Navigating the Uncertainties of Acquisitions, Governance and Strategic Planning July 2013 Robert J. Di Vito, JD, CHRC Chief Operating.

Navigating the Uncertainties of Acquisitions, Governance and Strategic Planning July Robert J. Di Vito, JD, CHRC Chief Operating Officer

Agenda Overview of Piedmont Healthcare
Strategically aligning the Piedmont Healthcare Foundation Measuring Success: Team & Individual Engaging the Foundation Board; Restructuring the Board Committees Acquiring & Dissolving the Henry Medical Center Foundation

History of Piedmont Healthcare
1905: Piedmont Sanatorium founded by Drs. Ludwig Amster and Floyd Wilcox McRae 2004: Name changed to Piedmont Healthcare; Piedmont Mountainside acquired 2007: Piedmont Newnan acquired; Piedmont Heart Institute formed 2012: Piedmont Henry joins PHC 1925: name changed to Piedmont Hospital 1976: Piedmont Hospital Foundation incorporated, 501(c)(3) tax exempt status obtained 1983: Piedmont Healthcare, a not-for-profit organization, as Piedmont Medical Center 1957: moved to its present address on Peachtree Road 1997: Piedmont Fayette opens 1994: Piedmont Medical Care Corporation and Piedmont Physician Group formed 2011: Foundation name changed to Piedmont Healthcare Foundation 2013: Henry Medical Center Foundation dissolved; all assets moved to Piedmont

PHC in 2013 VISION 2020 By 2020, Piedmont Healthcare will be nationally recognized as a Top 10 community healthcare system where patients want to go for a superior healthcare experience, dedicated professionals want to work, and the best physicians want to practice. PHC Piedmont Atlanta 529 beds Piedmont Fayette 157 beds Piedmont Mountain-side 42 beds Piedmont Medical Care Corporation 245 MDs Piedmont Heart Institute 85 MDs Piedmont Newnan 143 beds Piedmont Henry 215 beds Piedmont Clinic 851 MDs Piedmont Foundation 3100 Donors

Piedmont Healthcare: On the Map

Foundation’s Mission Provide sustainable resources of private support for Piedmont priorities.

Piedmont Healthcare Foundation Org Structure (February 2013)
PHCF Board of Directors PHC EVP & CAO Ed Lovern President, Piedmont Healthcare Foundation Mendal Bouknight Chief Operating Officer Robert Di Vito Director, Major Gifts Kelly Loftin Donor Relations Officer Erica Nelson Director Annual Giving & E-Philanthropy James Tobias Director, Principal Major Sarah Batts Outreach Specialist Felicia Brown Gift Processing David Tatum Director, Major Gifts James Gates Waters Pavilion Liaison Lillian Thornton Office Coordinator Omega Burnett PHC Finance PHC-Wide Fund & Grant Managers Decision Support Grants & Finance Officer Anna Johanson Sixty Plus Program 5 FTEs Project Coordinator Carmen Smith

Where Will Piedmont Healthcare Be In 2016?
Optimization & Preparation Strategies Breakeven on Medicare Enhance Revenue Cycle Improve Quality Outcomes Establish Culture of Safety & Reliability Improve Satisfaction – Patient, Physician, & Employee Explore Opportunities to Acquire / Partner with Other Providers Expand Ambulatory “Footprint” Differentiate & Grow Srv / Srv Lines Secure & Grow Physician Base 2016 Better Transformed & Repositioned Transformational Strategies Focused on Cost Management Show a Margin on Medicare Horizontal Integration as Appropriate Built Infrastructure for Community Health Built Infrastructure to Reduce Variability Prepared for Value & Mgt of Payment Risk Increased Alignment, Engagement, and Strategic Involvement of Physicians Increased Patient Engagement Recognized by the Community as the Leading “Value” Provider THE GAP 2014 Optimize & Prepare

Where Piedmont Must Evolve Its View of Philanthropy by 2016
From Traditional Tool for raising money Logo, Look, Language Needs Organization Deliver Programs Market At . . . Send Money Donors Emotional Reaction Power of a Few 2016 Better Transformed & Repositioned To Breakthrough What Piedmont stands for A compelling mission, vision, values in action Strategic Priorities Cause Deliver Outcomes (Value) Community of Believers Shared Values Voice of Many THE GAP 2013 Optimize & Prepare

