Lei Yan, Sr. Consultant Sam Yanez, Manager Chuck Brown, Manager Deloitte Consulting LLP Performance Management Te

1. Case Study of Profitability and Cost Management in Healthcare Financial Planning • Oracle Open World 2013 Lei Yan, Sr. ConsultantSam Yanez, ManagerChuck Brown, Manager Deloitte Consulting LLP Performance Management Technology

2. Today’s Agenda • Introduction of Presenters • Deloitte Performance Management Overview • Healthcare Industry Profitability and Cost Management • Hyperion Profitability and Cost Management (HPCM) Overview • HPCM Application Walkthrough • Lessons Learned • Achievement and Wins • Q&A

3. Introductions Lei Yan Lei is a Senior Consultant in Deloitte’s Performance Management Technology (PMT) practice. He has 7 years of information management experience specializing in Finance Transformation solutions and Business Intelligence. Lei has served clients across industries including healthcare, financial, real estate, energy and public sector, mainly focusing on information system implementation and business process optimization to support the long-term business vision of his client. He has financial system product experience with Hyperion Planning, Essbase, and Hyperion Profitability and Cost Management Sam Yanez Sam is a Manager in Deloitte’s Performance Management Technology (PMT) practice. He has more than 20 years of business and technical experience leading complex projects for process improvements, business transformations, business intelligence capabilities, and system implementations primarily in the consumer products, healthcare and manufacturing industries. His experience includes expertise in delivery analytics solutions across multiple enterprise functional areas, with a focus on management and financial reporting, allocations and analysis. His financial systems experience includes the delivery of Hyperion Planning Essbase, Hyperion Financial Reporting, and Hyperion Profitability and Cost Management Chuck Brown Chuck is a manager in Deloitte’s Performance Management Technology (PMT) practice. He has more than 20 years of industry and consulting experience, specializing in financial planning, budgeting and administration, capital expenditure planning, management reporting, and consulting practice management. His product experience includes Hyperion Planning, Oracle Hyperion Financial Data Quality Management (FDQM/FDQM), Hyperion Essbase, and the reporting tools from Oracle that leverage these products. Chuck has expertise in Planning, Essbase, HFM, FDQM and HPCM. His blended industry experience crosses many areas including consumer & industry goods, automotive, aerospace & defense, media & entertainment, health care, pharmaceuticals, and software & technology.

4. Deloitte Overview • We are a global firm with the reach and range of services to deliver robust and scalable solutions that can meet the service delivery demands of your organization. • Four world-class businesses (we are the only professional services organization that offers a complete range of services) • Consulting • Audit, Tax, and Financial Advisory Services • 193,000 employees located in 700 offices in more than 150 countries • $31.3 billion in global revenues • Service provider to 60% of the Fortune 500 • Deloitte’s Finance Transformation Capabilities Deloitte at a glance Source: Gartner, Magic Quadrant for Global Financial Transformation Services, November, 2012 • Deloitte Consulting Worldwide • 90,000 professionals working in more than 600 offices across 150 countries in the world • Provide services in three key areas: • Strategy and Operations • Technology Services • Human Capital Source: Kennedy; Finance Management Consulting Marketplace 2009-2012

5. Deloitte Performance Management Technology (PMT) Capability Overview Working as part of the Finance Transformation team and Business Analytics team, Performance Management Technology (PMT) bridges the gap between Finance and IT for improved and holistic performance management solutions and capabilities. PMT Capabilities Where PMT fits in Deloitte Consulting Audit Tax FAS • Budgeting • Forecasting and Business Planning • Performance Dashboards • Reporting Strategy • Profitability and Cost Analytics • Management Reporting and Analysis • Financial Consolidation Information Management BIDW EDM PMT • Enterprise Data Solutions including: • Master Data Management • Information Governance • Data Cleansing and Conversion • Data Quality Management • Data Architecture • Complete Offering of Business Analytics Solutions including • Data Warehouse/BI Solutions • Information Strategy • Reporting, Dashboard and Scorecard Solutions • Financial Performance Management Services including: • Planning, Budgeting and Forecasting • Management and Stat Reporting • Activity Based Analysis

6. Performance Management: Linking to Oracle EPM Deloitte’s approach to integrated performance management can be enabled by the Oracle EPM suite of tools. Deloitte’s Point of View Enabled by Oracle • Hyperion Planning Suite • Hyperion Financial Management Suite • Oracle Business Intelligence • Exalytics

