CHARLES B. GREEN Brigadier General, USAF, MC, CFS Multi-Service Market Manager

1. Market Definition, FY 2003 Demographic Trends & Utilization Clinical Service Line Demand / Productivity Financial Performance of Direct & Purchased Care Inpatient & Outpatient Comparisons to Clinical Benchmarks Appointing/Referral Management/Medical Management Consolidation/Collaboration activities other than clinical care/Efficiencies Distinct Missions Plotting a course for the future Market Definition, FY 2003 Demographic Trends & Utilization Clinical Service Line Demand / Productivity Financial Performance of Direct & Purchased Care Inpatient & Outpatient Comparisons to Clinical Benchmarks Appointing/Referral Management/Medical Management Consolidation/Collaboration activities other than clinical care/Efficiencies Distinct Missions Plotting a course for the future

2. Overview Mission, Vision, Goals, and Objectives Define the Market thru Market Analysis Assess Clinical Service Line Efficiency Determine Opportunities Formulate an Integrated Business Plan Course for the Future

3. Mission, Vision, and Objectives Mission: Maximize Utilization of the Direct Care System in the San Antonio Multi-Service Market Area Vision: A World-Class, Multi-Service, Unified Health System Serving San Antonio and Referred Beneficiary Market Goals: Optimize efficiency between direct and private sector care markets Eliminate duplicate services Increase synergy and cooperation among San Antonio MTFs Ensure patient satisfaction with access and quality service Strengthen Readiness by allocating appropriate mix of resources Collaborate support functions across the market Objectives: Establish the Consult and Appointing Management Office Increase RWPs / RVUs in the direct care system per the business plan Consolidate logistical and contracting functions Realign staff resources to meet patient demand Establish enrollment sites to meet changing patient demographics Enroll eligible beneficiaries up to capacity

4. Population: 204,000 Beneficiaries Eligible for Care / 230,000 Unique Users of Direct Care System 136,500 San Antonio Enrollees 113,920 MTF Prime Enrollees / 7,100 Private Sector Prime /15,480 TRICARE Plus FY03 Descriptive Statistics: Total Health Care Charges: $480.5M Direct Care (90%) ? $309M Inpatient & $121.4M Outpatient Private Sector Care (10%) ? $13.8M Inpatient & $36.0M Outpatient Outpatient Visits: 1.87M Direct Care (86%) ? 1.6M -- Private Sector Care (15%) ? 271.7K Inpatient Dispositions: 28.1K Direct Care (89%) ?25.0K -- Private Sector Care (11%) ?3K Total DHP Resources in San Antonio Multi-Service Market (SA-MM): $1.0B Total SA-MM Capitated Revenue: $122M Private Sector Care for Prime Enrolled to a MTF: $29.7M Private Sector Care for <65 Unenrolled Patients: $20.1M FY 2003 Market Overview Total Enrollees: 136,500 7,100 enrolled to the private sector 15,480 TPLUS 113,920 enrolled to an MTF Avg Capitation rate per enrollee = $1,074 ? $122.4M for entire SA-MM Revised Financing: MTF Enrollees capitated amount ? $122.4M + MTF Enrollee private sector Care ? $20.4M Outpt + $9.4M Inpt= $29.8M = $152.2M Total Enrollees: 136,500 7,100 enrolled to the private sector 15,480 TPLUS 113,920 enrolled to an MTF Avg Capitation rate per enrollee = $1,074 ? $122.4M for entire SA-MM Revised Financing: MTF Enrollees capitated amount ? $122.4M + MTF Enrollee private sector Care ? $20.4M Outpt + $9.4M Inpt= $29.8M = $152.2M

5. Census data shows slow growth of 2% in San Antonio metropolitan area each year. Population center is slowly shifting to the North/Central area.Census data shows slow growth of 2% in San Antonio metropolitan area each year. Population center is slowly shifting to the North/Central area.

