Physician Employment Advocate Health Care James R Dan

Physician Employment Advocate Health Care James R. Dan, M. D. May 2, 2014

Leading in a challenging environment • Intense reimbursement/price/cost pressure • Care shifting to outpatient • Rapid growth in consumerism • Massive provider consolidation • New industry entrants

The healthcare economic reality 2013 Federal budget Gov’t Receipts $2. 9 T Growth projections for Federal spending Gov’t spending as % of GDP Federal Health Programs Social Security Healthcare consuming over 50% of gov’t receipts Other Mandatory Gov’t Outlays $3. 8 T Sources: Estimates from The Budget and Economic Outlook (January 2012) - Congressional Budget Office.

Reimbursement dynamics 2020 Outlook Today Commercial 40% 20 20 0% 0% (20) Medicare (20) (40) Medicaid Avg Margin: 3. 5% Uninsured (100)% 0 25 50 75 Health System Payer Mix GE Healthcare Proprietary and Confidential Information 100 Comm’l Exchange Operating Margin % 40% TODAY 3. 5% Medicaid Expansion +2% Aging/ Medicare -4% Exchanges -2% Reimburseme nt Cuts -2% Comm’l Rates -2% 2020 Outlook -4. 5% Medicare Avg Margin: (4. 5)% Medicaid Uninsured (100)% 0 25 50 75 100 Health System Payer Mix

The Death of the Chargemaster • The Brill Effect • Consumer-driven high deductible plans focus the mind on price as much as use • Reference pricing scares providers • All payer transparency is coming soon GE Healthcare Proprietary and Confidential Information

The Environment • Intense reimbursement/price/cost pressure • Care shifting to outpatient • Rapid growth in consumerism • Massive provider consolidation • New industry entrants

Fill the hospital Empty the hospital 2012 -2020 Inpatient growth Overall -6 to -8% Orthopedics Neuro 17% 8% Cancer 1% Spine 2012 -2020 Outpatient growth -1% +18 -20% Cancer Gen Med/Surg Neuro 21% Cardio 20% 30% 21% Gynecology -5% Spine 18% Gen Med/Surg -5% Ortho 18% Cardio -25% Gynecology 10% Shift from high-cost acute settings accelerating GEHealthcare Proprietary and Confidential Information

The Environment • Intense reimbursement/price/cost pressure • Care shifting to outpatient • Rapid growth in consumerism • Massive provider consolidation • New industry entrants

Consumerism rapidly growing GE Healthcare Proprietary and Confidential Information

Consumerism rapidly growing

The Environment • Intense reimbursement/price/cost pressure • Care shifting to outpatient • Rapid growth in consumerism • Massive provider consolidation • New industry entrants

Provider consolidation - 5 largest airlines control >75% of seats - 5 largest health systems control < 10% of beds GE Healthcare Proprietary and Confidential Information Source: Kaufman Hall & Associates, Inc. , Presentation by Anu Singh, GE analysis

The Environment • Intense reimbursement/price/cost pressure • Care shifting to outpatient • Rapid growth in consumerism • Massive provider consolidation • New industry entrants

New entrants Walgreens Goal: Reinvent Pharmacy Advance community pharmacy to play a greater role in healthcare through integration and expanded services- focus on chronic disease management Source: Presentation at Lazard Annual Healthcare Conference GE Healthcare Proprietary and Confidential Information

New entrants

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Pluralistic Physician Structure Physicians on Advocate Medical Staffs = 5, 900 Advocate Physician Partners (APP) = 4, 400 AMG/Dreyer 1, 200/200 17 Independent = 3, 000 Non-APP = 1, 500

What is the Role of AMG? Advocate Vision To be a faith-based system providing the best health outcomes and building lifelong relationships with those we serve. AMG Role A nationally-recognized, physician-led integrated group committed to delivering the best health outcomes. 18

AMG Growth History and Projection 1, 200 Number of Physicians 1, 000 800 600 400 200 0 *Projected 19 2007 2008 2009 2010 2011 2012 2013

Group Composition APNs/PAs 8% Family Medicine 15% Internal Medicine 14% Other Related Specialists 35% OBG YN 4 ts lis ita sp Ho P ed iat = Primary Care Cardiac Related Specialists 13% 6% = Specialists rics 5% %

The Advocate Medical Group Journey Group Optimization 2012 -2014 Rapid Growth and Integration 2010 -2011 Physician-led Governing Council 2009 Consolidated, Dedicated Management 2008 21

AMG Contribution to Advocate Health Care • • • 22 Health Outcomes/Safe Clinical Enterprise Advocate Experience Advocate. Care Service Lines Loyal Patient Growth Progressive Care Models

AMG Performance • • • Top decile in 7 of 9 national CI benchmarks Associate Satisfaction – top decile 4 years Physician Satisfaction – 78 th %ile Patient Satisfaction – 62 th %ile Cost/RVU actual decline over past 5 years Growth - With Dreyer, 20% of system revenue and the engine of Advocate • Medicare Advantage medical costs flat yearover-year for 4 years 23

AMG Value Proposition • • Group focused on health outcomes and safety Competitive physician compensation and benefits Professionally satisfying practice environment Proactive input into clinical and operational practice performance • Strong connection to Advocate system leadership • Resources of a large, nationally recognized, integrated health care system 24

What you need to believe to thrive in AMG 1. Committed to Vision of Best Health Outcomes and Safest Care 2. Cost Concerns are Best Addressed via #1 3. Integrated, Team Care is Essential for #1 and #2 4. Commitment to Personal Leadership of a Health Care Team 25

What is the Role of AMG? Advocate Vision To be a faith-based system providing the safest environment and best health outcomes, while building lifelong relationships with the people we serve. AMG Role A nationally-recognized, physician-led integrated group committed to delivering the best health outcomes. 26

Historical Data 2013

What We Need to Believe to Thrive in AMG: Leading from Principles 1. Committed to Vision of Best Health Outcomes and Safest Care 2. Cost Concerns are Best Addressed via #1 3. Integrated, Team Care is Essential for #1 and #2 4. Commitment to Personal Leadership of a Health Care Team 28