THE 3 RD CHINA INTERNATIONAL EMR AND REGIONAL HEALTH CARE FAIR

1. THE 3RD CHINA INTERNATIONAL EMR AND REGIONAL HEALTH CARE FAIR OCT 25 2009 BEIJING CHINA HIT AND RHN EXPERIENCE IN THE U.S. AND WHAT IT MEANS TO CHINA

2. AGENDA • LEARNING FROM THE H.I.T. EXPERIENCE OF THE U.S. • THE CURRENT STATUS OF I.T. USE IN CHINESE HOSPITALS • EVOLUTION OF RHNs IN THE U.S. • EVOLUTION OF RHNs IN CHINA

3. DORENFEST GROUP • IN 2006 THE DORENFEST GROUP FORMED THE DORENFEST CHINA HEALTHCARE GROUP, BASED IN SHANGHAI. WE OFFER A VARIETY OF CONSULTING, TRAINING, AND EDUCATION SERVICES TO THE CHINA HEALTHCARE SYSTEM TO HELP THEM IMPROVEMENT IT MANAGEMENT, OPTIMIZE HOSPITAL WORKFLOW, IMPORVE QUALITY OF CARE AND REDUCE COST. • OUR CLIENTS INCLUDE: • SHANGHAI CHANGNING MATERNITY AND INFANT HEALTH INSTITUTE • PEKING UNIVERSITY MEDICAL COLLEGE #3 HOSPITAL • SHANDONG RIZHAO PEOPLE’S HOSPITAL • SHENZHEN CITY HEALTH BUREAU • CHONGQING CITY HEALTH BUREAU • HONGKONG HOSPITAL AUTHORITY • MICROSOFT

4. THE 3RD CHINA INTERNATIONAL EMR AND REGIONAL HEALTH CARE FAIR LEARNING FROM THE H.I.T. EXPERIENCE OF THE U.S.

5. HEALTH EXPENDITURES AS A PERCENTAGE OF GDP (IN BILLION) $2,325.7 $2,169.5 $2,016.0 $1,877.6 $990.3 $1,299.5 $696.0 $426.8 $245.8 $160.0 $75.1 来源：CENTERS FOR MEDICARE AND MEDICAID SERVICES

6. H.I.T. MARKET GROWTH IN THE U.S. (IN BILLION) $ in billions $30.5 $28.0 $25.8 $23.6 $21.6 $20.0 $19.0 $18.5 $16.0 $13.6 $11.6 $10.0 $8.5 $7.5 6.7% 13.3% 17.6% 16.0% 17.2% 17.6% 15.6% 2.7% 5.2% 8.0% 9.3% 9.3% 8.9% 8.9% 年增长率： SOURCE: SHELDON I. DORENFEST & ASSOCIATES, LTD.

7. U.S. HOSPITALS STARTED USING H.I.T. IN THE 1960s AND SOUGHT AN EHR THROUGH FOUR GENERATIONS OF I.T. SYSTEMS • FINANCE SYSTEMS (1970s) • LIMITED CLINICAL SYSTEMS (late 1970s and 1980s) • MORE ADVANCED CLINICAL SYSTEMS (1990s) • ELECTRONIC HEALTH RECORDS (2000s)

8. 成熟层次 HIMSS AnalyticsReport–EMRStage Model Level of Complexity (N=5,073)。 Source: HIMSS Analytics Database (derived from the Dorenfest IHDS+Database) 2009年

