Healthcare Economics: Improving Clinical and Economic Outcomes through SJM Technology

1. Healthcare Economics: Improving Clinical and Economic Outcomes through SJM Technology

2. HHS Has Taken Aim At Heart Failure Readmissions1 • HF is #1 Medicare expenditure for preventable readmissions • The Department of Health & Human Services (HHS) is working a number of strategies to improve performance 1. MEDPAC, “Report to Congress: Promoting Greater Efficiency in Medicare”, June 2007. Advisory Board Cardiovascular Roundtable Research & Analysis as reported in Publication 20286C entitled “Transformative Care Delivery, Part II: Reducing Preventable Readmissions”. SJM Confidential – For Internal Use Only

3. Next Step: Penalize Facilities with High Readmissions Hospital Readmissions Reduction Program (HR 3590 Section 3025) • Penalizes hospitals for “excess” readmissions above acceptable threshold • Initially covers three focus areas: HF, AMI, Pneumonia1 • Applied across all Medicare inpatient payments subject to a cap2 • Effective start date of October 1, 2011 • due to way penalties are asssessed.1,3 FY 2013 penalties based on readmission data collected FY 2012 (Oct 1, 2011 – Sep 30, 2012) • Hospital Readmissions Reduction Program (HR 3590 Section 3025). • Note that these penalties are subject to a payment cap. Penalties are not to exceed the amount of payment that a facility receives for each admission over and above the threshold. • Penalties are based on trailing 12 months worth of readmissions data. SJM Confidential – For Internal Use Only

4. Goals for Payment Reform Initiatives • Improve clinical quality • Increase care coordination • Align physician and hospital incentives • Paying for episodes of care • Address problems of underuse, overuse and misuse of services • Avoid unnecessary costs in the delivery of care 4

5. Payment Reform Initiatives

6. Medicare Payment Reform: Potential Impact Source: Affordable Care Act

7. FY 2009 Medicare Inpatient CHF Discharge Data: Intermountain Medical Center Source: FY 2009 MedPAR files

8. Medicare Payment Reform: Potential Impact Provider: Intermountain Medical Center Location: Murray Utah FY 2009 Medicare inpatient base operating payment: $53.9 M National Average Readmission Rates: AMI 19.9%, HF 24.7, Pneumonia 18.3%1 Provider Average Readmission Rates: AMI 18.0%, HF 21.4, Pneumonia 13.7%1 Potential Impact by 2017$3,638,250 1Medicare 30-day all cause-readmission rates based on hospital data from July 2005 to June 2008. Sources: FY 2009 MedPAR file and Hospital Compare data

9. SJM Confidential and Proprietary Information Remote Healthcare Technology is Everywhere!

10. SJM Confidential and Proprietary Information Healthcare Information Ecosystem Electronic Medical Record (EMR) aggregates health information across organizations EMR Integration Repository of CRM data across vendors (optional) Merlin.net® PCN consolidates SJM Device Information Merlin@Home® transmitter communicates device data to Merlin.net® PCN For Internal Use Only

11. SJM Confidential and Proprietary Information Market Dynamics • Healthcare reform is promoting new payment models to encourage coordination of care for better health outcomes. • Results of New Payment Models • Consolidated payments • Trend towards hospital systems &physician practice alignment. • Incentives to adopt EMR • Clinical Results • 50% relative reduction in the risk of death1 • 80% reduction in time to clinical decision (4.6 vs. 22 days)2 • 18% Reduction in length of hospital stay (Estimated savings $1,659/stay*)3 • In-office follow-up visits reduced 40%, while maintaining patient safety4 • Arrhythmic events detected earlier (21-35 days)5 • Clinic Efficiency • Reduce unnecessary clinic visits • Reduction in wait times • Reduction in transcribed errors • Disease Management • Daily Monitoring/ “Peace of Mind” • Decreased time to intervention • Reduction in LOS • Reduction in hospital costs • Economic Benefit • Increased Reimbursement • Leverage EHR infrastructure • Extend capability beyond CRMD 1 ALTITUDE Survival Study (Long-Term Outcome After ICD and CRT Implantation and Influence of Remote Device Follow-Up) Boston Scientific 20102,3,4 CONNECT Trial (Clinical Evaluation of Remote Notification to Reduce Time to Clinical Decision) Medtronic 2010, *estimated using the Medicare Limited Data Set - Standard Analytic Files from 2002-2007 5, TRUST Trial (Lumos T- Safely Reduces Routine Office Device Follow-up) Biotronik 2008

13. Managing Heart Failure Patients Heart failure patients receiving CRT devices pose unique challenges • Unpredictable venous anatomy may not always provide access to optimal LV pacing site • Pacing complications may arise at implant or post-operatively, potentially leading to the need for surgical revision • Therapy response is not guaranteed

