Alameda Health System FY20 Budget Update and Process Overview

1. Alameda Health System FY20 Budget Update

2. FY20 Budget Process - Timeline Jan -Feb 8: Internal volume projections, discussions (with dyad leaders and staff) and review of key budget assumptions. Feb 14: Present Proposed Budget process and timeline to AHS Finance committee Feb 19-Mar 8: Internal Budget preparation and deep dive with departments March 12: Half Day Leadership retreat of key AHS Staff and clinical leaders March 14: Present Key Revenue assumptions and forecast to AHS Finance Committee Mar 15-April 15: Internal Budget discussions with Dyad Leaders, SBUs and support services April 11: Present Budget progress update to Finance Committee April 26: Present Budget draft (Budget workshop- deep dive) AHS BOT retreat May 9: Final Budget to AHS Finance Committee May 23: FY 2020 AHS budget for approval to AHS Board 2

3. FY 20 Budget Principles and Process Budget Principles: • Develop a balanced budget that enables AHS to provide the highest quality of services for the population of Alameda County, while fueling AHS’s journey to population health and addresses community need. • Budget is reflective and supportive of FY2020 AHS Operational plan developed with input and feedback from staff and clinicians. Budget Process: • Budget baseline volume model takes a regression analysis of prior year actual historical trends and adjusts based on qualitative input from department leaders. • Inclusive of all areas of AHS and involves input from physician leadership (Dyad) and operation leaders. • The Budget Oversight Committee is the vehicle by which justified adjustments are reviewed. 3

4. FY20 Budget Target LineDescription REVENUES -------------------------- Total Gross Patient Charges Capitation Revenue Contractual Allowances Total Net Patient Revenue Other Revenues Total Revenue - All Sources ACTUAL2018 BUDGET2019 PROJ2019_N BUDGET2020 3,302,516,808 33,677,851 2,702,125,727 634,068,931 374,127,765 1,008,196,696 3,383,472,004 33,633,811 2,754,769,985 662,335,830 396,029,106 1,058,364,936 3,438,385,000 38,451,000 2,843,055,000 633,781,000 400,446,000 1,034,227,000 3,491,838,284 38,835,803 2,888,975,294 641,698,793 366,444,784 1,008,143,577 EXPENSES --------------------------------- Total Salaries Wages and Overtime Employee Benefits Registry and Temp Services Total Labor Expenses Non-Labor Expenses Excluding 3 DEMO CC Total Operating Expenses 486,401,872 171,227,296 28,226,066 685,855,234 323,340,366 1,009,195,600 499,293,757 177,711,365 31,412,893 708,418,015 318,026,197 1,026,444,212 492,363,000 173,819,000 23,913,000 690,095,000 307,924,000 998,019,000 568,051,872 195,532,687 4,946,729 768,531,287 327,881,439 1,096,412,726 Operating Income GASB 68 Interest Expense () Interest Income Capital Cost Transfer Non-Operating Income Total Income (998,904) (20,417,602) (1,821,085) 31,920,723 (49,789,992) (914,813) 36,208,000 (37,281,000) (1,865,170) 1,202,170 (4,419,000) (5,870,000) (88,269,149) (36,776,311) (1,865,170) 928,631 560,212 730,977 336,998 (21,971,961) 316,545 (17,907,325) 285,000 (7,305,548) (143,181,115) Operating Margin EBIDA Labor Cost % of Total Revenue Benefits % of Salaries, Wages, OT -0.1% 1.6% 68.0% 35.2% 3.0% 4.6% 66.9% 35.6% 3.5% 4.6% 66.7% 35.3% -8.8% -7.1% 76.9% 34.4% EBIDA Margin @ 2.8% Goal EBIDA Margin @ Current Gap from EBIDA Goal 28,228,020 (71,354,193) (99,582,213) Proposed budget Target Reduction EBIDA if target reduction achieve EBIDA % if target reduction achieve. 86,178,858 14,824,665 1.47% 4

