RATING AGENCY
PRESENTATION
MAY 31 - JUNE 1, 2011
 Overview of Greenville Hospital System (GHS)
 Local Economy and Competitive Environment
 Strategic Initiatives
• Total...
• Financial Sustainability
– Reimbursement and Managed Care Strategies
– Operating and Financial Overview
o Key Utilizatio...
4
Overview of Greenville Hospital System
Overview of GHS
Vision and Mission
GHS Vision
Transform health care for the benefit of the people
and communities we serve...
 Founded in 1912 as City Hospital
 Established in 1947 by Act of the South Carolina
Legislature
 Largest healthcare sys...
 Regional tertiary referral center with the following
signature services:
• Heart Institute
• Children’s Hospital
• Neuro...
Overview of GHS
Board of Trustees
8
9
Hired
Michelle
Taylor
Smith
7-25-11
Overview of GHS
President’s Council
Overview of GHS
New CFO
10
Terri T. Newsom, Vice President and Chief Financial Officer, joined Greenville Hospital
System ...
Overview of GHS
Linking Strategy, Operations, and Finance
 GHS has already made the big investments in facilities,
progra...
12
Overview of GHS
Greenville Hospital System at a Glance
Significant Investments
Baptist Easley
Hospital
• Patewood Memor...
Overview of GHS
Greenville Memorial Medical Campus
• Greenville Memorial Hospital
• Children’s Hospital
• Roger C. Peace R...
• Outpatient Centers
• Patewood Medical Offices
• Patewood Memorial Hospital
GHS / Clemson University
Translational Resear...
• Greer Memorial Hospital
• Greer Medical Office Buildings
• Cottages at Brushy Creek Skilled Nursing and Subacute
Overvie...
• Hillcrest Memorial Hospital
• Hillcrest Medical Offices
Overview of GHS
Simpsonville Medical Campus
16
• North Greenville Hospital
- Long Term Acute Care
• North Greenville Medical Offices
Overview of GHS
North Greenville Med...
50/50
Ownership
through
Greenville
Health
Corporation
Overview of GHS
Baptist Easley Hospital
18
Overview of GHS
Summary of Major Investments
System Attribute GHS Investments
Physician Alignment 544 employed physicians;...
20
Local Economy and
Competitive Environment
Local Economy and
Competitive Environment
Greenville Economy
 Hub of the Upstate, the fastest growing region in South Car...
 2010 - Relocating and existing companies created 2,083 new jobs and
new capital investment of $251.9 million (GADC)
 20...
Mission St. Joseph’s Health System
Asheville, NC
62 miles
Carolinas Medical Center
Charlotte, NC
106 miles
..GreenvillePic...
2008 2009 2010
Primary Service Area
Greenville 65.6% 65.1% 64.4%
Secondary Service Area (GHS market share of inpatient cas...
25
Strategic Initiatives
Strategic Initiatives
Multi-Year Goals Bridge
Long-term Strategy and Annual Goals
Strategy
to Annual
System
Goals
26
Strategic Initiatives
Multi-Year Goals
27
Total Health
• Right Care, Right Time, Right Place
• Clinical competencies to pe...
28
Total Health
Strategic Initiatives
Strategic Initiatives
Total Health
The GHS Total Health philosophy is central to our approach to
healthcare delivery, work...
30
 Total Health is our approach to develop clinical
competencies to accommodate health reform in the future,
which inclu...
31
Highly Integrated Delivery System
Strategic Initiatives
 Physician Network and Engagement
 Leadership Development
 Improving Operational Performance
 Growth
Strategic Initiat...
33
Physician Network and Engagement
Strategic Initiatives
Highly Integrated Delivery System
Strategic Initiatives
Highly Integrated Delivery System
Employed Physician Network
* Includes 3
Medicine/Pediatrics
Physic...
 Expansion of GHS physician network throughout primary and
secondary service areas
• New models of consumer-oriented prim...
 Board of Trustees
(Physician leaders are voting members of Board Committees)
 GHS President’s Council
(Executive Team i...
37
Leadership Development
Strategic Initiatives
Highly Integrated Delivery System
Leadership
Development
PEOPLE
• Management Orientation
• Leadership Dev. Retreats
• Emerging Leaders
• Center for Frontlin...
39
Improving Operational Performance
Strategic Initiatives
Highly Integrated Delivery System
40
Improving Operational Performance
Strategic Initiatives
Highly Integrated Delivery System
©2011 University HealthSystem Consortium
Adjusted cost/discharge (1)
• Adjusted cost/discharge declined in
all major categ...
©2011 University HealthSystem
Consortium
4242
Greenville Memorial Hospital
A Top Performer in Readmissions
30-day readmiss...
4343
Strategic Initiatives
Highly Integrated Delivery System
Improving Operational Performance
©2011 University HealthSyst...
©2011 University HealthSystem
Consortium
4444
Strategic Initiatives
Highly Integrated Delivery System
Improving Operationa...
45
Strategic Initiatives
Highly Integrated Delivery System
Improving Operational Performance
 Aggregation and analysis of...
