1. Children’s Health Network DRAFT Finance Committee July 2012

2. CIN Financial Plan – Additional Operating Costs Required Network Software and Infrastructure Costs –$400,000 per year for 400,000 Unique Patients Program Implementation & On-going Costs –$75,000 year 1; $50,000 thereafter Clinically Integrated Entity Development –Legal fees of approx $150,000 (expensed in 2012) 2

3. Recommendations Staffing is consistent with other CIN structures and the roles/responsibilities will be needed in the new CHN CPN Dues compared to others are considerably less (dues for primary care/nonproceduralist in Central Georgia and Integrity Health $2,500/$3,500 per year) A balance of $2.5 million is needed to maintain favorable income statement/financial health Operating Margins will need to be 5-10% of revenues $125,000-250,000 3

4. Current CPN Revenue  Income Payer Admin (HP and UCARE)$995,000 CHC Community Benefit fee$900,000 Affiliation Fees $350,000 Other $60,000  Affiliation Fees ( approx 700 members ) Primary Care (230) $200 Specialist (369) $300 Other (101) $200 Surgery Centers (3) $1,500 Hospitals (2)$89,000 (does not inc Gillette) 4

5. Financing the CHN Utilize $500,000 of reserve funds for start-up New affiliation fees (simple example) Primary Care (230) $600 Specialist (369) $600 Other (101) $600 Surgery Centers (3) $3,000ea Hospitals (2) $180,000ea Dues could increase incrementally over 3 years as CHN builds value (allows for planning an operating budget) Dues could be adjusted based on financial performance of CHN (dividends) Investment of 1-3% on all risk payments/quality/capitation payments negotiated by the CHN.

6. Projected impact to CHN budget CPN Admin 2012 Budget Total Op Rev $2,305,000 Total Expenses $1,832,000 CPN Earnings (pre tax) $473,000 CHN Admin Yr 1 Budget Increase in fees $436,000 CPN Earnings (current) +$473,000 Increase in exp (IHC & Legal) -$475,000 Net Op Margin (pre tax) $434,000 Tax est at 42% -$182,000 Net Income $252,000 Necessary Margin (10%) $230,500

7. Nurse triage financing 2012 budget 7 Total Operating Revenue $2,460,000 - Payers $160,000 - CPN Subscribers $1,679,000 - Non Subscribers $621,000 Total Expense $2,856,000 CPN Triage Earnings (pre tax) $(396,000)

8. Nurse Triage Recommendations Nurse Triage is necessary in total cost of care contracts and medical home initiatives Nurse Triage needs to break-even -Increase dues for CPN members closer to retail prices -Negotiate with health plans to use of CHN Nurse Triage (remove duplication of services in contracts) -Identify further cost savings/re-look at hours of service and integration with eCW clinics -Annual Participation Fee for nurse triage -$/per clinician for maintenance/upgrades of systems. 8

9. Other considerations Revisit 2012 budget and performance Recommendation on dues (parity b/w specialty and primary care) Sweat equity of physicians (committee work etc) Roles of staff in the new CHN Include Heath System Pediatricians in Quality/Triage (PN, Allina, HP) Negotiate admin fees into all contracts with CHN and apply a % investment back into CHN