Technology Meets Medicine: Business Models and Distribution Strategies

Slide 2 Presentation Outline and Research Reference Slide 4-10: Summary of Industry and Technology Trends Slides 11-12: Business Models and Distribution Strategies Slides 13-14: Market Sizing Slides 15-16: Parks’ 2008 Research Deliverables and Contact Info Channel Research: • Private Insurance and Digital Health Solutions Industry Research: • Executive Update: Sensor Technology for Home Health Applications • Connected Medical Devices: Analysis and Forecasts • Delivering Quality Care to the Digital Home © 2008 Parks Associates www.parksassociates.com

Slide 3 Industry Trends: Supply Side • Industry consolidation initiated by large-cap companies: -Philips is aggressive in assembling an end-to-end solution for health and wellness market -Top-tier players got bought out: Bosch snatched Health Hero, Inverness bought Alere Medical, Paradigm Health and Matria Healthcare -Small players are struggling to build scale • Large tech looks at consumer market for growth -Microsoft launched HealthVault -Google is developing its own PHR solution -Intel works with Wal-Mart to create a PHR system -Qualcomm prepares to launch LifeComm service • Medical device makers strengthen connectivity solutions -Medtronic Carelink Network -Boston Scientific LATTITUDE System -St. Jude Medical HouseCall Plus -Biotronik Cardiomessenger © 2008 Parks Associates www.parksassociates.com

Slide 4 Industry Trends: Demand Side • Consumers’ influence on the rise -Health 2.0 -Alternative care model including retail clinic -Health Savings Account and Consumer-directed Health Plans—retail sales of telehealth solutions? • Self-insured employers proactive for employee health management -A booming corporate wellness market -Strong uptake on disease management programs • Medical Home model gathers strength -Primary care physicians want the role for care coordination and preventive care -Insurance industry participation added momentum -Medicare Medical Home demonstration project key to wider adoption © 2008 Parks Associates www.parksassociates.com

Slide 5 Industry Trends: Regulatory & Legislative Front • Medicare slow to adopt -Political environment and budgetary constraints tie Medicare’s hands -More interested in EHR and e-Prescribing than telehealth • Home health monitoring legislation efforts more specific -S631 (Remote Monitoring Access Act of 2007) named specific conditions for reimbursement -S.321 (Fostering Independence Through Technology Act) proposes to establish a pilot project under Medicare to incentivize home health agencies to use home monitoring and communications technologies • FCC provide crucial infrastructure funding -About $400 million for building telehealth and telemedicine infrastructure • 2008 Presidential Election: Universal Health in sight? © 2008 Parks Associates www.parksassociates.com

Slide 6 Connected Medical Technology Improves • Performance reliability and cost reduction should be R&D’s focus - Reduction in radio interference, enhancement in data calibration accuracy, and adaptive software algorithms improve medical sensor performance and user- friendliness • Body Sensor Network holds promise but remains a challenging topic - Integration of different types of sensors is challenging - No consensus on the choice of network protocols - HL7 to facilitate data interoperability, and Continua Health Alliance to standardize networking technologies © 2008 Parks Associates www.parksassociates.com

Slide 7 Medical Devices With Connectivity is the Future • Connected medical device design must balance performance, cost and power management - Intelligent sensors, feature-rich software, and support of industry standards (HL7 and Continua Interoperability standards) are key to better design and usability • Emerging distribution channels set to expand market acceptance - PERS, Security Dealers, Care Enhancement Service, Service Providers, and retail are likely to raise consumer awareness and drive adoption • Re-alignment of business interest is critical to a feasible financing model: - Consumers should be able to purchase low-cost peripheral medical devices - Insurance should pick up the tab for monitoring service fees - The Medical Home model presents an opportunity to re-align interest between consumers, providers and payers © 2008 Parks Associates www.parksassociates.com

Slide 8 Connectivity Comes in Many Flavors Standalone Health Monitoring Data Gateway Cardiocom Commander RTX Healthcare Philips TeleStation Telemonitoring System VitelCare Turtle 400 RTX3370 TeleHealth Monitor Health Monitoring Data Gateway on TV Set-top Box Card Guard & Kreatel’s BL Healthcare TVx Health Hero Philips Motiva TV IPTV Health monitoring Health Set-top Box Health Buddy TV Health Portal Set-top Box Health Monitoring Data Gateway on Mobile Device LifeWatch Research-in-Motion Ericsson Mobile Healthpia Glucophone LifeStar PDA Blackberry for Health Health © 2008 Parks Associates www.parksassociates.com