46
Growth
Strategic Initiatives
Highly Integrated Delivery System
Volume through Transfer and Referral Center
Improving flow of targeted cases to GHS from key referral sources
0
100
200
30...
 Increase referrals to GHS specialty programs
 Develop and expand business lines
 Extend reach into new markets
 Lever...
49
Accountable Care Organization
Strategic Initiatives
Strategic Initiatives
Accountable Care Organization
 Pilot with GHS Employee Health Plan
• Pharmacy: 340(b), step therapy...
51
Academics and
School of Medicine
Strategic Initiatives
 Good for Our Patients and Families
• Enhanced quality, access to clinical innovations, etc.
• Helps address looming phys...
 Projected to cost $186 million over 10 years
 $105 million will be covered by tuition and fees
 GHS will pay remaining...
54
Financial Sustainability
Strategic Initiatives
55
Reimbursement and
Managed Care Strategies
Strategic Initiatives
Financial Sustainability
6 Months
FY2009 FY2010 FY2011
Medicare 34.7% 33.7% 35.3%
Medicaid 16.2% 15.8% 16.0%
Managed Care 30.2% 31.9% 28.6%
Commerc...
 Pay for Performance
• GHS is ready to respond to CMS quality initiatives
– Value Based Purchasing Program, Physician Qua...
58
Operating and
Financial Overview
Strategic Initiatives
Financial Sustainability
59
6 Months 6 Months
FY2008 FY2009 FY2010 FY2010 FY2011
Discharges 43,359 42,689 42,570 21,193 21,547
Acute 40,378 39,535 ...
60
2008 2009 2010 2010 2011
Gross Revenues $2,826.8 $3,137.6 $3,458.4 $1,685.0 $1,911.2
Net Revenues $ 1,111.8 $ 1,240.5 $...
61
Actual Budget Variance Budget
Gross Revenues $ 1,911.2 $ 1,887.4 $ 23.8 $ 3,743.7
Net Revenues $ 695.6 $ 691.7 $ 3.9 $ ...
(In Millions) 62
2008 2009 2010 2010 2011
Assets
Cash and Investments $ 185.3 $ 155.3 $ 154.3 $ 123.6 $ 187.5
Board Design...
63
6 Months 6 Months
FY2008 FY2009 FY2010 FY2010 FY2011
Profitability
Operating Margin % 1.9% 0.6% 2.3% 0.4% 1.7%
Excess M...
64
Capital Structure and
Investment Update
Strategic Initiatives
Financial Sustainability
 GHS recently restructured its four series of variable rate bonds (2008B-E) to
achieve the following goals:
• Reduce conc...
 The following changes were made to GHS’ variable rate debt portfolio:
 Rationale:
• US Bank LOC (replaced low rated-Sun...
Previous Underlying Debt Mix
* Overall debt mix reflects $30 million fixed rate payer swap with termination date of 5/1/15...
Outstanding debt is structured to achieve level annual debt service
Notes
1) 2008B and 2008C assume 20-year SIFMA average ...
Cash and
Equivalents
24.1%
Fixed Income
64.0%
Equity-linked
Notes *
11.9%
Total Cash and Investments: $712.3 Million
* Pri...
70
Summary/Takeaway Points
Summary/Takeaway Points
Linking Strategy, Operations, and Finance
 GHS has made the big investments in facilities, progra...
 We are integrating and optimizing prior investments to succeed under
health reform
• Focus on operating efficiencies
• E...
73
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Rating Agency for GHS - FY 2011

  1. 1. RATING AGENCY PRESENTATION MAY 31 - JUNE 1, 2011
  2. 2.  Overview of Greenville Hospital System (GHS)  Local Economy and Competitive Environment  Strategic Initiatives • Total Health • Highly Integrated Delivery System – Physician Network and Engagement – Leadership Development – Improving Operational Performance – Growth • Accountable Care Organization • Academics and School of Medicine Agenda for Discussion 2
  3. 3. • Financial Sustainability – Reimbursement and Managed Care Strategies – Operating and Financial Overview o Key Utilization Statistics o Statements of Revenues and Expenses o Balance Sheets o Cash Flow Statements o Financial Ratios – Capital Structure and Investment Update  Summary/Takeaway Points Agenda for Discussion - continued 3
  4. 4. 4 Overview of Greenville Hospital System
  5. 5. Overview of GHS Vision and Mission GHS Vision Transform health care for the benefit of the people and communities we serve GHS Mission Heal compassionately. Teach innovatively. Improve constantly. 5
  6. 6.  Founded in 1912 as City Hospital  Established in 1947 by Act of the South Carolina Legislature  Largest healthcare system in South Carolina  One of the largest multi-hospital systems in the Southeast with five medical campuses located throughout Greenville County • 4 acute care hospitals • 13 specialty healthcare facilities including long-term acute care, rehabilitation, behavioral, and skilled nursing • Physician network of 544 employed physicians Overview of GHS Greenville Hospital System 6
  7. 7.  Regional tertiary referral center with the following signature services: • Heart Institute • Children’s Hospital • Neurosciences • Musculoskeletal  A physician-led, comprehensive, integrated healthcare delivery system • Centrally managed and operated • Single governance, corporate management, medical staff, support services, and standard of care  University Medical Center that provides undergraduate and graduate medical education and medical research in support of the clinical enterprise Overview of GHS Greenville Hospital System 7
  8. 8. Overview of GHS Board of Trustees 8
  9. 9. 9 Hired Michelle Taylor Smith 7-25-11 Overview of GHS President’s Council
  10. 10. Overview of GHS New CFO 10 Terri T. Newsom, Vice President and Chief Financial Officer, joined Greenville Hospital System University Medical Center (GHS) in March 2011. Ms. Newsom is responsible for all financial functions of the hospital system and its affiliates, including accounting, treasury, financial planning and analysis, revenue cycle, corporate integrity, and supply chain. Prior to joining GHS, she was the Associate Vice President for Ambulatory Care Finance at Duke University Health System and the Divisional Chief Financial Officer of Duke Raleigh Hospital. Ms. Newsom has been involved in health care since 1991. While at Duke, she served on the boards of community and civic organizations and was also a member of the North Carolina Chapter of the Healthcare Financial Management Association. She earned a bachelor’s degree in accounting from Appalachian State University and is a certified public accountant.
