Physician Employment Advocate Health Care James R. Dan, M.D. May 2, 2014

Leading in a challenging environment Intense reimbursement/price/cost pressure Care shifting to outpatient Rapid growth in consumerism Massive provider consolidation New industry entrants

The healthcare economic reality 2013 Federal budget Growth projections for Federal spending Gov’t Receipts $2.9T Gov’t spending as % of GDP Federal Health Programs Social Security Healthcare consuming over 50% of gov’t receipts Other Mandatory Gov’t Outlays $3.8T Sources: Estimates from The Budget and Economic Outlook (January 2012) - Congressional Budget Office.

Reimbursement dynamics Today 2020 Outlook TODAY Medicaid Expansion 3.5% +2% Aging/ Medicare -4% Exchanges -2% Reimbursement Cuts Comm’l Rates 2020 Outlook -4.5% Commercial 40% 40% Comm’l Operating Margin % 20 20 0% 0% (20) Medicare (20) Exchange Operating Margin % Medicare (40) (40) Medicaid Avg Margin: 3.5% Avg Margin: (4.5)% Medicaid (100)% Uninsured (100)% Uninsured 25 50 75 Health System Payer Mix 100 25 50 75 Health System Payer Mix 100 GE Healthcare Proprietary and Confidential Information

The Death of the Chargemaster The Brill Effect Consumer-driven high deductible plans focus the mind on price as much as use Reference pricing scares providers All payer transparency is coming soon GE Healthcare Proprietary and Confidential Information

The Environment Intense reimbursement/price/cost pressure Care shifting to outpatient Rapid growth in consumerism Massive provider consolidation New industry entrants

Fill the hospital Empty the hospital 2012-2020 Inpatient growth 2012-2020 Outpatient growth Overall -6 to -8% Overall +18-20% Orthopedics 17% Cancer 30% Neuro 8% Gen Med/Surg 21% Cancer 1% Neuro 21% Spine -1% Cardio 20% Gynecology -5% Spine 18% Gen Med/Surg -5% Ortho 18% Cardio -25% Gynecology 10% Shift from high-cost acute settings accelerating GE Healthcare Proprietary and Confidential Information

The Environment Intense reimbursement/price/cost pressure Care shifting to outpatient Rapid growth in consumerism Massive provider consolidation New industry entrants

GE Healthcare Proprietary and Confidential Information Consumerism rapidly growing GE Healthcare Proprietary and Confidential Information

Consumerism rapidly growing

The Environment Intense reimbursement/price/cost pressure Care shifting to outpatient Rapid growth in consumerism Massive provider consolidation New industry entrants

Provider consolidation 5 largest airlines control >75% of seats 5 largest health systems control < 10% of beds GE Healthcare Proprietary and Confidential Information Source: Kaufman Hall & Associates, Inc., Presentation by Anu Singh, GE analysis

The Environment Intense reimbursement/price/cost pressure Care shifting to outpatient Rapid growth in consumerism Massive provider consolidation New industry entrants

GE Healthcare Proprietary and Confidential Information New entrants Walgreens Goal: Reinvent Pharmacy Advance community pharmacy to play a greater role in healthcare through integration and expanded services- focus on chronic disease management Source: Presentation at Lazard Annual Healthcare Conference GE Healthcare Proprietary and Confidential Information

New entrants

Pluralistic Physician Structure Physicians on Advocate Medical Staffs = 5,900 Advocate Physician Partners (APP) = 4,400 AMG/Dreyer 1,200/200 Independent = 3,000 Non-APP = 1,500

What is the Role of AMG? Advocate Vision To be a faith-based system providing the best health outcomes and building lifelong relationships with those we serve. AMG Role A nationally-recognized, physician-led integrated group committed to delivering the best health outcomes.

AMG Growth History and Projection Number of Physicians *Projected

Group Composition PIE CHART

The Advocate Medical Group Journey Group Optimization 2012-2014 Rapid Growth and Integration 2010-2011 Physician-led Governing Council 2009 Consolidated, Dedicated Management 2008

AMG Contribution to Advocate Health Care Health Outcomes/Safe Clinical Enterprise Advocate Experience AdvocateCare Service Lines Loyal Patient Growth Progressive Care Models

AMG Performance Top decile in 7 of 9 national CI benchmarks Associate Satisfaction – top decile 4 years Physician Satisfaction – 78th %ile Patient Satisfaction – 62th %ile Cost/RVU actual decline over past 5 years Growth - With Dreyer, 20% of system revenue and the engine of Advocate Medicare Advantage medical costs flat year-over-year for 4 years

AMG Value Proposition Group focused on health outcomes and safety Competitive physician compensation and benefits Professionally satisfying practice environment Proactive input into clinical and operational practice performance Strong connection to Advocate system leadership Resources of a large, nationally recognized, integrated health care system

What you need to believe to thrive in AMG Committed to Vision of Best Health Outcomes and Safest Care Cost Concerns are Best Addressed via #1 Integrated, Team Care is Essential for #1 and #2 Commitment to Personal Leadership of a Health Care Team

What is the Role of AMG? Advocate Vision To be a faith-based system providing the safest environment and best health outcomes, while building lifelong relationships with the people we serve. AMG Role A nationally-recognized, physician-led integrated group committed to delivering the best health outcomes.

Historical Data 2013

What We Need to Believe to Thrive in AMG: Leading from Principles Committed to Vision of Best Health Outcomes and Safest Care Cost Concerns are Best Addressed via #1 Integrated, Team Care is Essential for #1 and #2 Commitment to Personal Leadership of a Health Care Team