6. Comparison of Direct Care Service Lines to Academic and Private Practice MGMA Top service lines based on high utilization are included and rank ordered from left to right on the graph. The exceptions are Ortho and General Surgery services lines which are considered mission critical. In aggregate, SA-MM work RVUs compare favorably against benchmark. SA-MM is above RVUs/FTE benchmarks for 6 of the 10 service lines, Internal Medicine, Cardiology, Dermatology, Urology, General Surgery, and Gastroenterology. SA-MM is below RVUs/FTE benchmarks for 4 of the 10 service lines, Family Practice, Physical Medicine, Pediatrics, Orthopaedics, and. BAMC is above RVUs/FTE benchmarks for 4 of the 10 service lines, Internal Medicine, Dermatology, Urology, and General Surgery. BAMC is below RVUs/FTE benchmarks for 6 of the 10 service lines, Family Practice, Physical Medicine, Cardiology, Orthopaedics, and Gastroenterology. WHMC is above RVUs/FTE benchmarks for 8 of the 10 service lines, Family Practice, Pediatrics, Internal Medicine, Cardiology, Dermatology, Urology, General Surgery, and Gastroenterology. WHMC is below RVUs/FTE benchmarks for 2 of the 10 service lines, Physical Medicine, and Orthopaedics. Family Practice does not have a teaching program, so they are compared to private practice benchmarks. BAMC and WHMC Family Practice FTEs are over represented due to the inclusion of FTEs utilized by McWethy for readiness (i.e. SRPs) and sickcall, which we are not counting the workload and RVUs for. Physical Medicine does have a teaching program but MGMA does not have an academic benchmark for comparison. Physical Medicine is compared to private practice benchmarks. In general, academic work RVUs/FTE are lower than private practice work RVUs/FTE, so BAMC and WHMC Physical Medicine would be more favorable to an academic benchmark.Top service lines based on high utilization are included and rank ordered from left to right on the graph. The exceptions are Ortho and General Surgery services lines which are considered mission critical. In aggregate, SA-MM work RVUs compare favorably against benchmark. SA-MM is above RVUs/FTE benchmarks for 6 of the 10 service lines, Internal Medicine, Cardiology, Dermatology, Urology, General Surgery, and Gastroenterology. SA-MM is below RVUs/FTE benchmarks for 4 of the 10 service lines, Family Practice, Physical Medicine, Pediatrics, Orthopaedics, and. BAMC is above RVUs/FTE benchmarks for 4 of the 10 service lines, Internal Medicine, Dermatology, Urology, and General Surgery. BAMC is below RVUs/FTE benchmarks for 6 of the 10 service lines, Family Practice, Physical Medicine, Cardiology, Orthopaedics, and Gastroenterology. WHMC is above RVUs/FTE benchmarks for 8 of the 10 service lines, Family Practice, Pediatrics, Internal Medicine, Cardiology, Dermatology, Urology, General Surgery, and Gastroenterology. WHMC is below RVUs/FTE benchmarks for 2 of the 10 service lines, Physical Medicine, and Orthopaedics. Family Practice does not have a teaching program, so they are compared to private practice benchmarks. BAMC and WHMC Family Practice FTEs are over represented due to the inclusion of FTEs utilized by McWethy for readiness (i.e. SRPs) and sickcall, which we are not counting the workload and RVUs for. Physical Medicine does have a teaching program but MGMA does not have an academic benchmark for comparison. Physical Medicine is compared to private practice benchmarks. In general, academic work RVUs/FTE are lower than private practice work RVUs/FTE, so BAMC and WHMC Physical Medicine would be more favorable to an academic benchmark.