Where Will The Piedmont Foundation Be In 2016?
Nice to Have/Appreciated Passive Board – No Governance An Afterthought for Projects or “Needs” Vaguely Reported Respectable ROI Set annual targets based on three-year rolling average. 2016 Better Transformed & Repositioned Essential/Strategically Engaged Empowered Foundation Board – Strong Governance Aligned and at the table with the Strategic Plan, Senior Leadership and Capital Planning Fully Transparent Strategic ROI/Production Dollars/Net Raised per FTE Set fund raising goals/campaigns based on donor-fundable priorities across the system. THE GAP 2012 Optimize & Prepare

Current State: Nice to Have Future State: Essential
Defining Essential Activity Current State: Nice to Have Future State: Essential Fundraising Goal Internal to department; Finance doesn’t report to leadership or Boards External fundraising goal; Finance reports to leadership and Boards; relied on by the System Return on Investment Target set internal to department Target set by Foundation & System Leadership; Priority Setting Foundation & each entity determines strategic priorities for fundraising During each budget cycle, Foundation & System determine fundable projects & reach agreement on financial goal Spending Funds either not used or used when remembered Spending part of culture; budgets established and funds utilized Staff Deployment Centralized, with some alignment to individual entities Centralized, all aligned to system priorities Board Engagement Knowledge of fundraising goals Ownership of fundraising goals External Contribution Reporting Contributions not consolidated on any one entity IRS 990 Consolidate on to PHCF IRS 990 13

Current Piedmont Healthcare Foundation Structure
PHCF Board reorganized in Feb 2011 Assures Piedmont’s philanthropic support is generated and stewarded into valuable gifts meeting the immediate and future healthcare needs of the region. PHCF Operates as Type III Supporting Organization Foundation under PHC Contributions and grants are received by Foundation Contributions and grants recorded on individual entity’s financial statement and 990’s; beginning FY2012, summarized on Foundation’s 990, Schedule A & O Foundation Responsible for Solicitation; Donor Stewardship/Relations Entity Finance Departments Responsible for Fund Accounting and Budgeting

Recommended Piedmont Healthcare Foundation (PHFC) Structure
Operate as a Type 1, 501(c)(3) supporting foundation Contributions and grants received, recorded and maintained on PHCF’s financial statement and 990 Transfer funds to entity when costs are incurred Establish single PHCF Finance Person; reporting to PHC CFO or Controller with dotted line to PHCF Governance, PHCF accountable to PHC Board and CEO of PHC Operationally, PHCF staff report to the CAO Rationale Models the benchmarked organizations nationally and in Metro Atlanta Allows for full PHCF Board oversight Consolidates Solicitation, Donor Stewardship/Relations and Fund Accounting under one entity All gifts can be made payable to PHCF Next Steps Determine oversight role of PHCF and PHC Boards Determine Board committees and reporting Align Foundation with Piedmont system priorities

Gwinnett Medical Center
Summary of Financial Operating Models Comparable Healthcare Foundations Issue Piedmont Wellstar Banner Sharp Inter-mountain Shepherd Center Grady Gwinnett Medical Center Tanner Medical Revenue reported on Foundation 990? No Yes Where do funds reside? Entities Foundation Foundation; swept to entity at end of year Who can “spend” restricted funds? Department /Service Line Manager Foundation Board CEO/CFO Approval; Foundation board for larger expenses <$25,000: Managers $25,000 Administrators CFO & Foundation Executive Director Foundation President Department/Service Line Manager Hospital President & Foundation President Timing for spending restricted funds Budget cycle Anytime Budget Cycle Agreements in place between Foundation and Finance No formal agreements Draft policy Unknown Foundation Role/Responsibility Foundation deposits funds directly with entity; tracks inflows Operations director tracks inflows/outflows; liaises with Accounting Operations director liaises with Accounting Foundation liaises with dedicated FTE in hospital’s finance department every night. Accountant and Director of Finance with Foundation liaise with hospital as needed. Foundation staff member liaises with finance as needed. Finance Role/Responsibility All Reconciliation and reporting of restricted funds. Enters adjustments in General Ledger Enters adjustments to funds in General Ledger Enters adjustments to funds in General Ledger; prepares form 990. Dedicated FTE within hospital’s finance department to enter adjustments to funds in General Ledger daily. Enters adjustments to funds in General Ledger as needed.