  11. 11. Overview of GHS Linking Strategy, Operations, and Finance  GHS has already made the big investments in facilities, programs, and people  GHS is integrating and optimizing those investments to succeed under health reform  GHS has five multi-year goals to health reform: • Total Health • Highly Integrated Delivery System • Accountable Care Organization • Academics that support the clinical enterprise • Sustainable Financial Model 11
  12. 12. 12 Overview of GHS Greenville Hospital System at a Glance Significant Investments Baptist Easley Hospital • Patewood Memorial Hospital $65.9m • Greer Memorial Hospital $61.6m • Cottages at Brushy Creek $23.0m • Greenville Memorial Hospital (GMH) • Emergency Room $18.5m • Private Room Renovations $50.0m • Baptist Easley Hospital $42.0m
  13. 13. Overview of GHS Greenville Memorial Medical Campus • Greenville Memorial Hospital • Children’s Hospital • Roger C. Peace Rehabilitation Hospital • Marshall I. Pickens Hospital • Cancer Center • Memorial Medical Offices • Health Sciences Education Building 13
  14. 14. • Outpatient Centers • Patewood Medical Offices • Patewood Memorial Hospital GHS / Clemson University Translational Research Hub Overview of GHS Patewood Medical Campus 14
  15. 15. • Greer Memorial Hospital • Greer Medical Office Buildings • Cottages at Brushy Creek Skilled Nursing and Subacute Overview of GHS Greer Medical Campus 15
  16. 16. • Hillcrest Memorial Hospital • Hillcrest Medical Offices Overview of GHS Simpsonville Medical Campus 16
  17. 17. • North Greenville Hospital - Long Term Acute Care • North Greenville Medical Offices Overview of GHS North Greenville Medical Campus 17
  18. 18. 50/50 Ownership through Greenville Health Corporation Overview of GHS Baptist Easley Hospital 18
  19. 19. Overview of GHS Summary of Major Investments System Attribute GHS Investments Physician Alignment 544 employed physicians; growing to 600 in the next 12 months Sites of Care Greenville County Information Technology 3rd year of a 5-year, $65 million spending plan Market Focus Dominant presence in SC’s most attractive healthcare market Resource Management Operating performance allows us to invest in physician strategy Quality A top performer in quality (UHC report, 2011) Revenue Focus A top performer in managed care contracting (UHC report, 2011) Management Orientation Successful management team with extensive, varied background Clinical Focus Primary care through quaternary care 19
  20. 20. 20 Local Economy and Competitive Environment
  21. 21. Local Economy and Competitive Environment Greenville Economy  Hub of the Upstate, the fastest growing region in South Carolina  Population growth of 1.6% per year  Unemployment rate of 7.8% as compared to 9.8% for the State of South Carolina  Greenville County has announced over $1.1 billion in new capital investment and 6,195 new jobs in the last five years  The SC Department of Commerce indicates that Greenville is home to more corporate headquarters than any other region in South Carolina  As of 2010, more than 50 Fortune 500 companies maintained offices in Greenville County Source: SC Employment Security Commission, April 2011 / Greenville Area Development Corporation (GADC) 21
  22. 22.  2010 - Relocating and existing companies created 2,083 new jobs and new capital investment of $251.9 million (GADC)  2011 - Anticipating investment of over $950 million • Michelin North America – Michelin expanding every major facility in South Carolina; investing $350 million, adding 100 jobs • BMW of North America – New $750 million assembly line and paint shop alongside the original plant – 1,600 new jobs are being created as a result of a 50% increase in production capacity set for 2011 • General Electric - Aviation – Multi-million dollar investment and 100 additional jobs by 2013 • Kemet Corporation – $34.1 million expansion, 110-120 new positions • Amy’s Kitchen – The $63 million investment is expected to create 700 jobs over the next five years Source: SC Employment Security Commission, April 2011 / Greenville Area Development Corporation (GADC) 22 Local Economy and Competitive Environment Major Employer Investment
  23. 23. Mission St. Joseph’s Health System Asheville, NC 62 miles Carolinas Medical Center Charlotte, NC 106 miles ..GreenvillePickens Spartanburg Cherokee Union Laurens Greenwood Anderson Oconee Abbeville . Primary Market Secondary Market . .. . .. . .. . . . AnMed Health Medical Center Oconee Memorial Hospital Cannon Memorial Hospital Baptist Easley Hospital Abbeville Area Medical Center Self Regional Healthcare Laurens County Hospital Wallace Thomson Hospital Upstate Carolina Medical Center Mary Black Health System Spartanburg Reg. Healthcare Center North Greenville Medical Campus Simpsonville Medical Campus Greer Medical Campus Bon Secours St. Francis Eastside Bon Secours St. Francis Health System Memorial Medical Campus Larger Medical Facility Smaller Medical Facility Palmetto Health Alliance Columbia, SC 104 miles Emory Atlanta, GA 181 miles . Patewood Medical Campus .AnMed Health Women’s & Children’s Hospital Village at Pelham ... 23 1.4 million people in the Upstate Local Economy and Competitive Environment Primary Market and Five-county Secondary Market