7. Deloitte Point of View: Getting the Foundation Right • Business analytics makes extensive use of fact-based structured data for management to drive integrated decision-making. • Performance Management is an umbrella term that describes the methodologies, metrics, processes and analytical applications used to monitor and manage the business performance of an enterprise. Examples include: • Budgeting, planning and forecasting • Profitability modeling and optimization • Financial reporting, consolidation and analytics • Drill through Exec. Reporting/ Dashboard Business Analytics PerformanceManagement/EPM • Drill through Information value Business Intelligence/Data Warehouse • Enterprise Data Warehouses/Data Marts • ETL for BI/DW solutions • Drilldown, exceptions and Alerts Operational reporting ERP/Transactional Systems • Provide extracts to BI/DW • Enable basic operational view of the data The Performance Management/EPM layer is based on a solid ERP and BI/Data Warehouse solution

8. commoditization • consumerism & retail Security agingPopulation consumerdriven medicaid paymentaccuracy underwriting Strategy healthcare reform privacy funding solutions politics insurance mandate medical loss ratios legislation taxincrease lowerPremium ICD 10 “donut hole” employer mandate Obama Care • price sensitivity HIPAA compliance margin compression exchange medicare marketplace enterprise performance management unemploymentrate • lower switching costs • intensifying competition • increased regulatory scrutiny

9. Healthcare Financial Planning needs to evolve to meet the demands of a more complex business environment OPPORTUNITY New technology & greater data availability DEMAND More complex business environment Changing Role • Improved data availability • New and Better understanding of Drivers • Smarter tools • Technological advancements (e.g., HPCM) • More skilled resource • Creates opportunity to transform to meet business needs • Intensifying competition • Increased regulatory scrutiny • Commoditization • Price sensitivity • Consumerism & Retail • Lower switching costs • Margin compression • Creates business need for enterprise metrics and business decision support • Business is increasingly tasked with delivering decision support and strategy advice, moving away from low value transactional activities • Healthcare is increasingly focusing on cost reduction and supporting the introduction of new product/services entering new markets

10. Enterprise Cost Transparency (ECT) Framework Enterprise Cost Transparency Cost Drivers Enabling Technology Supporting Processes Framework Components 1 2 3 4

11. ECT Framework – Expected benefits 1 2 3 4

12. Revenue and expense allocation results help the business understand what the profit and cost are at various levels of detail. Profitability and Cost Management requires healthcare industries to understand the “behind-the-scene” of allocation and its result. Understand Your Profitability and Cost What is the core concept of Profitability and Cost Management? Driver analysis is the fundamental step for Profitability and Cost Management. It helps the organization obtain insight to their business and understand how to manage revenue and cost. • Business defines drivers that have significant impact to business revenue and cost performance. • Drivers are reviewed and approved to be manageable for allocating revenue and cost. Review Drivers Discover Drivers • Drivers are applied to corresponding allocation logic. Change of logic requires change of driver if applicable. • When the driver is no longer appropriate for revenue or cost control purpose, it should be replaced. Apply Drivers Retire Drivers

13. Profitability and Cost drivers need to be managed throughout the planning cycle and allocation process. Healthcare industries must look for a way of obtaining driver insight and performing flexible driver management before they can perform allocation. • Manage Your Profitability and Cost Drivers How to manage drivers? Independently Managed: When drivers are discovered and selected for allocation, users can create drivers and driver logics . Drivers should be defined independently from allocation scenario, time period, and cost unit. Define Drivers Flexible Assignment: Since drivers are independently defined, a revenue/cost unit can have different driver assignments in different planning scenarios at different time periods, if the allocation logic requires. Assign Drivers Manage Drivers Easy Reporting: Driver data view is needed for business users to review and validate drivers used in the past, current, and future allocation logics. Report Drivers

14. Cost Drivers Define Allocation Logic 1 2 3 4 5

15. Hyperion Profitability and Cost Management (HPCM) Overview

16. Oracle Hyperion Profitability and Cost Management (HPCM) is a performance management application that can provide actionable insights into costs and profitability. • Probability and Cost Management Enabler Hyperion Profitability and Cost Management Packaged Solution: HPCM provides out-of-box modeling framework and databases Business User-Driven: HPCM enables business users to create and deploy allocation models with minimum IT support HPCM Flexible Allocation Platform: HPCM supports multiple allocation methods and modeling approaches Transparent Process: HPCM visualizes allocation process through built-in interactive traceability maps Hyperion Integrated: HPCM is integrated with other Hyperion performance management application in Oracle EPM system