9. U.S. H.I.T. EXPERIENCE IN THE LAST 30 YEARS • HOSPITAL MANAGEMENT REALIZE AND EMPHASIZE THE IMPORTANCE OF IT. IT IS CONSIDERED AS AN INVESTMENT INSTEAD OF COST. • IT PLANNING IS CRITICAL. PLANNING IS TO ANSWER THE QUESTION WHY THE APPLICATION IS AIMED TO DO AND WHAT ARE THE BENEFITS? • FOCUS ON ROI OF IT PROJECTS. IT INVESTMENT RETURNS CAN’T BE REALIZED UNTIL THE RETURNS ARE WELL DEFINED. • CLINICIAN PARTICIPATION IN HOSPITAL IT DEVELOPMENT HAS A DIRECT IMPACT ON THE LONG TERM EFFECT OF THE IT INVESTMENT. RECENT SUCCESS EXPERIENCE IN THE U.S. DEMONSTRATE THE SIGNIFICANT IMPACT FACTORS OF SYSTEM PLANNING, SYSTEM SELECTION AND IT MANAGEMENT (THROUGH COMMITTEE AND PROJECT). EFFECTIVE IT GOVERNANCE STRUCTURE CAN GUARANTEE CLINICIAN’S PARTICIPATION • IMPLEMENTING IT APPLICATION SYSTEM IS NOT JUST SOFTWARE IMPLEMENTATION BUT RATHER WORKFLOW CHANGE AND ORGANIZATIONAL CHANGE. SYSTEM IMPLEMENTATION REQUIRES STRONG CAPABILITY OF PROJECT MANAGEMENT AND CHANGE MANAGEMENT AND GOOD UNDERSTANDING OF USER NEEDS AND HOSPITL WORKFLOW. • CIO AND BUSINESS EXECUTIVES MUST ESTABLISH A GOOD PARTNERSHIP.

10. BUT POORLY IMPLEMENTED CHANGE LAYERED REDUNDANT WORK ON TOP OF ORIGINAL INEFFICIENCY GROWTH IN REDUNDANCY 4x Legacy I.T. Systems Manual New Thrusts of the 2000's 3x NOW 1990's Systems and Surrounding Integration 2x BEFORE I.T.=1x TOTAL HOSPITAL WORK PROCESS

11. H.I.T. EVOLUTION IN THE REST OF THE WORLD • CANADA STARTED IN THE LATE 1970s • EUROPE AND AUSTRALIA BEGAN IN THE EARLY 1980s • ASIA BEGAN IN THE 1990s • CANADA, FRANCE, GERMANY, ENGLAND, AND AUSTRALIA ALL STARTED LATER THAN THE U.S., INVESTED LESS, AND HAVE MADE MORE PROGRESS • HONG KONG STARTED EVEN LATER, INVESTED EVEN LESS, AND IS NOW AT THE STATE OF THE ART IN H.I.T. • CHINA H.I.T. IS NOW AT AN EARLIER STAGE OF DEVELOPMENT. CHINA HAS THE GOALS AND DESIRE TO “LEAPFROG” THE REST OF THE WORLD IN H.I.T. USE IN THE NEXT FEW YEARS

12. THE 3RD CHINA INTERNATIONAL EMR AND REGIONAL HEALTH CARE FAIR THE CURRENT STATUS OF I.T. USE IN CHINESE HOSPITALS

13. EVOLUTION OF H.I.T. IN CHINA • CHINA BEGAN TO COMPUTERIZE ITS HOSPITALS IN THE EARLY 90’S. • CHINA MADE SLOW PROGRESS WITH INITIAL FOCUS ON FINANCIAL SYSTEMS • ABOUT 5 YEARS AGO CHINESE HOSPITALS BEGAN TO MOVE MORE AGGRESSIVELY TOWARD I.T. USE FOR CLINICAL SYSTEMS. • ALONG THE WAY, MANY SOFTWARE SOLUTIONS WERE DEVELOPED WITH SEVERAL HUNDRED SMALL SOFTWARE COMPANIES EMERGING IN CHINA. • IN 2005, CHINA SPENT LESS THAN 1% OF TOTAL HEALTHCARE COSTS ON I.T. OR ABOUT $600 MILLION (USD) • IN 2007, CHINA SPENT OVER $1 BILLION (USD) ON H.I.T. • WE PREDICT RAPID GROWTH WILL ACCELERATE OVER THE NEXT THREE YEARSWITH H.I.T. INVESTMENT IN CHINA RISING TO BETWEEN $2 AND $3 BILLION (USD) BY 2010

