Rhonda C. Anderson

Senior Vice President and Chief Financial Officer

Ascension Healthcare

November 9, 2016

Running 129 Hospitals: Financial

Management Insights from the

Nation’s Largest Nonprofit Health

System

Agenda

2

• Ascension Overview

• Journey to One Ascension

• Managing Key Revenues and Costs

• Continuing the Journey

Ascension Overview

FINANCIAL AND STATISTICAL INFORMATION (Fiscal Year To Date June 30, 2016)

Total Assets $32.5 Billion

Total Operating Revenue $21.9 Billion

*Income from Recurring Ops $981.0 Million

Net Income $477.7 Million

Care of

persons living

in poverty and

community

benefit

programs:

*

4* Includes Self Insurance Trust Fund (SITF) Investment Performance

Total Admissions 777,593

Equivalent Discharges 1,597,177

Physician and Clinic Visits 12,687,354

FTEs 120,798

$1.8

BILLION

ASCENSION HEALTHCARE AND SOLUTIONS

5

Ascension

Healthcare Division

Ministry Markets

Ascension Senior Living

Ascension Medical Group

Ascension Community

Clinics

Ascension Clinical

Holdings

Ascension At Home

Solutions Division

Ascension Information

Services

AscensionMinistry

Service Center

Ascension Care

Management

Ascension Investment

Management

Ascension Global Mission

Ascension Ventures

Ascension Holdings

Ascension LeaderInstitute

Ascension SmartHealth

Solutions

OUR CARE DELIVERY SYSTEM

6 6

Ascension is the largest Catholic health system, the largest private nonprofit system

and the second largest system (based on revenues) in the United States, operating

in 23 states and the District of Columbia.

Grand Cayman

6

Hospital Operations Continuum of Care

Discharges 777,593

Total Owned Beds 22,990

Acute Care Hospitals 112

Rehabilitation Hospitals 6

Psychiatric Hospitals 9

L/T Acute Care Hospitals 2

Total 129

Joint Venture Hospitals

(<50% Ownership)13

Outpatient Visits 27 million

Ambulatory Surgery Centers 66

Occupational Health Programs 55

On-site Employer Clinics 76

Free-standing Imaging Sites 110

Retail Pharmacy sites 45

Sleep Centers 31

Virtual Care Programs 70

Mobile Clinical Services 26

Specialty Clinics 613

Retail Lab Collection Sites 155

Community & Social Programs 157

Primary Care Clinics 565

Other Miscellaneous Services 155

Sites of Care by Business Segments

7

Health Plans & Risk Bearing

Home Health

Sites of Care by Business Segment

8

* Includes facilities part of a CCRC

Visits 505,361

Durable

Medical Equip15

Home Health

Services42

Hospice

Services16

Outpatient

Rehab

Centers

148

Covered

Lives2.6 Million

Health &

Medical

Insurance

Plans

7

Other risk

bearing

activities /

programs

26

Physician Enterprise

Beds

L/T Care/Skilled

Nursing* 22 2,780

Independent/

Assisted Living* 17 1,768

Other Living

(HUD, Other)2 108

PACE program

Enrollees 3 514

Senior Care

Visits13.1

Million

Primary Care

Clinics565

Employed

Physicians6,500

Aligned

Physicians~45,000

Journey to One Ascension

Delivery Macrostructure

Delivery supported by Ministry-Wide Functions (HR, Finance, Mission Integration, Communications,

Legal, Clinical) and Solutions (e.g., Resource Group, Analytics Group)

Work together to realize benefits from scale and standardization

Work together to

realize market

strategies and

integrate care

with the benefit of

scale, expertise,

and experience

from specialized

units

DELIVERY-WIDE CLINICAL

SERVICE UNITS

Ascension At Home

Ascension Medical

Group

Responsible for strategy and clinical, operational,

and financial performance within Ascension

standards

Responsible for strategy and operations

across markets

Individual market

DELIVERY-WIDE SUPPORT UNITS

Responsible for optimizing clinical and operational performance through consolidation and standardization

