University of Alabama Health Services Foundation, P.C.

1. University of Alabama Health Services Foundation, P.C. A brief glimpse inside a Faculty Practice Plan...

2. Not a Typical MD Practice • A bona fide corporation • “Shareholder value and earnings” not in annual distributions but for • program development / expansion • compensation / expenses for operation • retention for business downturns • MDs are “fully employed / only here”

3. A Brief View of our History • Founded in 1973 • IRS Tax Exempt 501(c)(3) • As a physician-led company • Superior Patient Care • Group Practice in an Academic Environment • Establish Funds for Program Development • The era was ripe for such activities • Medical Practice Plans birthed out of “university anxieties”

4. The “Stages of our Growth” • 1970s - a benefit plan and to bill and collect professional revenue • 1980s - organizational development • University Affiliation • Ambulatory Clinics • Complete Health Joint Venture • 1990s - corporate style behavior • The Kirklin Clinic • UAB Prime Care • Sale of Complete Health • UAB Health System

5. Board of Directors • Purpose • Develop major policy and strategy • Provide a balanced perspective to our goals • Recruit key executives and hold them accountable for success • Membership • 10 public members (“outside directors”) • 9 physician leaders (“internal directors”) • Executive leadership

6. Public Board Members • Eddie Adair Cordova Ventures • Dr. Neal Berte Birmingham Southern College • Donald James Vulcan Materials Company • Charles Perry, Jr. Highland Associates • Dowd Ritter Regions Bank • Van Richey American Cast Iron Pipe Company • Jerome Rose Lehr, MiddleBrooks, Price & Proctor • James Stephens EBSCO Industries, Inc. • Lee Styslinger, III Altec, Inc. • Michael Warren, Jr. Energen Corporation

7. Executive Leadership • A uniquely balanced and important partnership of MD / business leadership • Corporate service functions • General Counsel, Finance, Human Resources, Treasury, Corporate Compliance, et al

8. UNIVERSITY OF ALABAMA HEALTH SERVICES FOUNDATION Corporate Services Clinical Services Managed byUAB Health System UAHSF Board of Directors UAB Health System Executive OfficersRay L. Watts, M.D.PresidentReid F. JonesExecutive Vice President General Counsel ExecutiveDirectorHuman Resources Chief FinancialOfficer ManagementServicesOrganization ExecutiveDirectorTKC ChiefInformation Officer Director InsuranceRisk Management

9. Financial Overview • $1 billion economic impact • extremely strong Balance Sheet • $434 M endowments, $161M debt • FY 2006 Total Operating Revenue = $381 M • FY 2006 Net Patient Care Revenue = $322M

10. Total Payor Mix Blue Cross Blue Shield 37% Medicare 21% Medicaid 9% United Health Care 3% Viva 8% Commercial Insurance 5% Self Pay 9% Other 8%

11. UAHSF Expense Structure Salaries and Benefits $205 59% Medical and Laboratory 41 11% Administrative and General 39 11% Contributions to UAB 17 5% Internal Research Funding 16 5% Other 29 8% ($ in millions)

12. General Endowment Fund • The Successful Failure • Over $100 million dollars • Research Initiatives • Creation and Implementation of the MSO • Faculty Recruitment

13. Scope of Services Portfolio • Offers services in 32 clinical specialties … primary and specialty care • Employs 850 physicians and 1,800 non-physician employees • 22nd largest employer in the State of Alabama

14. Service Locations • Have the “clinical franchise” for physician services at UA Hospital • Also provide services at other hospitals, in TKC, at selected regional clinics, and in “local offices” • The Kirklin Clinic Acton Road

15. The Kirklin Clinic Opened June 15, 1992 • 454,000 Square Feet • Clinic Encounters • 734,000 in 2002 • 744,000 in 2003 • 756,000 in 2004 • 769,000 in 2005 • 754,000 in 2006 *based on TKC Patient Encounter Report