PHCF – Return on Investment; FY2014 Goal
Fiscal Year Total Budget Total Raised ROI Net Raised FY 2004 $725,090 $3,067,132 $4.23 $2,342,042 FY 2005 $1,166,950 $6,021,463 $5.16 $4,854,513 FY 2006 $1,153,815 $4,996,021 $4.33 $3,842,206 FY12 Marcus Gift Years of Pledge Amt Considered in each year FY 2007 $1,426,991 $16,553,098 $11.60 $15,126,107 $13,270,000 5 $2,654,000 FY 2008 $1,310,352 $7,862,114 $6.00 $6,551,762 FY 12 FY 13 FY 2009 $2,128,993 $6,876,648 $3.23 $4,747,655 $19,792,579 $9,140,010 FY 2010 $1,979,276 $6,017,000 $3.04 $4,037,724 -$13,270,000 Full Marcus $0.00 Yearly Share Total Expenses $9,176,579 Adjusted Raised $11,794,010 FY 2011 $2,046,950 $8,243,099 $4.03 $6,196,149 FY 2012 $1,751,748 $11.30 $18,040,831 $5.24 Adjusted FY 13 ROI FY 2013 $2,250,000* $4.06 $6,890,010 Adjusted FY 12 ROI FY 11 ROI Target Raised Target ROI 3 year Average Target FY 2014 $1,922,322 $9,295,916 $4.84 $7,373,594 Target FY14 ROI * Estimated

Piedmont Healthcare Foundation FY2013 Metrics through June 30, 2013
Category FY 13 Actual FY13 Target Total Dollars Raised $9,194,010 $9,000,000 (102% of Goal) Spent Dollars $5,353,576* $10,000,000 (Thru May 31) (54% of Goal) Active Donors 3,100 3,500 (88.6% of Goal) *Approximately an additional $5M has been identified by fund managers as having been spent, Foundation is working with PHC Finance to ensure restricted funds are transferred to offset these expenses. Entity Total Pledges/Cash Atlanta $5,053,902 Corporate $1,081,265 Fayette $406,224 Foundation $402,333 Heart Institute $1,747,052 Henry $237,665 Mountainside $44,900 Newnan $220,668 Service Line Total Pledges/Cash Cardiovascular $2,217,411 Oncology $1,924,068 Neuroscience $55,885 Transplant $750,806 Women's Services $1,555,008 Unrestricted $420,552 Other $2,270,280

PHCF’s Metrics, Continued
FY 2013 Actual FY to Date FY 2013 Target Annual Internal (Monthly) Average Gift over $10K** $ ,073 Average Gift under $100K $ ,104 Community Outreach # of Tours/Events 18 # of Participants 1647 # of Fundraising Events 13 Funds Raised $ ,183 Piedmont-led FE ROI $ Waters Pavilion Occupancy Rate (thru June 2013) 46% 50% Net Income (thru May 2013) $ ,767 Staff Moves Identify/Qualify 178 Cultivation 245 Solicitation 179 Donor Relations 2190 Close 48 Number of Donors (88.6% of goal) 3100 3500 ** Not including gifts over $1M

All Entities FY 2013 Grants and Funds Spending Detail: $11,121,729

FY 2014 Grants and Funds Budget Detail for all Entities $9,694,900*
* $1, 427,896 of the budgeted spending is from endowment distributions

