1. 0 Presenters: Robert Goodman Managing Partner The Mansfield Group Peter Myhre President MarCap Corporation ELA Healthcare Finance Summit September 13-14, 2005 Outpatient Ambulatory Care

2. 1 Outpatient Ambulatory Care Session Agenda Overview: Outpatient Ambulatory Care Market Robert Goodman Financial Health of Market Participants Peter Myhre How Providers Are Obtaining Equipment Robert Goodman Structures That Work Best Peter Myhre Question and Answer Session

3. 2 Overview: Outpatient Ambulatory Care Market Outpatient Ambulatory care services – 35 years in the making Trends in ambulatory care services  Growth remains strong  Ownership continues to be varied – physicians, management companies and/or hospitals  Competition — saturated markets

4. 3 Overview: Outpatient Ambulatory Care Market Outpatient ambulatory care market  Diagnostic imaging – MRI, CT, PET/CT as well as other imaging modalities  Surgery – single specialty and multi-specialty centers  Treatment – radiation therapy, dialysis and physical therapy

5. 4 Financial Health of Market Participants Provider (borrower) profile  Typically single purpose entities established by physicians, management- development companies and hospitals  Usually limited liability companies; often joint ventures between two or three of the parties noted above  Generally stand-alone facilities and most often start-ups

6. 5 Financial Health of Market Participants Provider cash flows  Revenues = patient procedure/scans x related reimbursement  Expenses – largely fixed; debt service and staffing are the most significant outflows  Profitability – once breakeven revenue is exceeded, majority of incremental revenue drops to the bottom line

7. 6 Financial Health of Market Participants Risk considerations  Commitment - equity and guarantees  Patient referrals – the right physician specialties  Self-referral restrictions – state and federal  Payor risk – contracting and reimbursement

8. 7 Financial Health of Market Participants Manufacturers/vendors profile  Manufacturers and vendors vary significantly in financial strength  Dominant full line manufacturers are Siemens, GE, Philips and Toshiba  Variety of single line/specialty manufacturers

9. 8 Financial Health of Market Participants Evaluating vendor risk  Strength of business - financial statements, and installed base  Equipment – reliability and operating costs  Sales force – direct and distribution  Service/repair – quality and capability  Potential fraud – management and motivations

10. 9 How Providers Are Obtaining Equipment Equipment financing options and project financing options  Business Plan – business case or rationale behind equipment purchase or project  Equipment: – Cash (equity) – Capital leases and loans – FMV leasing – Per-use

11. 10 How Providers Are Obtaining Equipment  Project: – Cash (equity) – Capital leases and loans – FMV leasing for major equipment (MRI, PET, linear accelerators, etc.) – Working capital lines of credit, primary and back-up (surgery centers vs. diagnostic imaging centers)

12. 11 How Providers Are Obtaining Equipment Debt sources  Leasing companies  Captive finance organizations (e.g., Siemens and GE)  Local and regional banks

13. 12 Structures That Work Best Lease Structures  60 to 84 month terms  Payment deferral until reimbursement ramps-up  Interim funding  Equipment and tenant improvements

14. 13 Structures That Work Best Differentiating products  Working capital  Acquisition funding  Physician equity financing Differentiating terms  Limited to no personal guarantees  Guarantee burn off  No covenants

15. 14 Structures That Work Best Risk management terms  Blanket lien including A/R  Subordination of payments to owners  Covenants before making distributions  Assignment of tenant’s rights

16. 15 Peter Myhre MarCap Corporation 200 West Jackson, Suite 2000 Chicago, Illinois 60606 800.621.1677 www.marcapcorp.com Robert Goodman The Mansfield Group 6 Oak Tree Court Westampton, NJ 08060 609.267.0990 www.mansfield-group.com