Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 1 1 Our Integrated Model We believe in the power of a provider-owned supply chain Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 2 $4.6 Billion Operating Revenue 4,418 Staffed Beds 40,000 Co-workers 2,000 Integrated Physicians Arkansas, Kansas, Missouri and Oklahoma  30 Acute Care  5 Managed/Affiliated Hospitals  4 Heart Hospitals  2 Children’s Hospitals  753 Physician Practices  294 Clinic Locations Our Owners Who We Are Source: 2015 Mercy

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 3 $1.477 Billion Operating Revenue 1,799 Licensed Beds 10,897 Co-workers 2,095 Medical Staff Louisiana  5 Acute Care Hospitals  JV/Management Services Our Owners Who We Are Source: 2014 Annual Report

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 4 Our Partners Our Goal: Together with our partners, to transform the health care industry through supply chain collaboration, integration and optimization Providers we’ve consulted with Our Reach Who We Are

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 5 5 The “Rep-Less” Model In-sourcing traditional outsourced service & distribution for PPI Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 6 Growth Curves The Rep-Less Model Source: 2014 Annual Report

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 7 ProceduresRegion/Type % Change Instrumented fusionsCervical249,790253,4901.5% Instrumented fusionsThoracolumbar393,000409,4004.2% Disc replacementsCervical13,69015, % Disc replacementsThoracolumbar2.0502,1504.9% Kypho/vertebroplastiesAugmentation103,800110,0006.0% Kypho/vertebroplastiesVertebroplasties43,70045,1003.2% Totals806,030835,5303.7% Source: Millenium Research Group, Toronto, Canada. The Rep-Less Model US Spine Procedure Trends

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 8 Company 2015 Sales (mil) COGS % R&D % SG&A % Taxes % Lit.; Acq. & Other % Net Income % Medtronic $1, DePuy $ NuVasive $ Stryker $ Globus $ Zimmer/Biomet $ Orthofix $ LDR Spine $ Alphatec Spine $ Other $1,694n/a Totals $7,179 Sources: Spinemarket, Minneapolis, Minnesota, based on YTD sales through September 2014, K's The Rep-Less Model US Leaders in Spine

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 9 Cost Structure of a Spinal Implant The Rep-Less Model How can providers and manufacturers collaborate to reduce waste? Top 9 Medical Device Manufacturers 41% SG&A 29% COGS 11% Net Income 8% Lit.; Acq. & Other 8% R&D 4% Taxes Top 9 Medical Device Manufacturers

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information (k) vs. PMA – Let’s Discuss Traditional market forces do not apply to spine… The Rep-Less Model Spine vs. Pharma

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 11 Steps in the Supply Chain Think Lean… Value? Provider – Supplier What can I impact? Implant Design Contract MFR Vendor (Marketer) Group Purchasing Organization Distributor Sales Rep Hospital ›››› ›› Steps in the Supply Chain The Rep-Less Model

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 12 Strategies to Reduce Supply Cost The Rep-Less Model 5-10% 15% 20% 40% 60+% License Manufacture Dis- Intermediate Vertically Integrate Consolidate Utilization Negotiate *Product utilization based on outcomes Dual Source Sole Source Bulk Buy Capped Pricing is not a strategy, it is a negotiation tactic…. Reduce SG&A 1. Internalize 2. Automate GPO Leverage Capped Pricing *Can be employed along with contracting

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 13 Traditional Models Based on desired margin Commission-driven Involved in process Desirable as it increases sales Unauthorized and driven by margin desire Transactional Difficult - control in hands of manuf. Grow revenue, increase share price In hands of the manufacturer Key Dynamics Pricing Sales rep compensation Distributor New technology Niche products Hospital-Vendor relationship Long-Term Cost containment Company motivation Program control Dis-intermediation Based on provider needs Service-driven No longer in process Only utilized if clinical advantage Only clinically authorized Integrated & strategic Completely in the hands of the provider Leverage volume to reduce costs for providers, improve efficiency In hands of the provider The Rep-Less Model Dis-Intermediation

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 14  Service Physician involvement  Implant quality Product review  Outcomes Training  Access to niche technology 80/20 rule  What’s in it for me? The Rep-Less Model Physician Concerns

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 15  Identify physician champion  Ability to influence peers  Review the data one on one  Financial state of the hospital & specific service  Physician Scorecard  By physician (cost per case) – benchmark  Quality & Outcome Metrics  Medical Device Industry information  SG&A, steps in the supply chain, etc.  What can we do differently to truly impact this space? The Rep-Less Model Physician Engagement

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 16 Supplier Standardization 91% Case Compliance 10% Case Time 54% Consignment Inventory Double Digit % Savings Internalized Sales/Service Reduced SG&A The Rep-Less Model Pilot Results

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 17 Year 2 Physician allegiance maturity 8 out of top 10 suppliers were engaged in the RFP process Year 3 3 hospitals implemented (implementing 2 more now) Proven model with non-integrated surgeons Product/Specialty Penetration Consulting Key learning – innovative partnerships can be built in the PPI space The Rep-Less Model Program Maturation

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 18 Core Manufacturing Distribution Physician Clinics DME The Rep-Less Model Focus beyond your core

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 19 Future Models? The Rep-Less Model Insurance Carrier Hospital Manufacturer Physician Patient Implant

Resource Optimization & Innovation, LLC (ROi) all rights reserved Confidential & Proprietary Information 20 Questions