Physician

ServicesCare Excellence Operations Services

Payer & Network

Contracting Services

INDIVIDUAL MARKETS

Ascension Senior Living

10

MINISTRY-WIDE FUNCTIONS

Enhancing Capabilities and Expertise Across Ascension

11

DELIVERY SOLUTIONS

Clinical

Communications

Finance

Human Resources

Legal

Mission Integration

Advocacy

StrategyIncreased standardization,

collaboration and the level of

expertise across Ascension

Value Generation for MWF

Actual FY16

$20 – 25

million Projected

FY17

$35 – 40

millionFY18 – FY20

$55 – 65

million

12

Finance – Centers of Expertise

DELIVERY SOLUTIONS

Clinical

Communications

Finance

Human Resources

Legal

Mission Integration

Advocacy

Strategy

General Accounting

Net Revenue Management

Payor Contracting

Tax Reporting

13

The Finance community will serve as a collaborative, trusted, strategic

business partner, promoting stewardship, highly efficient financial

operations, and contributing to effective decision-making to ensure

operational success

Serve as a strategic business partner to all leaders within Ascension

Employ deep financial expertise to deliver service-oriented, highly

responsive results

Anticipate and address financial, strategic and operational issues and

opportunities

Maintain a strong internal control environment

Provide a single, reliable source of financial data and analytics

Achieve efficiency in structure and service

Ensure that decisions and services are mission-focused

Share information transparently

Ensure high quality investor and banking relationships

New Governance Structure

• Consolidation of Finance and Audit Committees into one

Finance Committee

• Standard Finance Committee Charter for each Ministry

Market

• Monitors the financial performance of the Health Ministry

Market (focus on P&L); Balance Sheets monitored at

System level

• Audit scope decisions made at System level

• Financial Integrity responsibilities remain with local

Finance Committee

• Goals, including performance compensation, set at the

System level; local boards monitor and provide oversight on

System wide goals

Ascension Health Ministry

Accountabilities

Debt issuance & leasing

Investment management

Capital allocation

Budget reviews and approval

Track performance and

operational improvement

initiatives

Monitor financial integrity

compliance

Manage quarterly and annual

audits

Operational strategies

Capital project analyses

Budget reviews and approval

Track performance and

operational improvement

initiatives

Physician integration

Develops short term and long-

term financial plans

Financial integrity

• Economies of Scale

• Consistent policies and procedures

• Clean audit reports

General Accounting

• Improved reimbursement yield

• Leveraged deep internal expertise

• National advocacy

Net Revenue Management

• Improved reimbursement yield

• Leveraged deep internal expertise

• Centralized tools for risk based contracts

Payor Contracting

• Leveraged expertise – reduced reliance on outside resources

• Reduced risk with consistent compliance

• Consistent approach to tax planning

Tax

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Service Level Commitments

Managing Key Revenues and Cost

Challenges in FY16

Aggressive Competition

Investment

Market

Revenue Cycle

18

Common Tools

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Oracle's PeopleSoft - leverages best practices to achieve world-

class finance processes, and efficiently delivers greater visibility into

business-critical information.

Kaufman Hall Axiom Healthcare Suite – solutions for budgeting &

forecasting, long-range planning, capital planning & management,

and performance reporting.

Kronos - helps manage all aspects of the employee lifecycle.

Kronos workforce management solutions is used to monitor and

impact workforce efficiency in consistent and well-organized manner.

Crowe Revenue Cycle Analytics - provides the single source of

truth for net revenue.

Hyperion Financial Management - a comprehensive, Web-based

application that delivers global financial consolidation, reporting and

analysis

One of the largest healthcare information technology (IT) service organizations in

North America with annual operating expenses in excess of $1 billion and an

annual capital budget in excess of $250 million.

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Enhanced usage of IT

operational metrics through its

Technology Business

Management (TBM) function

and its IT Balanced Scorecard

Utilization of cutting-edge

technology and processes to

protect Ascension’s IT assets and

data

Continuous focus on cost-reduction

opportunities, driving an average of

$41.4m of cost reductions for each

of the past 5 years

Supporting changes in Ascension’s

care delivery model by enabling

infrastructure for data management

and advanced analytics Supporting clinical

standardization through

deployment of standard IT

systems and workflow process

in inpatient and ambulatory

care settings

AIS drives value to Ascension by

Ascension Information Services

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Ascension Information Services

Overall AIS has achieved an average of $41.4m of cost reductions for each of the past

5 years. Without IT cost reduction initiatives, growth would have been 9.3% on average, compared to 4.0% average growth with these initiatives.