17. HPCM Product Architecture • HPCM Out-of-the-Box Model Relational Essbase Calculation Database (BSO) • Maintain Model Workspace Calc Script Data Transfer • Maintain Dimensions • Deploy Dimensions • HPCM Model • Business Dimensions • POV Dimensions • Stages • Drivers • Assignments • Reporting and Analysis • Financial Reporting • Smart View EPMA/DRM Reporting Database (ASO)

18. HPCM Solution Architecture • HPCM Solution Architecture Relational Database Reconciliation HPCMAPP EPMA/DRM Essbase Database Alloc Engine Pre Allocation Planning HPCM_CAL HPCM_RPT Flat File Data Flow Reporting Post Allocation Planning Metadata Driver Data

19. HPCM Application Walkthrough

20. In each HPCM allocation model, there are five built-in task areas which shows the work stream of HPCM application: • HPCM Allocation Model (HPCMAPP) The following activities from each task area represent the key process of creating and using an HPCM application model:

21. HPCM Allocation Stages and POV • Create Stages and POV • Deploy Databases • Define and Select Drivers • Define and Select Assignment Rules • Execute Calculation • Validate Result • Trace Allocation

22. In HPCM, stages represent the levels of allocation. Business dimensions are assigned to a stage to create the intersection where cost and revenue for that stage is stored, both as a destination from the preceding stage and the beginning point for next stage. • HPCM Allocation Stages

23. POV Manager in HPCM provides users the capability of creating, copying and deleting POV dimension members such as Year, Period and Scenario, etc. Allocation logic can be different at each POV intersection. • HPCM POV Manager

24. Deploy HPCM Databases • Create Stages and POV • Deploy Databases • Define and Select Drivers • Define and Select Assignment Rules • Execute Calculation • Validate Result • Trace Allocation

25. When Stages and POVs are configured, user can deploy the two Essbase cubes of HPCM: Calculation Database and Reporting Database. • Deploy HPCM Databases HPCMAPPC Data Transfer • HPCMAPP • Business Dimensions • POV Dimensions • Stages • Drivers • Assignments HPCMAPPR

26. Define and Select Drivers • Create Stages and POV • Deploy Databases • Define and Select Drivers • Define and Select Assignment Rules • Execute Calculation • Validate Result • Trace Allocation

27. In HPCM, Drivers represent how revenue and cost are allocated. During Driver Definition, user can select driver type, formula type and allocation layer. • Define and Select Drivers When a driver is defined, it needs to be assigned to corresponding planning unit (e.g. cost center) and a specific POV intersection of a stage based on the allocation logic.

28. Define and Select Assignment Rules • Create Stages and POV • Deploy Databases • Define and Select Drivers • Define and Select Assignment Rules • Execute Calculation • Validate Result • Trace Allocation

29. An assignment rule is an optional filter sets for a single destination stage. It is a collection of criteria that are applied to a dimension that override the driver logic. • Define and Select Assignment Rules Similar to Driver Selection, an assignment rule needs to be assigned to a planning unit (e.g. Cost Center) and a specific POV intersection at a stage according to allocation logic.

30. Execute Calculation: Allocation and Genealogy • Create Stages and POV • Deploy Databases • Define and Select Drivers • Define and Select Assignment Rules • Execute Calculation • Validate Result • Trace Allocation

31. When the allocation logic has been created in HPCM, user can execute calculation: • Execute Calculation: Allocation and Genealogy Allocation Calculation HPCMAPPC Data Transfer Genealogy Calculation HPCMAPPR

32. HPCM SmartView Validation • Create Stages and POV • Deploy Databases • Define and Select Drivers • Define and Select Assignment Rules • Execute Calculation • Validate Result • Trace Allocation

33. User will be able to validate allocation result through SmartView. If there was any variance as UnassignedCost, user will need to trace the allocation process and locate the cause. • HPCM SmartView Validation

34. HPCM Trace Allocation • Create Stages and POV • Deploy Databases • Define and Select Drivers • Define and Select Assignment Rules • Execute Calculation • Validate Result • Trace Allocation

35. HPCM provides user the capability of tracing each allocation path visually. In Trace Allocations, user can view how cost and revenue was allocated and see the detailed information in Properties section. • HPCM Trace Allocation