14. FACTORS CONTRIBUTING TO FUTURE SPENDING GROWTH IN CHINA H.I.T. • CHINA HOSPITAL WORK PROCESSES ARE REDUNDANT, EXPENSIVE AND ERROR PRONE WITH GREAT OPPORTUNITIES FOR IMPROVEMENT WITH APPROPRIATE USE OF I.T • CHINESE HOSPITAL LEADERS WOULD LIKE TO TAKE A BIG LEAP FORWARD IN IMPROVING WORK PROCESSES AND IN DIGITIZING CHINESE HOSPITALS • THE MINISTRY OF HEALTH (MOH) GUIDELINES FOR HEALTH I.T. DEVELOPMENT CALLS FOR ELECTRONIC MEDICAL RECORDS AND REGIONAL HEALTH NETWORKS TO BE IMPLEMENTED BETWEEN 2003 AND 2010 PROVIDING MUCH MOMENTUM FOR HOSPITALS AND HEALTH BUREAUS TO INVEST MORE IN I.T. NOW • THE SOON TO BE FINALIZED HEALTHCARE REFORM IN CHINA WILL BE FACILITATED BY BETTER USE OF I.T. IN CHINESE HOSPITALS

15. GENERAL FACTORS IMPEDING SUCCESS IN CHINA H.I.T. • CHINESE HOSPITALS’ INVESTMENT ON IT IS RELATIVELY LOW • THE POOR RESULTS ACCOMPLISHED FROM PAST INVESTMENTS IN I.T. ARE CAUSING HESITATION AMONG LEADERS OF CHINESE HOSPITALS TO MAKE FUTURE INVESTMENTS IN I.T. • THERE IS CONCERN AMONG H.I.T. EXPERTS IN CHINA ABOUT THE READINESS OF H.I.T. SOFTWARE PRODUCTS AND INTEGRATION TOOLS TO FACILITATE THE ACCOMPLISHMENT OF CHINA’S GOALS • INEXPERIENCE IN THE BUYING OF H.I.T. SOFTWARE PRODUCTS • THE IMPLEMENTATION SKILL, PROCESS IMPROVEMENT SKILL AND CHANGE MANAGEMENT EXPERIENCE NEEDED FOR CHINA TO TAKE THE BIG LEAP FORWARD THAT IT WOULD LIKE TO TAKE IS NOT YET AVAILABLE AT THE LEVEL REQUIRED FOR CHINA TO ACCOMPLISH ITS GOALS

16. ALLOCATION OF H.I.T. INVESTMENT AROUND THE WORLD 来源：计世咨讯

17. WHAT HOSPITALS NEED TO DO TO IMPROVE THE RETURN ON IT INVESTMENT • IMPROVE THE IT GOVERNANCE STRUCTURE • PROMOTE BETTER PARTICIPATION OF CLINICIANS IN IT BUILDING • DURING NEW SYSTEM IMPLEMENTATION, HOSPITAL NEEDS TO TAKE MORE RESPONSIBILITY ON CHANGE MANAGEMENT AND PROCESS IMPROVEMENT • RE-POSITION IT DEPARTMENT TO MORE FACILITATE, EDUCATE AND TRAIN HOSPITAL MANAGEMENT AND USERS TO PARTICIPATE IN IT DEVELOPMENT • REDUCE THE HOSPITAL’S DEPENDENCE ON SOFTWARE VENDORS

18. THE 3RD CHINA INTERNATIONAL EMR AND REGIONAL HEALTH CARE FAIR EVOLUTION OF RHNs IN THE U.S. 18

19. SUMMARY OF EVOLUTION OF RHNs IN THE U.S. COMMUNITY HEALTH INFORMATION NETWORKS (CHINs) BEGAN IN 1990 AS THE FIRST GENERATION OF RHNs IN THE UNITED STATES. CHINs FAILED BECAUSE OF UNCLEAR OBJECTIVES AND LACK OF VALUE TO POTENTIAL PARTICIPANTS INTEGRATED DELIVERY EMERGED IN 1993 AS THE HOSPITAL ANSWER TO THE CLINTON HEALTHCARE REFORM PROPOSAL BY THE MIDDLE 1990s, INTEGRATED DELIVERY SYSTEMS EMERGED IN EVERY CITY IN THE UNITED STATES, AND THE CHIN CONCEPT DISAPPEARED BY 1996 19

20. THE VISION OF INTEGRATED DELIVERY SYSTEMS Hospital B Nursing Home Doctor’s Office Patient Data Outpatient Clinic Outpatient Clinic GovernmentReimbursement Insurance Payor Doctor’s Office Doctor’s Office Hospital A Home Health Agency Blood Bank Outpatient Clinic 20