7. Comparison of Provider FTEs to Civilian Benchmark Top service lines based on high utilization are included and rank ordered from left to right on the graph. The exceptions are Ortho and General Surgery services lines which are considered mission critical. MGMA FTEs Methodology to determine expected benchmark FTE: Expected FTE = (Total FY03 SA MMM RVUs)/(benchmark RVU/FTE) FTE methodology Provider FTEs represent available clinical time FTE data available in MEPRS was shown to generate incorrect FTEs across most service lines. FTEs are not being reported properly in MEPRS by the clinics. A manpower survey was distributed to the clinics to acquire correct FTEs for FY03. FTEs generated by the manpower survey are used in replacement of FTEs reported in MEPRS. Included skill type II staff for Primary Care (i.e. PAs, NPs) service lines, Family Practice, Internal Medicine, and Pediatrics, since we enroll to them. Physical Medicine also includes skill type II staff (i.e. Physical Therapists, Occupational Therapists) since thisskill type 2 are the majority staff providing services. All other service lines include only physician FTEs. Resident and intern FTEs are omitted in all service lines. MGMA Median work RVUs/FTE are used as the comparative metric between SA-MM and MGMA benchmarks. MGMA recommends the use of the median since the median, unlike the mean, is not subject to distortion when extreme values exist in MGMA survey data collected. MGMA survey is census and not a randomized sample, so survey respondents may not be representative of all clinical departments. MGMA academic comparative data options for faculty can be set at 67% or 100% of billable clinical activity. SA-MM FTEs are not 100% clinically available, so 67% billable clinical activity is used for MGMA comparisons. Conclusions In aggregate, SA-MM work RVUs compare favorably against benchmark. SA-MM is above RVUs/FTE benchmarks for 6 of the 10 service lines, Internal Medicine, Cardiology, Dermatology, Urology, General Surgery, and Gastroenterology. SA-MM is below RVUs/FTE benchmarks for 4 of the 10 service lines, Family Practice, Physical Medicine, Pediatrics, and Orthopaedics. BAMC is above RVUs/FTE benchmarks for 4 of the 10 service lines, Internal Medicine, Dermatology, Urology, and General Surgery. BAMC is below RVUs/FTE benchmarks for 6 of the 10 service lines, Family Practice, Physical Medicine, Cardiology, Orthopaedics, and Gastroenterology. WHMC is above RVUs/FTE benchmarks for 8 of the 10 service lines, Family Practice, Pediatrics, Internal Medicine, Cardiology, Dermatology, Urology, General Surgery, and Gastroenterology. WHMC is below RVUs/FTE benchmarks for 2 of the 10 service lines, Physical Medicine, and Orthopaedics. Family Practice does not have a teaching program, so they are compared to private practice benchmarks. BAMC and WHMC Family Practice FTEs are over represented due to the inclusion of FTEs utilized by McWethy for readiness (i.e. SRPs) and sickcall. Physical Medicine does have a teaching program but MGMA does not have an academic benchmark for comparison. Physical Medicine is compared to private practice benchmarks. In general, academic work RVUs/FTE are lower than private practice work RVUs/FTE, so BAMC and WHMC Physical Medicine would be more favorable to an academic benchmark. Top service lines based on high utilization are included and rank ordered from left to right on the graph. The exceptions are Ortho and General Surgery services lines which are considered mission critical. MGMA FTEs Methodology to determine expected benchmark FTE: Expected FTE = (Total FY03 SA MMM RVUs)/(benchmark RVU/FTE) FTE methodology Provider FTEs represent available clinical time FTE data available in MEPRS was shown to generate incorrect FTEs across most service lines. FTEs are not being reported properly in MEPRS by the clinics. A manpower survey was distributed to the clinics to acquire correct FTEs for FY03. FTEs generated by the manpower survey are used in replacement of FTEs reported in MEPRS. Included skill type II staff for Primary Care (i.e. PAs, NPs) service lines, Family Practice, Internal Medicine, and Pediatrics, since we enroll to them. Physical Medicine also includes skill type II staff (i.e. Physical Therapists, Occupational Therapists) since thisskill type 2 are the majority staff providing services. All other service lines include only physician FTEs. Resident and intern FTEs are omitted in all service lines. MGMA Median work RVUs/FTE are used as the comparative metric between SA-MM and MGMA benchmarks. MGMA recommends the use of the median since the median, unlike the mean, is not subject to distortion when extreme values exist in MGMA survey data collected. MGMA survey is census and not a randomized sample, so survey respondents may not be representative of all clinical departments. MGMA academic comparative data options for faculty can be set at 67% or 100% of billable clinical activity. SA-MM FTEs are not 100% clinically available, so 67% billable clinical activity is used for MGMA comparisons. Conclusions In aggregate, SA-MM work RVUs compare favorably against benchmark. SA-MM is above RVUs/FTE benchmarks for 6 of the 10 service lines, Internal Medicine, Cardiology, Dermatology, Urology, General Surgery, and Gastroenterology. SA-MM is below RVUs/FTE benchmarks for 4 of the 10 service lines, Family Practice, Physical Medicine, Pediatrics, and Orthopaedics. BAMC is above RVUs/FTE benchmarks for 4 of the 10 service lines, Internal Medicine, Dermatology, Urology, and General Surgery. BAMC is below RVUs/FTE benchmarks for 6 of the 10 service lines, Family Practice, Physical Medicine, Cardiology, Orthopaedics, and Gastroenterology. WHMC is above RVUs/FTE benchmarks for 8 of the 10 service lines, Family Practice, Pediatrics, Internal Medicine, Cardiology, Dermatology, Urology, General Surgery, and Gastroenterology. WHMC is below RVUs/FTE benchmarks for 2 of the 10 service lines, Physical Medicine, and Orthopaedics. Family Practice does not have a teaching program, so they are compared to private practice benchmarks. BAMC and WHMC Family Practice FTEs are over represented due to the inclusion of FTEs utilized by McWethy for readiness (i.e. SRPs) and sickcall. Physical Medicine does have a teaching program but MGMA does not have an academic benchmark for comparison. Physical Medicine is compared to private practice benchmarks. In general, academic work RVUs/FTE are lower than private practice work RVUs/FTE, so BAMC and WHMC Physical Medicine would be more favorable to an academic benchmark.

