Strategic Moves for Enhanced Vitality: North Country Health Services Strategic & Financial Plan for October 1, September 30, 2010

NCHS Strategic Moves for Collaboration to Build Strategy & Vitality Our plans have been built from a broad base of cooperation and input from community leaders, our physician colleagues and our frontline employees and managers. Our future vitality is driven by a new sense of collaboration to better serve our patients and our communities. Building our success on a foundation of service excellence and new engagement with our frontline workers. Working together to show we respect and value each of our many individual and team contributions

Our environment demands a bold vision, excellent strategy execution, and an enhanced alliance with MeritCare and other community medical partners Building our future on solid pillars of: Service, Quality, Growth, Finance & People Celebration of progress to plan enhances our persistence to succeed.

The essence of strategic planning at NCHS … Great planning is needed to assure that work gets done to achieve our vision and mission with pride, on budget. Not reports, but results! Not so much about profits, as about people … our patients, our residents, our visitors, our communities, our physician colleagues, our employee associates, our volunteers, our frontline managers, our senior leadership of board, medical staff and management. Not just cash flow, but a culture of caring and curing Building results, by building respect Mindful of our heritage, but not constrained by it as we move together into a brighter future.

NCHS Strategic Moves for Strategic Challenges to NCHS Plans: Need stability with growth Geographic distance and demographic diversity Many decision makers in continuum of care Complex regulatory compliance issues Competition for stakeholders’ loyalty Large capital requirements Tough fiscal pressures Press to deliver on economies of scale Need to deliver on promise of mission for caring and curing Calls for enhanced quality and safety Press for experiences & engagement of our physicians, staff, volunteers, & donors Growing government, media, and bond holder scrutiny of our performance Calls for faster, smarter, and more cost-effective decision-making processes

NCHS Strategic Moves for Contents of NCHS Strategic & Financial Plan 2010  Letter from Board Chair and CEO  Introduction:  Purpose of plan  Process to develop plan  Monitoring progress of plan execution  Strategic Direction:  Mission Matters  Vision driven, values based  Five Strategic Pillars for Performance  Measurable Goals within our Performance Pillars  Governance Matters  Links to Financial Plans  Capital Budget  Operating Budget for NCHS and its Units

NCHS Strategic Moves for Letter from CEO & Board Chairperson To our valued medical staff colleagues and friends within the region’s health care clinics and programs, our employees and the communities we exist to serve … Thank you for your past support, and your interests in our future plans to enhance your access to health and healthcare that is of high quality, safe, cost-effective and customized to your unique needs. Our region and the U.S. health sector face significant challenges regarding our collective desires for more medical technologies, higher quality of services, reduced rise in health service costs, and rising health problems from lifestyles that are not healthy. The needs and challenges are larger than any single group can address on their own. We will all need to plan and act together to meet these challenges. Our leadership is enthusiastic about our future vitality and our commitment and ability to address these challenges with your help. Please join us to refine and implement our strategic and financial plans. Sincerely yours, Jim Hanko, CEO Dean Crotty, Board Chairperson February 15, 2005

NCHS Strategic Moves for Introduction  Purpose of plan  To guide the development and execution of policies and work by many parties to enhance the health and health care of people of the Greater Bemidji Region  Process to develop plan  People from throughout the NCHS service area were invited to share insights about community health needs and health care system strategies in a web survey  NCHS internal and external stakeholder leaders participated in full day strategy review and development session on January 26  NCHS governance participants and spouses were engaged in sessions that explored vision dimensions and strategies and investments in eight key issue areas (see following pages)  Monitoring progress of plan execution  The board and senior management of NCHS will conduct monthly/quarterly reviews of and reports about the degree of progress being made to each of the strategic and financial performance targets identified in each of the five strategic pillars of: finance, growth, quality, service and people.

NCHS Strategic Moves for Top priority issue areas for planning & investments  Governance participants were invited on Feb 4 to explore actions to enhance NCHS performance in these 8 priority issue areas: 1. Enhancing patient and visitor loyalty with excellent customer service (Pillar 4 Service) 2. Enhancing our culture as the preferred regional employer with excellent employee pride and loyalty (Pillar 5 People) 3. Enhancing our collaboration with MeritCare and other area health providers (Pillar 1, 2, 3, 4, 5) 4. Enhancing our culture driven toward quality outcomes and patient safety (Pillar 3 Quality) 5. Expanding availability of mental health and chemical dependency services (Pillar 2 Growth 6. Protecting our financial vitality with processes to add or drop services (Pillar 1 Finance) 7. Enhancing our role in cardiovascular services (Pillar 2 Growth) 8. Expanding physician pride and loyalty with NCHS services and programs (Pillar 5 People) Initiatives in all 8 of these areas were defined & are available under separate cover.

