Capital Funding Strategies for Replacement or Renovations

1. Capital Funding Strategies for Replacement or Renovations Alan P. Richman President & CEO InnoVative Capital Presentation at the 1st Annual Florida Winter Conference Presented by HomeTown Health Tallahassee, Florida January 17, 2013

2. Capital Funding Strategies for Rural Hospitals Upfront Planning –The Minimum Project with the Maximum Value • Education is Essential to a Successful Financing • Dispels Misconceptions • Filters Unlikely Promises • Defines the Real Costs and Available Options • Sets Benchmarks and Aligns Expectations with Reality • Ensures Accountability • Saves Money and Time • Improves the Likelihood for a Desired Outcome 2

3. Capital Funding Strategies for Rural Hospitals Upfront Planning –The Minimum Project with the Maximum Value • Assembling the Right Team • Financial Advisor • C.P.A. Firm • Project Planner • Operations Analyst • Economist • Municipal Attorney • Public Relations Expert 3

4. Capital Funding Strategies for Rural Hospitals Upfront Planning – Questions in Need of Answers and Benchmarking Tools • Is the hospital being run well? • Strategic Operational Assessment • What are the services the market requires? • Market Demand Analysis • What does the hospital project cost and how much to spend to recruit doctors? • Project Master Planning and Physician Recruitment Reports • How will the project impact the future financial performance of the hospital? • Financial Feasibility Forecast • How much can the hospital afford to borrow based on current and future operations? • Maximum Debt Capacity Analysis 4

5. Capital Funding Strategies for Rural Hospitals Upfront Planning – Questions in Need of Answers and Benchmarking Tools • How much external (governmental) support is required upfront or annually? • Maximum Debt Capacity Analysis and Financial Forecast • How will this level of governmental support impact the residents and the community? • Economic Impact Analysis and Review of CAFR • How to build community stakeholder consensus? • Community Consensus Development Campaign • How should this be financed? • Capital Financing Eligibility Assessment and Capital Markets Review 5

6. Capital Funding Strategies for Rural Hospitals Upfront Planning – Why Go Through All of This? • To define the terms of a successful outcome and build confidence • To be able to judiciously allocate precious monies and eliminate unnecessary spending • To gain stakeholders in the undertaking including: • Hospital board members • Hospital management and staff • The governing body • Elected officials • Taxpayers • Potential new physician recruits 6

7. Capital Funding Strategies for Rural Hospitals Developing the Project • Renovation versus replacement • Onsite versus offsite • Targeted service line expansion • Equipment and space planning • Right sizing the project 7

8. Capital Funding Strategies for Rural Hospitals Financing the Project – Financing Options for Consideration • Limited Taxes versus General Obligation Debt • USDA Direct Loans • FHA/HUD Section 242 Mortgage Insured Ginnie Mae Loans or Bonds • Commercial Bank Bonds or Commercial Bank Loans 8

9. Capital Funding Strategies for Rural Hospitals Financing the Project – The Fine Print Makes a Difference • Financial and Operational Covenants • Loan Terms • Fixed Rate Long Term or Interest Reset Periods • Interest Rates • Ongoing Administration and Disclosure Requirements • Security Pledges • Negative Arbitrage and Other Financing Costs • Restricted Reserves and Money Management Requirements 9

10. Capital Funding Strategies for Rural Hospitals Summary • The Process Controls the Outcomes • The Investor Controls the Future • The Future is in Your Hands • Investing in Your Hospital is the Best Investment Your Community Can Make 10

11. Contact Information Alan P. Richman President & CEO InnoVative Capital LLC 1489 Baltimore Pike Building 400 Springfield, Pennsylvania 19064 Tel: 610-543-2490, Ext. 101 arichman@innovativecapital.com www.innovativecapital.com 11