• Located in Indianapolis

• Serves Ascension and its subsidiaries

• Responds to an ever-changing workplace by building a community

of associates who are flexible, innovative, and outstanding

service providers

Works closely with process partners across Ascension

to provide services related to human resources, payroll,

supply chain, finance and travel

Plays a key role in Ascension’s

effort to transform healthcare.

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Ascension Ministry Service Center

$717

$496

$28

$36 $47

$307

Strategic Sourcing / Contract Compliance

SmartHealth

Non Medical Benefits

Process Improvements

IT Hardware & Software Retirements

Position Efficiencies

Symphony Savings Comparison

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FY09 through FY18

$ in Millions

Original Savings = $1.6B

$1,487 $361

$72

$86

$43

$330

Current Savings

(incl. Extension) = $2.4B

• Portfolio of services including: contracting, operations and logistics,

integrated change management, and implementation services

• Operates a group purchasing organization (GPO), which benefits

members by leveraging their contract portfolio to increase

efficiency, decrease waste and reduce costs for participants

and suppliers

A resource management organization that provides a portfolio

of solutions to Ascension and non-Ascension participants

24

Reduced Ascension’s annual supply

expense by $896 million including:

• $676 million in supplies

• $220 million in other non-payroll spend

The Resource Group

Local Health Ministry

Accretive Partner

Ascension Health

25

One Ascension Revenue Cycle

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Revenue Cycle

Collaboration with Accretive Health focused on revenue cycle management in all

hospitals:

Ascension Healthcare – Accretive Partnership

Create a structure to free-up capabilities & capacity to improve processes

Value is created by optimizing processes at the interface points

Leverage technology to deliver superior outcomes

Daily/weekly operating cadence more important than monthly/quarterly

Standardization is the best way to combat rising complexity

% Improvement expected with delivery model

Payer

Yield

2%

Patient

Yield

1%

Uninsured

Conversion

1%

Net Impact of

Revenue Cycle

Improvements =

$110 million

Goals & Accomplishment in Optimizing our Provider Platform

Improve

Financial

Performance

Quality

Development

of Regionally

Integrated

Systems of

Care

Provider

Engagement

& Alignment

Provider Engagement & Alignment

Quality

Improve Financial Performance

Development of Regionally Integrated

Systems of Care

Focused on dashboards and analytics to report and review

performance; mammography screening; readmissions reductions;

performance management to systemically drive improvement at

provider/clinic level; and clinical leader engagement

Focused on physician formation and leadership development;

implementing one leadership structure to engage physicians in

decision making; provider satisfaction improvement; and

transitioning to standard compensation template and model

Focused on practice growth and revenue cycle with attention to

patient access and engagement to grow practices, revenue cycle

metrics and patient satisfaction

Focused on contributions to help drive successful transition to

value-based care through expansion of access and practice

growth

27

Ascension Medical Group

Accomplishments

Implemented standardized

physician practice management

platform for 85% of employed

ambulatory providers

Improved mammography

screening rate for eligible

patients by over 15% to 63.4%

Achieved a 5% increase in

number of primary care lives

served (1.6 million YTD)

CURRENT VALUE-BASED HEALTHCARE

DELIVERY

3

7

3

6

Wholly/Partially Owned Health Plans

MSSP ACOs in 12 Ministry Markets

Ministry Markets Participating in CJR

Bundled Payments (16 hospitals)

Ministry Markets Participating

in CMMI Bundled Payments

PACE Programs

Covered Lives Under Value-Based

Contractual Arrangements2.6MEmployed Providers>7,000

OTHER SYSTEM MEASURES

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Map Key:

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Clinically Integrated Network Development

Clinical Management

Member Services

Administrative Capabilities

29

Ascension Care Management

Building core capabilities to launch a growing number

of services and solutions in diverse markets

Continuing the Journey

31

Succeeding in a Matrixed Model

Source: Master the Matrix: 7 Essentials for Getting Things Done in Complex

Organizations by Susan Finerty

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We are all responsible for

Ascension’s Financial Performance.

One Mission. One Integrated Ministry. One Ascension.

Running 129 Hospitals: Financial

Management Insights from the

Nation’s Largest Nonprofit Health

System

Rhonda C. Anderson

Senior Vice President and Chief Financial Officer

Ascension Healthcare

November 9, 2016