Robert Di Vito OBJECTIVE STATUS COMMENTS
Identify, assist in preparing and submit $1,000,000 in grants As of 1/31/13 - Submitted $1,788,087 in grants and proposals including Komen, ITJ, CME Grants and Harris Trust Optimize the operational functions of the Foundation to efficiently and effectively record, administer, steward grants and gifts Acknowledgement Letters are still going out later than required. David, Anna, Jamie, Carmen and Erica refining processes. Continue to lead the work with PHC Finance to ensure the timely recording and reporting of gifts and grants On-going. Monthly meetings continuing; Many outstanding items with some progress; Anna is now sending reports to PHC Finance. Robert met with Marie Gaffney to discuss continuing challenges. Larger meeting betw Fin and Found happening on April 22nd Other Working with Finance to close Aux bank accounts at PHH, PFH and PNH. Meeting with Fin and Exec Teams at hospitals to ensure process of recording gifts is changed so that all contributions come to PHCF *COMPLETE* *IN-PROGRESS* *INCOMPLETE*

Engaging the Board Began the journey three years ago
Renamed Foundation from associated with one hospital to fund raising entity for all entities By-Laws revised Nominations became more deliberate Core Group of Foundation Members set the direction of the Board Task Force Met with PHC Executives Task Force is driving the discussion More integration between PHC and PHCF Boards

Two staff on One Board Member Interviews Conducted
As you saw in the presentation at the Retreat, our Foundation has undergone significant transformation in the past several years. How do you envision the Foundation five years from now? What changes would you like to see? Can you think of ways that you personally can help us? What Foundation Board activities would be meaningful for you to become involved? Our Board’s minimum contribution is $1,000. Several members have proposed raising the commitment to $5,000 or $10,000. How do you feel about that? How committed are you to the mission and vision of this organization? Is the organization really doing what it says it is doing in the community? What do you look for in non-profits that you choose to support? How does Piedmont measure up relative to other organizations you support? What would you do with your philanthropic support that would be the most meaningful to you? Review slide 12 from the presentation. What will it take for Piedmont and the Foundation to accomplish the “what if’s?”

What if… . . . Piedmont and the Foundation worked together to bring world class care closer to home? . . . each Foundation Board member clearly understood and could articulate the case for support? . . . ALL Piedmont boards were fully engaged and philanthropically supportive of our vision? . . . the Atlanta community leaders and Piedmont partnered to transform healthcare for Atlanta and the Southeast? . . . all Piedmont boards had increased giving capacity and joined us to achieve our vision? . . . the Foundation staff and board members worked in tandem to share the Piedmont promise with the community? . . . there was a state of the art facility that attracts world renowned talent to advance treatment, innovation and education

Overview of Interviews with Board Members
Organization of the Board - On the right path - Need more people connected to community and who can provide impact gifts - More accountability and decision making Work of the Board - Desire more engagement and connection to other Board members and the organization Fundraising Priorities - OK with system priorities as long as there is clarity on how this impacts the local entity and community - Look for collaborative partners

Overview of Interviews with Board Members
Level of Support Required - 100% of all boards giving is non-negotiable - $1,000 minimum is appropriate threshold with encouragement to give more if able Priority of Personal Giving - Unrestricted (system, Southside and local) is supported as long as priorities for unrestricted are clearly known and the organization uses unrestricted gifts for those named priorities - Must show strong accountability and stewardship Is Piedmont living the Piedmont Promise - Yes. . . - However, requires more transparency on the priorities so the public understands how the Piedmont Promise impacts them and the community

New and Refined Board Committees
Executive Committee - Responsibilities: The principle responsibility of the PHCF Executive Committee is to hold the powers of the board of directors between meetings include setting the Board Meeting agenda as well as to review, evaluate and recommend matters to the PHCF Board of Directors. Structure: The PHCF Executive Committee consists of the Chairman of the Board and the Committee Chairs. Nominations & Governance Committee - Responsibilities: The Nominations & Governance Committee oversees the process for nominating members and officers to the PHCF Board of Directors. The Committee is also charged with reviewing proposed changes to the PHCF governance and presenting them to the full Board for consideration and action. Structure: The PHCF Nominations & Governance Committee consists of no more than 8 members of the PHCF Board of Directors. Contributions & Grants Policy Committee - Responsibilities: The Contributions & Grants Policy Committee serves the Foundation through the development of new policies and review of existing policies for the disbursement and oversight of contributions and grants made to any entity of Piedmont Healthcare. Structure: The PHCF Contributions & Grants Policy Committee consists of no more than 8 members of the PHCF Board of Directors. Allocations & Priorities Committee - Responsibilities: The purpose of the Allocations & Priorities Committee is to review, evaluate and approve potential philanthropic resource allocation to Piedmont Healthcare and its entities. The Committee is also charged with overseeing the development of cases for support, solicitation of gifts and establishing the guiding principles to establish philanthropic priorities. Structure: The PHCF Allocations & Priorities Committee consists of no more than 8 members of the PHCF Board of Directors. Finance & Audit Committee - Responsibilities: The Finance and Audit Committee serves the Foundation through the reviewing and monitoring of the Foundation’s operational, funds and grants budgets and developing and implementing audit processes to ensure appropriate resource allocation and reporting to fulfill the PHCF mission. Structure: The PHCF Finance & Audit Committee consists of no more than 8 members of the PHCF Board of Directors.