9. Recapture Inpatient Private Sector Care private sector care amount paid is grouped by MDC.private sector care amount paid is grouped by MDC.

10. Private Sector Recapture Yields Small Gains Compared to Total Health Care Cost

11. Direct Care ComparisonsTRICARE Prime versus TRICARE Plus

12. Concept of Capitation Note: This does not include private sector care from the private sector for our MTF enrollees. Note: Comparative analysis between MEPRS and charges indicate no significant difference between the inpatient MEPRS costs to DRG charges and no significant difference between outpatient MEPRS costs to CMAC charges. Therefore charges (CMAC & DRG) are being used as representation of our costs and represent the concept of fee for service. This is an example of profiling the enrollee population to an HMO model of capitation. Although there is a delta between the capitation rate and actual charges, this is not substantive data to draw conclusions at this time as to increase or decrease enrollment. What makes up the PMPY needs to be known before management decisions can be made on this type of data. Additionally, the capitation amount represents a portion of the budget under TNEX not the entire, therefore if we are operating in a deficit based on the charges vs capitation amount, the direct care costs (such as facility, salaries, ancillary which are carve outs) should make up that difference and that is where the business plan identifies each of these pieces. Note: This does not include private sector care from the private sector for our MTF enrollees. Note: Comparative analysis between MEPRS and charges indicate no significant difference between the inpatient MEPRS costs to DRG charges and no significant difference between outpatient MEPRS costs to CMAC charges. Therefore charges (CMAC & DRG) are being used as representation of our costs and represent the concept of fee for service. This is an example of profiling the enrollee population to an HMO model of capitation. Although there is a delta between the capitation rate and actual charges, this is not substantive data to draw conclusions at this time as to increase or decrease enrollment. What makes up the PMPY needs to be known before management decisions can be made on this type of data. Additionally, the capitation amount represents a portion of the budget under TNEX not the entire, therefore if we are operating in a deficit based on the charges vs capitation amount, the direct care costs (such as facility, salaries, ancillary which are carve outs) should make up that difference and that is where the business plan identifies each of these pieces.

13. Targets of Opportunity Increase Enrollment Capacity for Increased Enrollment is Up to 5,347 Enrollees Growing Population in SA in North Central Area New Enrollment Clinics Planned 33,000 Potential Enrollees < age 65 are the Target Population 24,080 are Non Enrolled Users of the Direct Care System Establish a Centralized Consult, Appointing, and Management Office Aggressively Recapture Leakage to the Private Sector Optimize the Utilization of the Direct Care System Increase Third Party Collections through Increased OHI Capture, More Timely Claims, Better Claims Denial Management, and More Accurate Documentation Future Projects Consolidated Logistics, Pharmacy, Contracting, and IT Functions

14. Initiatives in Progress Enrollment & Recapture AD Military Made Automatic -- Adds 4,200 Enrollees FY05 Stop Prime Leakage to Recapture $5M � 10M Optimize Individual Clinical Services thru Performance Reviews Consult & Appointing Management Office Lease Space and Manpower Identified $500K Invested in IT and Furniture Consolidated Call Center Operational 1 Nov 04 San Antonio Market Refill Pharmacy Robotic Refill Center in place by 1 Feb 05 Robot Centrally Purchased / $450K Site Prep Committed Integrated P & T Oversight IM / IT New Server Installed for MMO Performance Monitoring

15. Performance Against Business Plan Oct - Feb 04 WHMC performance is due to unrealistic FY 02 baseline year targets. Problems include poor data quality in FY 02 plus no adjustments for a one time adenovirus epidemic in the BMT student population. In addition, the increased deployment tempo has contributed to the decreased workload performance. Specific areas for improvement are: 1) outpatient: orthopaedics, emergency department, obstetrics/gynecology, and internal medicine subspecialties, and 2) inpatient: circulatory, respiratory, newborn, and orthopaedics.WHMC performance is due to unrealistic FY 02 baseline year targets. Problems include poor data quality in FY 02 plus no adjustments for a one time adenovirus epidemic in the BMT student population. In addition, the increased deployment tempo has contributed to the decreased workload performance. Specific areas for improvement are: 1) outpatient: orthopaedics, emergency department, obstetrics/gynecology, and internal medicine subspecialties, and 2) inpatient: circulatory, respiratory, newborn, and orthopaedics.