36. HPCM provides a batch utility to send command to HPCM processes. User can configure and apply this utility to automate HPCM tasks such as allocation calculation, genealogy calculation, copy POV data, and many more. • HPCM Automation How to automate HPCM processes? • There are a few questions that need to be considered before automating HPCM: • Where does automation fit in overall planning cycle? • What processes should be automated? • What is the validation process? • What is the error handling process? Before Automating HPCM Automating HPCM • Oracle Web Services Client provides a batch utility to perform HPCM operation on the HPCM server: hpm_ws_client.bat. This utility can be called either manually or embedded in other batch script. • The Web Service Client provides a range of operations for HPCM tasks. • For example: • getApplications: list all existing HPCM applications • getDriverDefinitions: list all Driver definitions of an HPCMapplication. • getAssignmentRuleDefinitions: retrieve all Assignment Rule Definitions • deployCube: deploy the Calculation Cube or Reporting Cube • To automate the allocation only, user need to utilize the following two key functions: processCalcScriptOptions and processGenealogyExecutionPaths

37. Function processCalcScriptOptions and processGenealogyExecutionPaths allow user to execute allocation calculation and genealogy calculation for a specific intersection of data. • HPCM Automation (Con’t) Allocation Calculation hpm_ws_clientprocessCalcScriptOptions <application_name> <pov_dimension_member_names> <layer_name> <clear_calculated_stage_names> <clear_all_stage_names> < generate_stage_names> <calculate_stage_names> <transfer_data_flag> Genealogy Calculation hpm_ws_clientprocessGenealogyExecutionPaths <application_name> <pov_dimension_member_names><layer_name> <paths> <overwrite_existing_flag> <execute_in_chain_flag>

38. Lessons Learned

39. Lessons Learned • Plan performance testing: Performance testing needs to be completed in a real-world environment, including real-world expected data volumes. • Build a solid foundation: The organization should have clear goals for allocation and clear owners for data. Utilize this foundation to build the HPCM solution and support it. • Reduce manual process: An end-to-end review of the allocation process is needed to analyze the need of automation. Error handling strategy needs to be evaluated before retiring manual process. • Start training early: Knowledge Transfer to support personnel is critical for the long term success of an HPCM Implementation. This includes QC Review at all phases. • Manage changes: The end users must be engaged early in the definition of the HPCM solution. Effective buy-in on the new allocation process, as well as on the sunset strategy of old allocation translates to an effective HPCM Solution. • Take a phased approach: The initial focus should be delivery of “out of the box” functionality, then steadily implement more complex functionality. Implementing customizations too quickly may lead to future issues. • Solution Support Model: Business and IT need to establish a support model around the EPM solution across organizational levels. This solution support model should represent a strong alliance between CFO and CIO executive groups. Operate Vision Plan Design Build Deliver

40. Achievement and Wins

41. Our client organization has developed additional performance management capabilities by using Hyperion Profitability and Cost Management. Achievement and Wins Key Capabilities Provide by HPCM Allocation Transparency Expense Center of Excellence Lenses of Cost and Cost Drivers • Uses an executive management system to provide leadership with a dashboard view of profitability, membership and growth trends from data from all systems and enabling data modeling for scenario analysis • Performs real-time processing, including quarter close • Allocates costs based on driver, statistics and data from source systems • Performs multivariate scenario analysis using system capabilities • Maintain control of the future state allocation process • Enable the “deskilling” of maintenance roles and concentration of value add activities with top talent • Provide one go-to place for expense analytical support, establishing consistency of information for decision making across the organization • Streamlined expense allocations and analytics requiring less resources and minimal manual effort • Develops expense assumptions reflecting service intensity based on historical and industry experience by function, PMPM, new vs. renewal business and direct vs. indirect costs • Uses an allocation methodology that accounts for direct vs. in-direct costs on a client specific basis • Develops expense assumptions by emerging micro segments within products • Provides case specific cost accounting based on clients utilization to true up actual charges and expenses paid

42. Q & A

43. Thank You Tim Osorio Director Information ManagementDeloitte Consulting LLP 225 West Santa Clara Street San Jose, CA 95113 Office: (408) 704-1013 Mobile: (408) 314-5108 E-mail: tiosorio@deloitte.com Lei Yan Senior Consultant Information ManagementDeloitte Consulting LLP 350 S Grand Avenue, 200 Los Angeles, CA 90071 Office: (714) 655-2680 Mobile: (213)553-1708 E-mail: leyan@deloitte.com 695 Town Center Drive, 1200 Costa Mesa, CA 92626 Office: (714) 436-7138 Mobile: (562) 400-0537 E-mail: chubrown@deloitte.com Chuck Brown Manager Information ManagementDeloitte Consulting LLP Samuel Yanez Manager Information ManagementDeloitte Consulting LLP 2500 One PPG Pl, Pittsburgh, PA 15222 Office: (412) 338-7245 Mobile: (412) 298-8288 E-mail: sayanez@deloitte.com See you at our booth #1511 MosconeSouth