HFMA March 10, 2011 “Toward a Business Strategy in Era of Health Care Reform” Howard Gold, Senior Vice President, Manage

1. HFMA March 10, 2011 “Toward a Business Strategy in Era of Health Care Reform” Howard Gold, Senior Vice President, Managed Care & Business Development North Shore-LIJ Health System

2. Economic Impact $6.0 billion in yearly revenue 38,000 workforce - the largest employer on Long Island and the ninth largest in New York City 7,500 physicians; Over 1,800 faculty 9,500 nurses  1,230 medical residents: Over 90 residency programs 800 medical school rotations 1,150 nursing students Research Institute with $45 million in grants 800 scientists, investigators and staff Key NS-LIJ Health System Statistics • Facilities • 13 owned/sponsored hospitals (4,344 beds*) • 3 Tertiary • 8 Community • 1 Children’s • 1 Psychiatric • 1 affiliate hospital; 1 clinical affiliate hospital • 2 owned long-term care facilities (376 beds*) • 16 affiliated long-term care facilities • Centers of Innovation • Centers of Progressive Care • 21,500 babies delivered • 248,600 hospital discharges • 110,700 ambulatory surgeries • 30.3% service area market share** 2009 Operating Statistics • 560,000 emergency visits • 567,100 home health visits • 67,108 ambulance transports • 13.5% NY metro region market share 2

3. NS-LIJ Health System Hospitals Manhattan Suffolk Children’s Hospital of NS-LIJ Staten Island Nassau Queens Brooklyn 3

4. Framing Statements Three business models have been used to control costs and rationalize health care delivery… two haven’t worked…third is just emerging: • Rate and Capital Regulation: State Government command and control model – 1980s – DEREGULATEDlinkage of Medicaid rate setting to commercial insurance. 2. Managed Care Rationing: 1990s – 2000s FAILED: Focus on per unit price, denials and utilization controls lead to the “indemnity” style networks and overutilization. No behavioral changes by payers, providers or consumers. Exponential increases in price and total expense. 3. Marketplace in the Age of Reform: 2010-2020 UNCERTAINTY

5. Marketplace in Age of Reform: Emerging Drivers • Not all stakeholders will survive • Federal government control will increase and so will taxes • Downward cost pressure from all sectors • More coverage and greater demand for services • Payers and consumers will demand value, efficiency, wellness, and evidence of quality. • Greater consolidation among providers and purchasing groups. More community physicians look for ways to align with large Health Systems and multiple specialty physician super-groups. • New emphasis on linking clinical performance with payments. • Consumer choice of high value providers and insurance products at lower cost may replace consumer choice of open access and all inclusive networks.

6. Becoming a High Value Provider presentssignificant challenges to large and diverse Health Systems and National Payers • Service and resource variations exist among facilities and physicians. • Evidence-based medicine is in its infancy. • Few standardized protocols and methods have been accepted to measure and monitor physician and hospital practice patterns. • Non-alignment of clinical and financial interests between and among hospitals, physicians and payers. • Requires infrastructure to access and share information. • Provider reimbursement is not based on wellness, consumer health, quality or service excellence. • Difficult to achieve real value without coordination of services across the life continuum and assured easy access for populations and individual patients.

7. Becoming a High Value Provider …Cont’d • Federal and State statutes and regulations disallow providers across the continuum and payers from working together in this way except in very specific instances: • Ownership • Employment • Risk Contracting • Clinical Integration • Must establish mechanism to legally, politically and organizationally pay System hospitals, affiliates, employed and voluntary physicians for doing better. • Share clinical benchmarks and pay providers for improving performance and coordinating referrals data; before, during and after hospitalization.

8. The Road we are Traveling

9. NSLIJ Strategies to Integrate the Continuum of Care • Transforming the Healthcare Delivery Model: Measuring Clinical Practice • Patient Safety • Mortality and Morbidity • Standardization and Reliability/Consistency • Efficiency and Coordination of Care • Appropriate intervention across the continuum: disease prevention, health promotion, and chronic condition management. • Transforming the Compensation Model: Clinical and Financial Integration • IPA and sub-networks • Aligning hospitals, physicians, consumer/patient and payer incentives • Risk/Reward, P4P and package pricing contracts • Partnering with payers for aligned products • Managing care

10. Clinical Integration,“ACO” and High Value Provider Clinical Advisory Group • Consumers • Employers • Payers • Unions • Retail Customers • Government Clinical Integration / ACO Compensation Models • NSLIJ Hospitals, Affiliates and IPA Membership • Smaller manageable sub-networks • Align Financial and Clinical Incentives Among Members • Monitoring and Benchmarking Service Delivery • Quality Outcomes • Patient Satisfaction • Evidence-Based Medicine • Efficient Utilization • Customized Disease and Health Management Reports • More Affordable Care • Population Health • Disease Management • FFS • Shared Risk • Global/Bundled Payments • Global Budgets • Single Source Funding • Capitation/Sub-Capitation • P4P

11. NSLIJ Employee Health Benefits: 3 Prong Experiment in Clinical and Financial Integration • Measure and manage efficiency, effectiveness and quality 2. Redesign benefit and product offerings. 3. Focus on workforce health and wellness.