14. Prevalence of Heart Failure Management Challenges 1. Duray et al Coronary Sinus Side Branches for Cardiac Resynchronization Therapy: Prospective Evaluation of Availability, Implant Success, and Procedural Determinants, Journal of Cardiovascular Electrophysiology Vol. 19, No. 5, May 2008 2. Gurevitz, O. et al. Programmable multiple pacing configurations help to overcome high left ventricular pacing thresholds and avoid phrenic nerve stimulation. PACE. 2005;28:1255-59. 3. Biffi, M. et al. Phrenic Stimulation: A challenge for cardiac resynchronization therapy. CIRCEP. 2009;2(4):402-410. 4. Leon, A.R. et al. Safety of transvenous cardiac resynchronization system implantation in patients with chronic heart failure: combined results of over 2,000 patients from a multicenter study program. J. Am Coll Cardiol 2005: 46:2348-2356. • First choice location not suitable for LV lead placement in 21% of CRT cases with bipolar LV leads due to PNS, high thresholds, and lead instability1 • Time-consuming pacing complications such as high pacing thresholds and phrenic nerve stimulation (PNS) may arise at implant or post-operatively • Incidence rates for high pacing thresholds are between 10-20%2 • 37% of CRT patients experience PNS at implant or follow-up3 • Up to 8% of patients require surgical revisions during a 6 month follow-up period4

15. Unify Quadra™ CRT-D Quartet® LV Lead

16. Basal and Mid-Septum Pacing is Associated with Significant Reductions in HF Admissions • MADIT-CRT demonstrated a 42% reduction in HF admissions or death (HR=0.58, p=0.019) in patients paced basally or mid-septum compared to those paced apically1. • Pacing from sub-optimal sites is believed to be a contributing factor to CRT non-responders which make up 30-35% of the CRT patient pool.2,3 • Despite these findings, apical pacing is still commonly utilized due to concerns over lead dislodgment1-3 • enable LV pacing at the preferred site without compromising lead stabilityfor better management of heart failure patients. Singh, Jagmeet P. et al, “Left Ventricular Lead Position and Clinical Outcome in the Multicenter Automatic Defibrillator Implantation with Cardiac Resynchronization Therapy (MADIT-CRT) Trial”. Circulation. 2011; 123:1159-1166. 2. Abraham WT, Fisher WG, Smith AL, Delurigic DB, et al. Cardiac resynchronization in chronic heart failure N Engl J Med 2002;346:1845-1853.  3. Cazeau S, Leclercq C, Lavergne T, et al. Effects of multisite biventricular pacing in patients with heart failure and intraventricular conduction delay N Engl J Med 2001;344:873-880. SJM Confidential – For Internal Use Only

17. SJM Confidential and Proprietary Information St. Jude Medical Signs Equity Investment and Option to Purchase Agreement with CardioMEMS CardioMEMS Completes CHAMPION Clinical Trial Study Study results indicate that the CardioMEMSimplantable hemodynamic monitoring system significantly reduces the leading cause of hospitalizations in the U.S. • Information from www.cardiomems.com

18. FY 2011 Medicare Payment for DRG 264:Intermountain Medical Center 1FY 2011 Hospital Inpatient PPS final rule 2MediRegs® MS-DRG Calculator 3FY 2012 Hospital Inpatient PPS proposed rule 4Fifty percent of estimated cost of CardioMEMs device 5MS-DRG rate plus maximum add-on payment

21. FAME Study - Cost-Effectiveness Evaluation Circulation. 2010;122:2545-2550.)

22. Unique Study Results FFR-guided PCI in patients with multivessel diseaseis one of those rare situations in whicha new technology not only improves outcomesbut also saves resources. Fearon et al, 2010 Circulation Volume122 page 2545.

23. Overall Health Outcomes and Costs Fearon et al, 2010 Circulation Volume122 page 2548.

24. FFR Better and Less Costly than Angiography Alone 1 Year Costs Angio $16,700 / patient FFR $14,315 / patient Fearon et al, 2010 Circulation Volume122 page 2548.

25. C7-XR – OCT with Extreme Resolution™ • Control • Ability to optimize care • Ease of operation • Detail Image courtesy of: Stent malapposition, Dr. Jeffrey Moses, Columbia University Medical Center, New York NY, USA.

26. OCT/IVUS IVUS OCT(C7-XR) DESFollow-up Pre-PCI Assessment, Stent Selection Vessel Scan Area Vessel Size (Media to Media) Ability to Identify Plaque Burden Post Stent assessment Catheter Performance Procedure Time 30

27. St. Jude Medical and iRhythm Technologies, Inc. enter into partnership to co-market novel cardiac rhythm monitor • 25 million patients have symptoms • 5 million arrhythmia patients • Only 2.3 million are diagnosed vs. Short-Term Monitors Long-Term Monitors Simple Intuitive Comfortable Cost Effective ü Up to 90% Non-Diagnostic Due to Insufficient Recording Time Complexity Results inPoor PatientCompliance ü ü ü

28. St. Jude Medical and iRhythm Technologies, Inc. enter into partnership to co-market novel cardiac rhythm monitor Zio™ Patch World’s 1st Single-Use, Continuous Recording Device • Designed to improve the diagnosis of cardiac arrhythmias. • 7-14 days of continuous recording, • Smallest, Lightest, Least Conspicuous Device Available • No need for removal, even during daily activities such as showering and sleeping • Proprietary ZEUS algorithm enables analysis of extended, continuous monitoring