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Clinical Operations Summit Advancing towards Health 2.0

Clinical Operations Summit Advancing towards Health 2.0. Looking at our current state, healthcare financials are stressed – not distressed – and can lead future change. Unit of measure. Average debt ratings, hospitals vs. various ‘distressed’ industries. AA-. B BB-. BB-. B.

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Clinical Operations Summit Advancing towards Health 2.0

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  1. Clinical Operations Summit • Advancing towards Health 2.0

  2. Looking at our current state, healthcare financials are stressed – not distressed – and can lead future change Unit of measure Average debt ratings, hospitals vs. various ‘distressed’ industries AA- BBB- BB- B U.S. Retail and Apparel Auto Print Media and Publishing SOURCE: Moody's, Fitch, S&P 2017 Sector Reports

  3. As we heard this week, the Rating Agencies appreciate our strategic plans but note our margin weakness …need to focus on getting margins and credit metrics back to overall strength that supports current rating… …margins still low to peers. The trend upwards is good, though need to continue to improve on operations and execute on Health 2.0 and related plans …strong vision. PSJH ahead of curve with Health 2.0 vs. peers (Health 1.5) giving the edge to PSJH going forward…approach to transformation actions shows thoughtfulness, and organizational alignment…

  4. Medicare margins continue to decline Overall Medicare margin for acute care programs, 2001-2016 Based on Medicare allowable costs; includes hospital inpatient and outpatient programs and others • 8 • 4 • Margin (in percent) • -1.2 • 0 • -4 • -8 • -12 • 2001 • 02 • 03 • 04 • 05 • 06 • 07 • 08 • 09 • 10 • 11 • 12 • 13 • 14 • 15 • 2016 SOURCE: MedPAC analysis of Medicare cost reports from CMS1

  5. Accelerating Health 2.0 will be key to transforming our future Process Modernization Revenue growth Capital efficiency Care Delivery and Operations External Spend Excellence Enterprise Support Services Modernization Reallocate Capital Divest non-core assets Rev Cycle Optimization & Payor Contracting Strategies Commercial Market Growth Partnerships Ambulatory Pop Health Services & Digital Reducing Clinical Variation

  6. By 2023, expect large-scale transformation to positively influence the Quadruple aim, including … 9-10% More and better access to care across the continuum, especially for the poor and vulnerable Best-in-nationclinical outcomes atlowest cost to deliver exceptional value EBIDA margins consistent with historical levels ensuring we have capital and resources to reinvest in the Mission Artificial Intelligence and automation to improve operational processes and reduce clinical variation Deployment of digital tools to ease the way for consumersand caregivers

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