Slide 9 Private Insurers’ Interest in Telehealth: Growing but Yet to Commit • Private insurers are interested in home health monitoring technology - They want “compelling” and “independent” study results, but not necessarily “clinical trial” quality - 2:1 ROI is a minimum, but more importantly, improvement over existing treatment is key to winning their endorsement • Private insurers liken home health monitoring to disease management service - They are more comfortable if home health monitoring technology is marketed as a service versus a medical device tool kit • They see the potential of the Medical Home model as a means to distribute home health monitoring applications - They want physician input and endorsement • They care about implementation details - How does the service actually work - How to ensure patient compliance - How to avoid over-referral or over-utilization © 2008 Parks Associates www.parksassociates.com

Slide 10 Market Opportunities and Business Models Seniors with •37.8 million seniors in total, with 5.6 Vital sign monitoring devices chronic and million 85 and older Sensor-based tracking system monitoring seniors’ aging •Two-thirds of the Medicare in-house activities and health-related issues such conditions population has at least one chronic as sleep quality, emergency event detection, etc. condition Fitness activity monitoring to ensure that seniors get an adequate amount of exercise as suggested by their physicians People with •Ninety million people suffer from Vital-sign monitoring devices tracking weight, one or more chronic conditions blood pressure, blood glucose, lung function, etc. chronic -20 million for diabetes, Fitness activity monitoring to ensure that people conditions -2.2 million with arrthymias exercise enough to live a healthy lifestyle -12.2 million regularly experience one or more asthma attacks, -12 million with COPD, -One in three Americans has high blood pressure People with •43 million Americans are members Fitness activity monitoring (calorie burn, heart rate, a strong of a health or fitness club; 20% are weight watch) to ensure that people work out at 55 and older, and 34% are between the level appropriate for their health and toward the desire to 33-54 years old goal set by their personal trainer or doctor stay fit and well © 2008 Parks Associates www.parksassociates.com

Slide 11 Market Opportunities and Business Models Disease Selling hardware Vs. capability Management Selling to independent DM Vs. affiliated DM Service Selling to self-insured employer Vs. commercial payer Capitation pricing Vs. fee for service pricing Personal 1.2-1.5 million user industry with slowing growth Emergency From emergency-only to health & wellness management Response Broaden target population to younger and more mobile population Service Human interaction key to value perception Home Care From cost saving to revenue generation Agencies From homecare coverage-only population to private pay and independent aging population Build business scalability Retail Market Target more technology savvy consumers Integrate device into existing technology platforms to reduce ownership cost Service usage ideally should be rewarded with incentives © 2008 Parks Associates www.parksassociates.com

Slide 12 Connected Medical Market: User Adoption Forecast Forecasts: User base Total Number of People to Use Health/Fitness Monitoring Devices at Home in the U.S. (2007-2012) 6 5.3 5 4 3.4 in millions 3 2.2 2 1.4 0.8 1 0.3 0 2007 2008 2009 2010 2011 2012 45 and younger 0.05 0.08 0.2 0.3 0.5 0.7 Baby Boomers (45-65) 0.1 0.2 0.2 0.4 0.7 1.1 Seniors (65 & older) 0.2 0.6 1.1 1.5 2.2 3.4 Source: Connected Medical Devices: Analysis and Forecast © 2007 Parks Associates © 2008 Parks Associates www.parksassociates.com

Slide 13 Connected Medical Market: Device and Service Revenue Forecast Forecasts: Revenue Health/Fitness Monitoring Devices and Service Revenue in the U.S. (2007-2012) $3,000 $2,471 $2,000 in Million Dollars $1,603 $1,028 $1,000 $795 $508 $209 $0 2007 2008 2009 2010 2011 2012 Monitoring service revenue $45 $98 $172 $265 $407 $665 Medical device revenue $164 $410 $623 $763 $1,196 $1,806 Source: Connected Medical Devices: Analysis and Forecast © 2007 Parks Associates © 2008 Parks Associates www.parksassociates.com

Slide 14 2008 Research Deliverables • Consumer Survey: Consumer-driven e-health: Interests, Behaviors and Usage - Exploring plausible service models for telehealth applications -Understanding consumers’ health needs in the digital age • Industry Report: Taking Care of the Elderly through Digital Technologies - Technology that assists seniors to live an independent life • Industry Report: Disease Management Services Go Hi-Tech - Monitoring technology adoption by disease management firms in the U.S. • Executive Update: Update on CMS Demonstration Projects and Government Reimbursement Policies -Status and results of Medicare demonstration projects involving telehealth applications, and state Medicaid program’s policy toward home health monitoring technology • Executive Update: Enhancing Diabetic Care through Intelligent Medical Devices -Trends in diabetes prevention, treatment, and care coordination © 2008 Parks Associates www.parksassociates.com

Technology Meets Medicine: Business Models and Distribution Strategies

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