 $406 -1% 18% 33% Net Payment PEPY $1,307 $1,431 9% $1,468 $1,502 2% 12% 5% Allowed Amount PMPY $842 $890 6% $851 $848 0% 1% -5% Out of Pocket PMPY $182 $161 -12% $186 $180 -3% 2% 12% Net Payment PMPY $657 $720 10% $665 $668 0% 1% -7% Days Supply PMPY 316.4 319.4 1% 375.4 371.7 -1% 19% 16% Prescriptions PMPY 10.35 10.37 0% 13.76 13.84 1% 33% 33% Allowed Amount Per Day Supply $2.44 $2.52 3% $2.27 $2.28 1% -7% -9% Net Payment Per Day Supply $1.81 $1.93 6% $1.77 $1.80 2% -2% -7% Prescriptions Maintenance Rx % Mail Order 8% 8% -4% 5% 4% -1% -45% -44% % Generic Prescriptions 61% 64% 6% 60% 65% 7% -1% 0% Discount Off AWP % 39% 38% -4% 33% 38% 16% -16% 1% Prescriptions Generic Efficiency 93% 91% -2% 93% 93% 0% 0% 2% WHAT’S YOUR OPPORTUNITY?

29. University Employers University Client % Variance from Norm Active Active Active Oct 2006 - Oct 2007 - % Time Period Sept 2007 Sept 2008 Change 2007 2008 % Change Previous Current Allowed Amount PMPY Inpatient Acute $767 $879 15% $922 $950 3% 20% 8% Net Payment PMPY Inpatient Acute $702 $815 16% $875 $907 4% 25% 11% Acute Admissions Per 1000 67.1 69.7 4% 55.3 55.8 1% -18% -20% Days Per 1000 for Acute Admissions 253.8 272.8 7% 227.1 214.2 -6% -11% -21% Days Length of Stay for Acute Admissions 3.7 3.9 5% 4.1 3.8 -6% 11% -1% Net Payment Per Acute Admission $10,081 $11,199 11% $15,666 $16,052 2% 55% 43% Net Payment Per Day for Acute Admissions $2,728 $2,931 7% $3,815 $4,179 10% 40% 43% Acute Avoidable Admits Per 1000 4.5 4.8 8% 3.1 3.1 0% -30% -36% Acute Readmissions Per 1000 3.6 3.1 -13% 2.7 2.4 -9% -25% -22% University Employers University Client % Variance from Norm Active Active Active Oct 2006 - Oct 2007 - % Time Period Sept 2007 Sept 2008 Change 2007 2008 % Change Previous Current Net Payment PMPY Outpatient $1,775 $1,863 5% $1,999 $2,072 4% 13% 11% Allowed Amount Per Outpatient Service $94 $94 0% $112 $116 3% 20% 24% Net Payment Per Outpatient Service $79 $79 0% $94 $99 5% 20% 25% Visits Per 1000 ER 245.3 246.2 0% 118.2 125.7 6% -52% -49% Medical Office Services Per 1000 10,613.9 11,126.5 5% 13,354.3 12,760.2 -4% 26% 15% Allowed Amount PMPY Outpatient Lab $171 $174 1% $153 $170 11% -10% -2% Allowed Amount PMPY Outpatient Radiology $311 $339 9% $419 $355 -15% 35% 5% Allowed Amount PMPY for ER $130 $152 16% $87 $115 33% -33% -24% Services Per 1000 Outpatient 22,478.2 23,811.5 6% 21,217.8 20,913.9 -1% -6% -12% Allowed Amount Per ER Visit $546 $620 14% $734 $918 25% 35% 48% Allowed Amount Per Medical Office Visit $151 $146 -3% $145 $133 -8% -4% -9% Medical Office Visits Per 1000 4,725 4,960 5% 6,935 6,745 -3% 47% 36% WHAT’S YOUR OPPORTUNITY?