Interim Lorma Reportmarch 2012.

Lorma Medical Headed for banner year

Lorma College will face a squeeze from higher costs as enrollment drops.

highlights

Hospital Financial Results are very strong. We continue to do well with our Laboratory, and

this is further bolstered by its recent upgrading. We have started our EEG unit. Lorma Medical Center was awarded as one of

the top tax payers in La Union. We have just set up a successful Medical

Transcription course in the college The Lorma LifeCheck clinic will open this April.

Record Hospital Improvement

Fiscal 2011 Fiscal 2012 Change Hospital Patients Admitted 10,871 12,589 +12.7% Revenues + 12.7% Net Income + 125.0% Net Income forecast for year ending May 31

+ 77.5%

Net income trend

Lorma Total Net Income

91 92 93 94 95 96 97 98 99 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

YearHospital Net Income College Net Income3 per. Mov. Avg. (College Net Income) 3 per. Mov. Avg. (Hospital Net Income)

Developments that have benefited our hospital.

We are upgrading our small private rooms to meet the demand. Special services we have started, such as marketing, corporate

services, telehealth care, and numerous patient seminars are starting to have a long term favorable impact.

We have taken the lead in radiology and imaging in the region through our MRI, advanced CT, Ultrasound, Nuclear imaging.

Our laboratory has been fully renovated, expanded with modern new equipments added.

Our image as a medical center spreads beyond our geographical area. Actually cities such as Dagupan, Baguio and Laoag are many times larger than San Fernando. Thus, over the years we, have had to do better in order to attain our leadership status.

Besides our technology status, we are known to give exceptional patient service.

Lorma LifeCheck clinic.

The clinic will open almost on schedule and within budget. If it is successful it can be replicated, perhaps in Rosario or another remote area

It is a new venture for us: we expect the best from it.

It is planned to help meet the changing dynamics in the health care market. Patients want quick convenient service at more moderate rates than that available at a hospital.

Original perspective

Objectives of LifeCheck clinic

One of the main driving forces for this clinic is to serve HMO clients. We want it to be a important referral point of patients to Lorma.

Other Objectives We also needed to accommodate more doctors as Lorma’s office

space is limited. There is a real threat that if we did not open this clinic others would

do it. This would negatively impact referrals to our main hospital. The doctor’s fees in this clinic will be fixed at a modest rate.

This clinic may not earn a large amount as we will offer lower charges, but it can be a strong source of referrals for patients that need hospitalization, or more advanced diagnostic procedures at the base hospital.

We expect the clinic to offer faster patient service, which should be attractive to corporate accounts as well as walk-in patients.

You are invited this PM for a pre opening tour.

Financial Situation Strong

We have very low debt versus equity. This means that we can borrow for income generating projects without undue concern.

We have made big investments recently, yet the cash position is steady and debt reduced.

Other new development plans that impact our patient services

After the new clinic is operational we will resume the plans to establish a women’s health care center.

We will continue to upgrade and renovate our old rooms. The suites on the 4th floor are about 15 years old now and in need of a Lorma style upgrade.

We are seeking accreditation to serve European tourists and retirees. This would enhance our image, and attract expats from all over northern Luzon.

We expect also to set up a Kidney Transplant Center under the imitative of Dr. Bautista.

College declines but still stable

Fiscal 2011 Fiscal 2012 Change

College students 4,285 4,136 -3.5%

Revenues college unchanged

Net Income College GS HS

- 1 %

Total College Net Income forecast for year ending May 31

- 18%

Impact of the college enrollment decline

Enrollment has dropped from 5,500 several years back to 4,100 now.

Further student population declines are expected.

Problems. There is an unexplained decline in GS enrollment. Earnings

have gone from positive to marginal. No reversal is forecast. The profitable nursing enrollment will decline further before a

long term reversal is anticipated. Just as in the hospital where the increase in volume has a

positive impact on income, so to in the college with the decline in enrollment the result in the “bottom line” is geometrically greater.

College outlook

Declining enrollment, a tuition freeze and rising costs will make further income declines inevitable. We have a lot of competition now from St. Louis College and government schools (which are well funded). Other schools such as UCC and Northern Christian College have become weak. Some small local nursing schools may soon be closed by CHED.

However, the college is financially solid with sufficient cash and receivables. If we watch costs than we will be ok.

Positive developments. We opened a Medical Transcription course. Enrollment is on target,

and start up investment was minimal. The Medical Technology course is starting to do well (but we will

have to raise salaries there due to a shortage of teachers.) The college needs to re-brand itself to encompass more than the

general perception that we are only a nursing school.

Consolidated Results ExplainedLORMA INCOME TRENDFLUCTUATION

HOSPITAL COLLEGE TOTAL LORMA

We have been fortunate over time for the good synergy between the hospital and the college. There have been times in the past when one branch that is strong helps the other in decline. While the college is having problems now, in the recent years the college helped the hospital with its development. Even now while our nursing enrollment is weak, it is perforating a little better than many other local nursing schools as potential enrollees are attracted by the hospital’s reputation and job prospects.

Hospital is positive - College is hopeful

Demographics are favorable for the hospital. An older population needs more intensive medical care because of age and other related illnesses. The economic situation is gradually improving.

The Philippine economy is now positive with the Government pumping development funds into the system. National finances are strong.

We hope major corruption may be diminishing (but not at the local level).

Outsourcing is a very positive factor in national economic development. Many tens of thousands of new jobs are being created. The outsource firms are patrons of the HMO’s. We hope to tap this market with the HMO – LifeCheck tie up. This call center business keeps jobs at home

Nursing enrollment will improve in time (5-8 yrs) .