  24. 24. 2008 2009 2010 Primary Service Area Greenville 65.6% 65.1% 64.4% Secondary Service Area (GHS market share of inpatient cases that leave home county) Pickens 54.5% 52.1% 51.5% Laurens 31.4% 28.8% 29.9% Oconee 42.0% 42.6% 44.7% Anderson 61.3% 63.1% 60.1% Spartanburg 64.5% 67.3% 67.6% 24 Local Economy and Competitive Environment Inpatient Market Share by County
  25. 25. 25 Strategic Initiatives
  26. 26. Strategic Initiatives Multi-Year Goals Bridge Long-term Strategy and Annual Goals Strategy to Annual System Goals 26
  27. 27. Strategic Initiatives Multi-Year Goals 27 Total Health • Right Care, Right Time, Right Place • Clinical competencies to perform under Health Reform Highly Integrated Delivery System • Systems, structures, and processes to improve operating performance • Network development for FFS business and for population coverage Accountable Care Organization • Business systems and structures to perform under Health Reform • Partnerships with payors Academics that Support the Clinical Enterprise • Leverage academics to improve clinical and financial performance • Create a clinical workforce to lead in a reformed healthcare environment Sustainable Financial Model • Efficiently create and allocate resources to achieve mission • Strong performance in today’s environment while positioning for Health Reform
  28. 28. 28 Total Health Strategic Initiatives
  29. 29. Strategic Initiatives Total Health The GHS Total Health philosophy is central to our approach to healthcare delivery, work force development, and medical education. We value interdisciplinary collaboration throughout a highly integrated delivery structure using patient-centered, standardized, and evidence- based practices with reportable quality and financial outcomes. GHS Pillars of Excellence People We work to transform health care Service Patients and families are the focus of everything we do Quality We provide right care at the right time and in the right place Growth We develop our System to meet the needs of our communities Finance We responsibly direct our resources to support our mission Academics We educate to transform health care 29
  30. 30. 30  Total Health is our approach to develop clinical competencies to accommodate health reform in the future, which includes the following: • Care coordination • Evidence-based practices • Clinical decision support system  Chief Medical Officer leading the effort  Characteristics • Cost effective and efficient • Patient centered • Coordinated team based care • Personalized medicine with focus on prevention • More spent on pre- and post-acute care settings Strategic Initiatives Total Health
  31. 31. 31 Highly Integrated Delivery System Strategic Initiatives
  32. 32.  Physician Network and Engagement  Leadership Development  Improving Operational Performance  Growth Strategic Initiatives Highly Integrated Delivery System 32
  33. 33. 33 Physician Network and Engagement Strategic Initiatives Highly Integrated Delivery System
  34. 34. Strategic Initiatives Highly Integrated Delivery System Employed Physician Network * Includes 3 Medicine/Pediatrics Physicians Source: UMG Master Physician File, dated 3.1.11 NOTE: These numbers do not include 111 non-MD providers 34 544 Total MDs Primary Care Physicians Specialty #MDs Family Practice 45 General Internal Medicine* 40 MD360 6 OB/GYN 25 Pediatrics 43 Total 159 Specialty Physicians Specialty #MDs Behavioral Medicine 13 Cardiology 30 Hospitalists 37 Neurology 5 Neurosurgery 6 OB/GYN 26 Ophthalmology 1 Ortho/Sports Medicine 28 Other Medicine Specialties 37 Otolaryngology 6 Pediatrics 78 Physiatry 8 Pulmonary 16 Radiology 39 Surgery 54 Urology 1 Total 385
  35. 35.  Expansion of GHS physician network throughout primary and secondary service areas • New models of consumer-oriented primary care – Creating new models for a new market: MD360 Convenient Care on Demand o 19,570 visits; 47% did not have a PCP; 86% of all MD referrals to GHS • Leveraging GHS specialty services capabilities – Managing mix and referrals: GHS surgeons covering ED call in regional community hospitals • Extending GHS physicians in new markets – Extending GHS MD network: Laurens County Healthcare System contracting with GHS to provide employed physicians to their medical community 35 Strategic Initiatives Highly Integrated Delivery System Physician Network
  36. 36.  Board of Trustees (Physician leaders are voting members of Board Committees)  GHS President’s Council (Executive Team includes key physician leaders)  Operations Council (COO, VP Medical Services, CFO, Clinical Chairs, Campus Presidents)  Physician Operations Council (Physician Executives, Clinical Chairs)  Unit Leaders (Physician/Nurse Leader Partnership) 36 Strategic Initiatives Highly Integrated Delivery System Physician Engagement Partnership/collaboration at all levels directed toward clinical and operational improvements
  37. 37. 37 Leadership Development Strategic Initiatives Highly Integrated Delivery System