16. Performance Oct - Feb 04Inpatient Care By Enrollment Category Source Data: WHMC/Brooks/Randolph: P2R2 virtual analyst website (extracted from M2 automatically); date: 18 Mar 04 BAMC: M2 data pull by Maj Dave Montplaiser, 19 Mar 04 Slide by: LtCol Julian/59 MDW/ADB/21 Mar 04/2-7966 Source Data: WHMC/Brooks/Randolph: P2R2 virtual analyst website (extracted from M2 automatically); date: 18 Mar 04 BAMC: M2 data pull by Maj Dave Montplaiser, 19 Mar 04 Slide by: LtCol Julian/59 MDW/ADB/21 Mar 04/2-7966

17. Performance Oct-Feb 04Outpatient Care By Enrollment Category Source Data: WHMC/Brooks/Randolph: P2R2 virtual analyst website (extracted from M2 automatically); date: 18 Mar 04 BAMC: M2 data pull by Maj Dave Montplaiser, 19 Mar 04 Slide by: LtCol Julian/59 MDW/ADB/21 Mar 04/2-7966 Source Data: WHMC/Brooks/Randolph: P2R2 virtual analyst website (extracted from M2 automatically); date: 18 Mar 04 BAMC: M2 data pull by Maj Dave Montplaiser, 19 Mar 04 Slide by: LtCol Julian/59 MDW/ADB/21 Mar 04/2-7966

19. Optimization of Business Plan Establish Realistic Targets for Workload Based on Historical Levels of Effort Optimize RVU / FTE through Template Management, Documentation Education, and Coding Encourage Population Health Management so Cost of Care for Enrolled Patients does not Exceed Capitated Amounts Fill to Capacity with Unenrolled Eligible Patients Receive Funding to Meet Actual Levels of Inflation, i.e. Pharmacy / Contracts Receive Funding to Support the TRICARE For Life Population through the Accrual Fund at Actual Levels of Care, Not Care Predicted on a Model Based on Lower Utilization

20. Next Steps Finalize Strategic Plan Optimize Enrollment According to Capacity Plan (Automate AD Enrollment) Stand Up Enrollment Site in North Central SA Use Best Practices and Civilian Benchmarks to Optimize RVU / FTE Monitor metrics for clinical service lines and the integrated business plan Optimize the Direct Care System by Aggressive Management of Consults, Appointments, and Templates Determine clinical targets for provision of care to meet demand and support business plan Individual clinical service performance reviews Make CAMO Operational by 1 Nov 04 Support the Distinct Missions through Continued Cost / Benefit Analysis Pursue Opportunities for Consolidation of Logistics, Contracting, and IT

23. Caring For the Sickest Patients in DoD

24. Facility Clinical Quality Standard Measures to 2003 HEDIS 90th Percentile Performance

25. Define Clinical Service Lines How well do the top 10 clinical service lines perform? Are they optimized? How do we compare to civilian benchmarks? What are the distinct missions? What is the value add? How well do we perform our readiness mission? How do we compare to civilian academic programs?

26. Define The Market How large is the potential market? What is the market penetration of the direct care system? Have we maximized the capacity of the direct care system? What are the characteristics of the market? Are MTFs geographically well situated to provide care for our beneficiaries? How much care are our beneficiaries using? What is the capacity for increased enrollment? Is there duplication of clinical services? Is the SA-MM positioning itself to address growing or shifting populations? Are there opportunities to consolidate clinical services? Is the market growing, flattening, or shrinking? Are we positioning enrollment sites to meet changing patient demographics?

27. Current Situation What is the utilization? What is our capacity? What is our productivity? What is the current staffing mix? How well are we managing templates? Are we maximizing the revenue cycle? How does TNEX and prospective payment impact us? What is our quality of care? What is our access to care?

28. Integrated Business Plan