Nominations Weighted Criteria
New Board Member Reflection of Community Influence in Community Other Volunteer Experience Donor Professional Affiliation Capacity Time to Commit

Acquiring and Dissolving the Henry Medical Center Foundation
Henry Medical Center Foundation – Overview April (c)(3) determined 2 person staff – “Supporting the work of Henry Medical Center and financially provide the margin of excellence” Funds raised overwhelmingly supported the general operations of HMCF Special events and employee giving campaign were primary fund raising strategies; three year return on investment was $.93 Prior to Acquisition – regular informational meetings between HMCF and PHCF; discuss plan for the incorporation of HMCF into PHCF At Acquisition Finalize plan to bring HMCF into PHCF Staff report to President and COO Board votes to be subservient to PHC Board votes on pathway to dissolution, by end of calendar year After Acquisition Attorney draws up dissolution document; Board approves Prior to Dec 31, 2012, all funds transferred to PHC Prior Board became PHH Foundation Council

Foundation Council Foundation Council Structure Terms of Service
10-15 highly influential community leaders 3 Council meetings per year Foundation Staff will work with members to identify and to provide cultivation opportunities for major donors Foundation Staff will provide training for Council Members interested in developing talking points regarding major gift opportunities Participate in ancillary opportunities outside designed to identify/cultivate donors Participate in solicitation of gifts Initial Council meetings will consist of tours of Piedmont priority needs and naming opportunities Terms of Service The terms of service will be three-year increments Foundation Council Member Expectations The purpose of the Council is to build friends and donors Council members are expected to support the mission of Piedmont, by developing, implementing, and overseeing fund raising strategies for Piedmont Council members are expected to attend 75% of all council meetings during their terms Council members are expected to lead the community by example in their own personal giving to Piedmont. It is expected that these gifts will average $1,000/year and some may be higher depending on individual ability. Donors are recognized for their inclusive giving including gifts directed to a specific program or service, unrestricted gifts, gifts in honor or memory of individuals, and gifts to Piedmont special events (or to external events benefiting Piedmont if a donation is given directly to the hospital) Council members shall be advocates for Piedmont within the community Council members shall identify a minimum of two (2) businesses/individual prospects annually and actively assist staff with introductions, meetings and discussions related to philanthropy Council members shall prepare and accompany staff in cultivation efforts with major prospects which the Foundation Staff will research prospect and draft strategy

Outcome & Results and Lessons Learned from Acquisition
Outcomes & Results Funds raised go to programs instead of general operating support Employee campaign most successful ever – raised close to $100K Fully integrated Raiser’s Edge Reduced number of Special Events Both legacy staff members transitioned out Lessons Learned Communications of expectations is critically important Unknowingly, Board and Staff were on a different page than PHCF Staff Difficult for HMCF and Piedmont Henry to release special events – seen as community relations events Hospital and Foundation Operating Executives need to have regular meetings Don’t underestimate culture and community

Navigating the Uncertainties of Acquisitions, Governance and Strategic Planning July 2013 Robert J. Di Vito, JD, CHRC Chief Operating.

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Navigating the Uncertainties of Acquisitions, Governance and Strategic Planning July 2013 Robert J. Di Vito, JD, CHRC Chief Operating.

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