21. RHIOs EMERGE IN THE DECADE OF THE 2000s RHIOs WERE THE SECOND GENERATION OF RHNs IN THE U.S. MANY DIFFERENT ORGANIZATIONS PROMOTED THEM IN THE EARLY 2000s BY 2004, NATIONAL POLICY EMERGED AND THE OFFICE OF THE NATIONAL COORDINATOR FOR HEALTH INFORMATION TECHNOLOGY (ONCHIT) WAS CREATED IN THE ENSUING SEVERAL YEARS BETWEEN 2004 AND 2007, ABOUT 65 OFFICIALLY DESIGNATED RHIOs EMERGED HEAVY INVESTMENT IN THESE RHIOs WITH MOST FUNDS USED IN THEIR START-UP MANY WERE UNABLE TO FIND A SUSTAINABLE OPERATING MODEL AND APPROACHED FINANCIAL COLLAPSE THESE MODELS TOOK ON DIFFERENT NAMES, AND SOME LONG TERM SUCCESSES EMERGED 21

22. LESSONS LEARNED BROAD VISIONS BUT LACK OF IMPLEMENTABLE ACTION PLAN OVERSIMPLIFIED IMPLEMENTATION APPROACHES LACK OF STAKEHOLDER COMMITMENT HEAVY INVESTMENT IN POORLY CONCEIVED IDEAS MUCH FAILURE AND LITTLE SUCCESS 22

23. THE 3RD CHINA INTERNATIONAL EMR AND REGIONAL HEALTH CARE FAIR EVOLUTION OF RHNs IN CHINA 23

24. EVOLUTION OF RHNs IN CHINA THE MINISTRY OF HEALTH (MOH) GUIDELINES FOR HEALTH I.T. DEVELOPMENT CALLED FOR REGIONAL HEALTH NETWORKS AND DIGITAL HOSPITALS TO BE IMPLEMENTED THROUGHOUT CHINA BETWEEN 2003 AND 2010 THIS PROVIDED MUCH MOMENTUM AS MANY HEALTH BUREAUS UNDERTOOK REGIONAL HEALTH NETWORK AND DIGITAL HOSPITAL INVESTMENT ONLY IN THE LAST TWO YEARS HAS DATA SHARING BEGUN TO EMERGE IN CHINA AS SOME RHNs SHARE LIMITED DATA SUCH AS LAB RESULTS HEALTHCARE REFORM HAS PROVIDED SUBSTANTIAL ADDITIONAL FUNDING IN A VARIETY OF WAYS, SO IT IS EXPECTED THAT SUBSTANTIAL ADDITIONAL PROGRESS WILL BE MADE IN THE NEXT FEW YEARS MUCH MORE ACTIVITY IN MANY CITIES AND PROVINCES. USTDA WILL BE FUNDING ONE OR TWO MAJOR PROJECTS 24

25. SUCCESSFUL RHN NEEDS A SOLID FOUNDATION RHN DEVELOPMENT IS LIKE BUILDING A 50-FLOOR BUILDING. THE FOUNDATION IS THE KEY. SUCCESSFUL RHN PROGRAMES HAVE CAREFULLY DEFINED THE FIRST STEPS LIMITED DATA SETS WITH HIGH BENEFIT TO MANY STAKE HOLDERS (SUCH AS HOSPITALS, COMMUNITY HEALTH CENTERS AND GOVERNMENT) WOULD BE ADVANTAGEOUS WHEN FIRST STEPS PROVE BENEFICIAL, MORE AGGRESSIVE SECOND STEPS CAN BE TAKEN 25

26. THANK YOU. FOR MORE INFORMATION CONTACT: YU ZHIYUAN (GRACE) THE DORENFEST CHINA HEALTHCARE GROUP SUITE 908, NO. 998 RENMIN ROAD, SHANGHAI PHONE: 021-63203522, 63269722 WEB SITE ADDRESS: www.dorenfest.com E-MAIL ADDRESS: info@dorenfest.com SHELDON’S E-MAIL ADDRESS: sheldon@dorenfest.com YU ZHIYUAN (GRACE) : yuz@dorenfest.com