  38. 38. Leadership Development PEOPLE • Management Orientation • Leadership Dev. Retreats • Emerging Leaders • Center for Frontline Leadership • Coaching Partnerships • Charge Nurse Development • Faculty Development • Leader Grand Rounds • Conscious Leadership • Authentic Community • 4 Ways of Being • Decision Rights • Clearing Model • Drama Triangle Partners: SC Hospital Association Jim Dethmer Executive Consultant Studer Group GE Healthcare Clemson University Evidence Based Leadership PEOPLE • Monthly Meeting Model • Thank-you Notes • Staff Rounding • HML • Selection/Retaining Talent SERVICE/QUALITY • Patient Rounding • AIDET • Owner vs. Renter • 10/5 Rule • Walking to destination • DC Phone calls • Hourly Rounding • Bedside Shift Report FINANCE • LEM Performance Improvement PEOPLE/SERVICE/ QUALITY/GROWTH/ FINANCE/ACADEMICS • Change Acceleration Process (CAP) • Work-Out • Lean Methodology • Six Sigma DMAIC Methodology Safety Culture PEOPLE/QUALITY • Just Culture • Teamwork Training • Communication Facilitation Training • Hand Hygiene • Surgical Safety Checklist • PSN (Event Reporting) 38 Strategic Initiatives Highly Integrated Delivery System Leadership Development
  39. 39. 39 Improving Operational Performance Strategic Initiatives Highly Integrated Delivery System
  40. 40. 40 Improving Operational Performance Strategic Initiatives Highly Integrated Delivery System
  41. 41. ©2011 University HealthSystem Consortium Adjusted cost/discharge (1) • Adjusted cost/discharge declined in all major categories, 2009 to 2010 • Clinical portfolio intensification a significant contributor • Total cost/discharge now 21% below UHC 25th percentile • Supply cost/discharge now 17% below UHC 25th percentile • Labor cost/discharge now 12% below UHC 25th percentile Total Expense Labor Expense Supply Expense $7,851 $4,185 $530 $6,648 $3,439 $481 2009 2010 UHC rank in 2010 5/70 8/69 7/69 (1) Total expense/discharge adjusted by CMI and wage index. Supply expense/discharge adjusted by UHC supply intensity score. Labor expense/discharge adjusted by CMI and wage index. Strategic Initiatives Highly Integrated Delivery System Improving Operational Performance Greenville Memorial Hospital Now Top 10 in Efficiency 41
  42. 42. ©2011 University HealthSystem Consortium 4242 Greenville Memorial Hospital A Top Performer in Readmissions 30-day readmission rates, all causes Rank among UHC members 8/112 9/114 28% lower Strategic Initiatives Highly Integrated Delivery System Improving Operational Performance 2009 2010 9.0% 8.7% 11.9% 12.1% Greenville UHC Median
  43. 43. 4343 Strategic Initiatives Highly Integrated Delivery System Improving Operational Performance ©2011 University HealthSystem Consortium UHC Members National Hospital Compare Highest observed 75th percentile Greenville Median 25th percentile Lowest observed Greenville Memorial Hospital A Top Quartile AMC in Value Based Purchasing
  44. 44. ©2011 University HealthSystem Consortium 4444 Strategic Initiatives Highly Integrated Delivery System Improving Operational Performance  GE Centricity - Global registration, scheduling, patient portal  eClinical Works - Electronic Medical Record for physician practices  Siemens Soarian - Hospital Electronic Medical Record/CPOE  Telus - Enterprise-wide Data Warehouse Enterprise-wide IT Platform
  45. 45. 45 Strategic Initiatives Highly Integrated Delivery System Improving Operational Performance  Aggregation and analysis of data from various internal and external systems • Includes clinical, financial, demographic, quality, and market data  How it has helped us • Optimal location for primary care practice placement • Value of Marshall I. Pickens behavioral health hospital to the System • Identifying high-value DRG cost-reduction targets and facilitating data analysis and performance improvement process Business Intelligence: Making Better Decisions by Knowing Our Business Better
  46. 46. 46 Growth Strategic Initiatives Highly Integrated Delivery System
  47. 47. Volume through Transfer and Referral Center Improving flow of targeted cases to GHS from key referral sources 0 100 200 300 400 500 600 700 800 900 Referral Center Totals By Month - March '11 47 Strategic Initiatives Highly Integrated Delivery System Growth - Access
  48. 48.  Increase referrals to GHS specialty programs  Develop and expand business lines  Extend reach into new markets  Leverage our scale by providing corporate services • Supply Chain • Information Technology • Revenue Cycle  Support academic enterprise • Patient volume • Diversity of patient base • Diversified economics  Position for health reform  The local choice for those seeking partnerships and affiliations 48 Strategic Initiatives Highly Integrated Delivery System Growth - Affiliations
  49. 49. 49 Accountable Care Organization Strategic Initiatives
  50. 50. Strategic Initiatives Accountable Care Organization  Pilot with GHS Employee Health Plan • Pharmacy: 340(b), step therapy, and generics • Benefit plan design: increasing patient responsibility for out-of-network services • Network design: concentration on GHS provider platforms • Results: 0% change in per capita spend CY10 compared to CY09  Planning for ACO • Preparing for new forms of risk-based payment • Population management capabilities with Palmetto Health 50
  51. 51. 51 Academics and School of Medicine Strategic Initiatives
  52. 52.  Good for Our Patients and Families • Enhanced quality, access to clinical innovations, etc. • Helps address looming physician shortage  Good for Community • Supports knowledge-based economy; job creation  Good for GHS • Consistent with vision and mission • Research focus: comparative effectiveness research and implementation science • Enhances GHS’ position as a destination specialty referral center - Academic Medical Center brand 52 Strategic Initiatives Academics and School of Medicine Why a Medical School?