5. Key Items to Close Budget Gap ID# Item Description Estimated $ Impact 1 Consolidating Support Services to improve efficiency SAPPHIRE Operating Cost reduction in Training, physician champion, future EPIC enhancement, contingency 919,314 2 3,657,233 3 Effective use of sitters 1,400,000 4 Set goal in improving physician productivity Reduce physician contract by converting to employed physicians 5 4,000,000 6 Eliminate HR expenses Med Supply & Pharmaceutical expense savings via GPO and Value Analysis 465,000 7 2,000,000 Increase SLH Med-Surg ADC due to the re-opening of 3rd Flr; result in an increase in Net Patient Revenue 8 1,622,130 5

6. FY20 Budget – Income Statement as of 4/8/19 LineDescription REVENUES -------------------------- Total Gross Patient Charges Capitation Revenue Contractual Allowances Total Net Patient Revenue Other Revenues Total Revenue - All Sources ACTUAL2018 BUDGET2019 PROJ2019 BUDGET2020 3,302,516,808 33,677,851 2,702,125,727 634,068,931 374,127,765 1,008,196,696 3,383,472,004 33,633,811 2,754,769,985 662,335,830 396,029,106 1,058,364,936 3,426,309,479 38,082,061 2,832,858,953 631,532,587 403,553,447 1,035,086,033 3,491,838,284 38,835,803 2,888,975,294 614,799,063 405,379,169 1,020,178,232 EXPENSES --------------------------------- Total Salaries Wages and Overtime Employee Benefits Registry and Temp Services Total Labor Expenses 486,401,872 171,227,296 28,226,066 685,855,234 499,293,757 177,711,365 31,412,893 708,418,015 489,770,497 173,579,984 24,090,212 687,440,693 556,543,905 198,190,975 8,040,104 762,774,984 Contracted Physician Services Purchased Services Pharmaceuticals Medical Supplies Materials and Supplies CMSP Services Repairs / Maintenance / Utilities Other Expenses Building / Equipt Rents and Leases Depreciation Non-Labor Expenses Total Operating Expenses 89,176,601 76,574,255 31,244,390 34,427,538 21,340,228 5,020,762 21,810,490 18,371,902 8,850,414 16,523,787 323,340,366 1,009,195,600 91,269,166 72,573,823 29,275,836 35,243,107 19,282,902 4,475,063 20,035,262 20,886,148 8,685,102 16,299,789 318,026,197 1,026,444,212 92,195,288 66,673,665 29,794,232 36,837,320 19,158,302 4,449,763 21,052,446 18,157,824 8,702,119 15,105,707 312,126,667 999,567,359 93,325,599 76,706,026 27,743,933 35,102,745 18,651,431 4,215,958 21,559,028 34,151,785 9,369,213 16,308,669 337,134,386 1,099,909,370 Operating Income EBIDA GASB 68 Interest Expense () Interest Income Non-Operating Income Total Income (998,904) 15,524,883 (20,417,602) (1,821,085) (21,971,961) 31,920,723 48,220,513 (49,789,992) (914,813) (17,907,325) 35,518,674 50,624,381 (36,776,311) (1,865,170) (7,305,548) (21,667,090) (79,731,138) (63,422,469) (36,776,311) (1,865,170) (7,305,548) (188,369,658) 928,631 336,998 560,212 316,545 730,977 730,977 Operating Margin EBIDA Labor Cost % of Total Revenue Benefits % of Salaries, Wages, OT -0.1% 1.6% 68.0% 35.2% 3.0% 4.6% 66.9% 35.6% 2.3% 3.0% 67.6% 35.2% -4.5% -3.7% 72.5% 35.6% EBIDA Target @ 1.47% EBIDA from Target 14,996,620 (78,419,089) 6

7. Options for Trustees’ Consideration – Wage freezes to staff of various levels. – Benefits restructure – Furloughs (administrative, executive, etc.) – Eliminate all discretionary spending (meals, travel, etc.) – Continued efforts to standardize staffing – Reduction of SAPPHIRE scope (elimination of Post Acute sites) – Security coverage across campuses – Evaluate Sheriff’s contract – Review requested resources to support homeless shelter and difficult patient placement – Service reductions/eliminations of lower margin programs: • Alameda Primary care • Ob/Gyn • NICU • Other 7