  53. 53.  Projected to cost $186 million over 10 years  $105 million will be covered by tuition and fees  GHS will pay remaining $81 million over 10 years • $45 million from existing medical education spending • $35 - $45 million from new incremental support – Affordable and sustainable  New model for medical education embedded in a delivery system • Leverage existing GHS infrastructure • Control over funding through budget approval process 53 Strategic Initiatives Academics and School of Medicine Medical School Cost and Organization
  54. 54. 54 Financial Sustainability Strategic Initiatives
  55. 55. 55 Reimbursement and Managed Care Strategies Strategic Initiatives Financial Sustainability
  56. 56. 6 Months FY2009 FY2010 FY2011 Medicare 34.7% 33.7% 35.3% Medicaid 16.2% 15.8% 16.0% Managed Care 30.2% 31.9% 28.6% Commercial 1.1% 0.9% 0.7% Self-Pay 6.6% 7.3% 7.3% Charity 6.4% 5.4% 5.5% Other 4.8% 5.0% 6.6% Total 100.0% 100.0% 100.0% Strategic Initiatives Financial Sustainability Stable/Attractive Payor Mix 56
  57. 57.  Pay for Performance • GHS is ready to respond to CMS quality initiatives – Value Based Purchasing Program, Physician Quality Reporting Initiative, HCAHPS, and All Care Measures  Meaningful Use • Following significant investments in IT, GHS will qualify for Meaningful Use beginning in FY2011  Risked-based ACO Reimbursement • GHS is organizationally well positioned to respond to risk-based or global/bundled payment reimbursement; additional investment in operational infrastructure is still required • Exploring partnership opportunities with BCBS for innovative provider/payor arrangements Strategic Initiatives Financial Sustainability Medicare Reimbursement 57
  58. 58. 58 Operating and Financial Overview Strategic Initiatives Financial Sustainability
  59. 59. 59 6 Months 6 Months FY2008 FY2009 FY2010 FY2010 FY2011 Discharges 43,359 42,689 42,570 21,193 21,547 Acute 40,378 39,535 39,443 19,573 19,956 Specialty/Post-acute 2,981 3,154 3,127 1,620 1,591 Average Length of Stay 6.63 6.67 6.72 6.76 6.78 Acute 5.08 4.90 4.79 4.85 4.91 Specialty/Post-acute 26.24 28.82 31.03 29.86 28.86 Average Daily Census 785 780 783 787 803 Medicare Case Mix Index 1.77 1.87 1.89 1.93 1.84 Inpatient Surgeries* 15,630 15,634 15,506 7,552 7,737 Outpatient Surgeries 19,888 21,328 23,306 11,771 11,680 Outpatient Visits 1,596,016 1,715,435 2,235,528 1,073,827 1,175,949 Facility 747,104 739,718 786,518 381,331 391,366 Physician Practice* 848,912 975,717 1,449,010 692,496 784,583 *Prior year amounts restated due to change in methodology Financial Sustainability Operating and Financial Overview Key Utilization Statistics
  60. 60. 60 2008 2009 2010 2010 2011 Gross Revenues $2,826.8 $3,137.6 $3,458.4 $1,685.0 $1,911.2 Net Revenues $ 1,111.8 $ 1,240.5 $ 1,346.1 $ 658.2 $ 695.6 Total Expenses 1,091.1 1,232.9 1,314.6 655.4 683.5 Operating Margin 20.7 7.6 31.5 2.8 12.1 Non-operating Gains/ (Losses) (0.3) 26.1 31.4 7.7 3.6 Revenue and Gains Over Expenses $ 20.4 $ 33.7 $ 62.9 $ 10.5 $ 15.7 (In Millions) For the Six Months Ended March 31 For the Fiscal Years Ended September 30 Financial Sustainability Operating and Financial Overview Statements of Revenues and Expenses
  61. 61. 61 Actual Budget Variance Budget Gross Revenues $ 1,911.2 $ 1,887.4 $ 23.8 $ 3,743.7 Net Revenues $ 695.6 $ 691.7 $ 3.9 $ 1,397.0 Total Expenses 683.5 685.4 1.9 1,376.0 Operating Margin 12.1 6.3 5.8 21.0 Non-operating Gains 3.6 5.8 (2.2) 11.7 Revenue and Gains Over Expenses $ 15.7 $ 12.1 $ 3.6 $ 32.7 (In Millions) FY2011 Annual For the Six Months Ended March 31, 2011 Financial Sustainability Operating and Financial Overview Budget Comparison
  62. 62. (In Millions) 62 2008 2009 2010 2010 2011 Assets Cash and Investments $ 185.3 $ 155.3 $ 154.3 $ 123.6 $ 187.5 Board Designated 296.3 490.8 513.9 492.8 524.8 Other Current Assets 188.2 230.7 237.9 224.7 245.0 Other Assets 11.7 9.6 9.7 9.2 10.1 Property, Plant and Equipment, Net 813.6 704.5 705.0 693.7 676.2 Total Assets $ 1,495.1 $ 1,584.0 $ 1,620.8 $ 1,544.0 $ 1,643.6 Liabilities and Fund Balance Current Liabilities $ 169.8 $ 164.8 $ 192.0 $ 154.6 $ 210.1 Long-term Debt 534.5 525.8 514.6 526.6 515.3 Capital Lease - - 3.7 - 4.5 Other 25.4 91.9 93.6 94.7 83.4 Fund Balance 765.4 801.5 816.9 768.1 830.3 Total Liabilities and Fund Balance $ 1,495.1 $ 1,584.0 $ 1,620.8 $ 1,544.0 $ 1,643.6 At Fiscal Years Ended September 30 At Interim Periods Ended March 31 Financial Sustainability Operating and Financial Overview Balance Sheets
  63. 63. 63 6 Months 6 Months FY2008 FY2009 FY2010 FY2010 FY2011 Profitability Operating Margin % 1.9% 0.6% 2.3% 0.4% 1.7% Excess Margin % 1.8% 2.7% 4.6% 1.6% 2.2% Operating EBIDA Margin % 10.1% 8.9% 9.4% 7.7% 8.8% Liquidity Days Cash on Hand 172.3 203.0 197.3 182.0 201.6 Days in Accounts Receivable 54.5 53.4 50.3 52.2 52.8 Leverage Debt Service Coverage Ratio 3.9 3.7 4.4 3.3 3.9 Long-term Debt/Total Capital 41.5% 40.1% 39.9% 41.8% 39.6% Financial Sustainability Operating and Financial Overview Financial Ratios
  64. 64. 64 Capital Structure and Investment Update Strategic Initiatives Financial Sustainability
  65. 65.  GHS recently restructured its four series of variable rate bonds (2008B-E) to achieve the following goals: • Reduce concentration of letter of credit (LOC) backed debt − Replaced majority of bank LOC-backed debt with bank direct placements. Prior to restructuring, entire variable rate debt portfolio was backed by bank LOCs subject to key risks: bank downgrade, bank renewal, market put, SIFMA dislocation, etc. • Improve bank credit quality within the variable rate portfolio − Replaced SunTrust as LOC provider, given its low credit ratings and associated rate volatility and put risk • Reduce renewal risk through staggered term expirations − Extended facilities out 3 to 5 years, with flexibility in negotiating rolling extensions • Create a more diversified portfolio that will reduce funding risk − Tied portion of variable debt to LIBOR as opposed to SIFMA via bank direct placements • Restructure debt in a cost-effective manner − Maintained current and historical advantages of variable rate debt with minimal expected incremental cost 65 Strategic Initiatives Financial Sustainability Variable Rate Bonds
  66. 66.  The following changes were made to GHS’ variable rate debt portfolio:  Rationale: • US Bank LOC (replaced low rated-SunTrust) − Low-cost facility at extended term (0.50% for 5 years); no material additional covenants; solid bank credit (Aa2/AA-/AA); favorable renewal provisions • Bank of America LOC (renewed existing facility) − Lowest cost facility (0.32% for 3 years); existing relationship allowed for efficient LOC extension; favorable renewal provisions • Wells Fargo / Wachovia Direct Placement (mode change away from LOC) − Eliminated bank credit risk and put risk associated with LOC-backed VRDBs; attractive pricing and term (current all-in rate of 1.01% with 5-year term); created more diversified overall capital structure GHS Variable Rate Debt Profile - Previous GHS Variable Rate Debt Profile - Current Bond Series Par Amount Structure Enhancement Bond Series Par Amount Structure Enhancement / Provider 2008B $60,595,000 Weekly VRDB-SIFMA SunTrust LOC 2008B $60,595,000 Weekly VRDB-SIFMA U.S. Bank LOC 2008C $61,195,000 Weekly VRDB-SIFMA Bank of America LOC 2008C $61,195,000 Weekly VRDB-SIFMA Bank of America LOC 2008D $56,395,000 Weekly VRDB-SIFMA Wells Fargo LOC 2008D $56,395,000 Direct Placement-LIBOR Wells Fargo 2008E $86,620,000 Weekly VRDB-SIFMA Wells Fargo LOC 2008E $86,620,000 Direct Placement-LIBOR Wells Fargo $264,805,000 $264,805,000 66 Strategic Initiatives Financial Sustainability Restructuring Specifics
  67. 67. Previous Underlying Debt Mix * Overall debt mix reflects $30 million fixed rate payer swap with termination date of 5/1/15 (MTM of -$2.1 million at 4/30/11). GHS Debt Profile – Previous Bond Series Par Amount Structure Enhancement Facility Fee Current Trade over SIFMA (%) Rate Term 1990 15,675,000 Fixed None - - 6.000% 10 yrs 2001 101,075,000 Fixed Ambac - - 5.192% 21 yrs 2003A 54,095,000 Fixed Ambac - - 4.645% 15 yrs 2008A 86,495,000 Fixed None - - 4.965% 13 yrs 2008B 60,595,000 Weekly VRDB-SIFMA SunTrust LOC 0.375% 0.170% 0.875% < 1 yr 2008C 61,195,000 Weekly VRDB-SIFMA Bank of America LOC 0.350% -0.010% 0.640% < 1 yr 2008D 56,395,000 Weekly VRDB-SIFMA Wells Fargo LOC 0.430% -0.010% 0.730% < 1 yr 2008E 86,620,000 Weekly VRDB-SIFMA Wells Fargo LOC 0.430% -0.010% 0.730% < 1 yr $522,145,000 2.865% Note: Assumed rate on VRDBs is 4/6/11 SIFMA (0.23%) + LOC fees + bank trading spread + remarketing fees GHS Debt Profile – Current Bond Series Par Amount Structure Enhancement / Provider Facility Fee / Spread Current Trade over SIFMA (%) Rate Term 1990 15,675,000 Fixed None - - 6.000% 10 yrs 2001 101,075,000 Fixed Ambac - - 5.192% 21 yrs 2003A 54,095,000 Fixed Ambac - - 4.645% 15 yrs 2008A 86,495,000 Fixed None - - 4.965% 13 yrs 2008B 60,595,000 Weekly VRDB-SIFMA US Bank LOC 0.500% -0.040% 0.770% 5 yrs 2008C 61,195,000 Weekly VRDB-SIFMA Bank of America LOC 0.320% -0.010% 0.610% 3 yrs 2008D 56,395,000 Direct Placement Wells Fargo 0.850% - 1.008% 5 yrs 2008E 86,620,000 Direct Placement Wells Fargo 0.850% - 1.008% 5 yrs $522,145,000 2.926% Note: Assumed rate on VRDBs is 5/4/11 SIFMA (0.23%) + LOC fees + bank trading spread + remarketing fees Note: Assumed rate on Wells Fargo Direct Placement is 75% of current LIBOR (0.21%) + GHS credit spread (0.85%) 67 Fixed Rate 49% Variable LOC 23% Variable Direct Placement 28% Fixed Rate 49% Variable LOC 51% Fixed Rate 49% Variable 45% Synthetic Fixed Rate 6% Strategic Initiatives Financial Sustainability Capital Structure
  68. 68. Outstanding debt is structured to achieve level annual debt service Notes 1) 2008B and 2008C assume 20-year SIFMA average of 2.770% + LOC fees + remarketing fees. 2) 2008D and 2008E assume 20-year LIBOR average of 3.841% with direct placement priced at LIBOR x 75% + 0.85% credit spread. 68 Strategic Initiatives Financial Sustainability Annual Debt Service Requirements
  69. 69. Cash and Equivalents 24.1% Fixed Income 64.0% Equity-linked Notes * 11.9% Total Cash and Investments: $712.3 Million * Principal Guaranteed 69 In addition to the risk-reduction benefits of the recent variable rate debt restructuring, interest rate risk and event risk are further mitigated by $171 million of conservatively invested cash and equivalents coming due in less than one year and $455 million of conservatively invested fixed income investments with an average duration of approximately 4 years. Strategic Initiatives Financial Sustainability Investment Allocation is Conservative
  70. 70. 70 Summary/Takeaway Points
  71. 71. Summary/Takeaway Points Linking Strategy, Operations, and Finance  GHS has made the big investments in facilities, programs, and people • Dominant market position • Modern facilities across-the-care continuum • Large employed physician network • Sophisticated IT system  GHS has five multi-year goals • Total Health • Highly Integrated Delivery System • Accountable Care Organization • Academics that support the clinical enterprise • Sustainable Financial Model 71
  72. 72.  We are integrating and optimizing prior investments to succeed under health reform • Focus on operating efficiencies • Extending network in key secondary service areas • Evidence-based medicine • Partnerships with payors • Building and leveraging academic medical center brand 72 Summary/Takeaway Points Linking Strategy, Operations, and Finance
  73. 73. 73

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