NCHS Strategic Moves for Performance Pillars support efforts to achieve our NCHS vision Values Guided Principled Passion Mission Based FinanceGrowthQualityServicePeople NCHS Vision 2010 Our strategy requires synergistic work among all of our five pillars; work that is grounded on and built from our commitment to our mission, values and principles

NCHS Strategic Moves for NCHS Vision 2010 NCHS is Northern Minnesota’s premier provider system recognized as a seamless & integrated system that delivers outstanding and progressive health care services Mission Based Our Mission is to assure a lifetime continuum of health care services for the people of Northern Minnesota

NCHS Strategic Moves for positioning statements from our leaders. “Making a positive difference in lives and living” “Our Community. Our Future.” “Our people serving neighbors and friends” “A proud heritage. A bright future.” “Modern curing. Old fashioned caring”

NCHS Strategic Moves for NCHS Vision 2010 Mission Based Values Guided: Principled Passion: Our Values and Principles Guide Our Work in the 5 Pillars as We Drive Toward Our Vision P ersonal Customer Services R esponsiveness and Teamwork I ndividualized Care D edication & Commitment E xceeding Expectations of Quality W orking as a Team, Shared Responsibility E mployee Knowledge and Skills C ompassion A ccountability and Leadership R espect, Integrity and Diversity E xperience and Innovation

How can we enhance plan execution? More measurable targets, clearer accountabilities, more results celebrations, more pay for performance

NCHS Strategic Moves for Vision 2010 Pillar The NCHS New, Board level, Strategic & Financial Plan is built up from a “Results Hierarchy” of a major goal for each pillar; a strategy to achieve the goal; and three major sub-strategies as key to implement the strategy. Matrix workplans and budgets are then developed and followed for each of the system’s operating units and managers How accomplished How measured Lead Strategy Sub-strategies Lead Manager Workplans and Budgets of Each Unit Matrix Connections & Support Across NCHS What is our goal

NCHS Strategic Moves for Vision 2010 FinanceGrowthQualityServicePeople Action Plans & Budgets for Each Division, Department or Unit Each unit leader asks and answers 2 questions: 1.How can our unit/team best contribute to the achievement of the NCHS “Results Hierarchy”? 2.How can I best earn the work & enthusiasm of my followers to best accomplish my monthly & annual workplans and budgets? The NCHS “Results Hierarchy” Values Guided Principled Passion Mission Based Operate Performance Driven Processes Expand Role in ED & Chronic Diseases Put the Patient First Recognize & Reward Service Excellence Nurture a Culture of Respect & Value What How What How What How What How What How “A” Credit Rating5% More Market Share Top 100 US Rural Hospital Systems 97% Patient Satisfaction Top Bemidji Employer Focus on Cash Smart Care Management Processes Build Philanthropy Recruit Physicians Invest in Specialty Centers Active Marketing Blame Free Work 24/7 Education Evidence Based Medicine Assess Moments of Truth Center for Patients & Visitors Transparent Reporting Earn Physician Pride & Loyalty Earn Employee Pride & Loyalty Celebrate People Stories Often

Pillar strategy developments The following pages outline the board level definition of what we hope to accomplish, and how, over the next five years within each of the five pillars. Management will be developing specific workplans for each of the strategies and sub-strategies during the Spring of 2005

NCHS Strategic Moves for Vision 2010 Finance The NCHS “Results Hierarchy” Operate Performance Driven Processes How accomplished “A” Credit Rating Focus on Cash Management* How measured Exceed S & P/Moody’s Cash & Debt Coverage Ratios Build Philanthropy* Smart Care Management Processes* Lead Strategy Sub-strategies Lead Manager Vic and CraigNew VPMASherri Matrix Connections & Support Across NCHS What is our goal Workplans and Budgets of Each Unit *Several actions defined under separate cover

NCHS Strategic Moves for Vision 2010 Growth The NCHS “Results Hierarchy” Expand Role in ED & Chronic Diseases How accomplished 5% More Market Share in All Services Recruit Physicians: Peds, Cardiology, Ortho* How measured MHA Quarterly Data Reports Active Marketing in All Media* Invest in Specialty Centers: Cardiac, Cancer, Ortho, Mental Health/CD* Lead Strategy Sub-strategies Lead Manager Jim HankoNew VPMASherri Matrix Connections & Support Across NCHS What is our goal Workplans and Budgets of Each Unit *Several actions defined under separate cover

NCHS Strategic Moves for Vision 2010 Quality The NCHS “Results Hierarchy” Put The Patient First How accomplished Top 100 US Rural Health Systems Blame Free Work Culture* How measured Solucient Competition 24/7 Access to Education in Six Sigma & Baldridge* Lead Strategy Sub-strategies Lead Manager Who Evidence Based Medicine* Matrix Connections & Support Across NCHS What is our goal Workplans and Budgets of Each Unit *Several actions defined under separate cover

NCHS Strategic Moves for Vision 2010 Service The NCHS “Results Hierarchy” Recognize & Reward Service Excellence How accomplished 97% Patient Satisfaction Assess Moments of Truth in Each Service Unit* How measured Avatar Systems and Focus Groups Transparent Reporting for All Units* Establish Center/Council for Patients & Visitors* Lead Strategy Sub-strategies Lead Manager Who Matrix Connections & Support Across NCHS What is our goal Workplans and Budgets of Each Unit *Several actions defined under separate cover

NCHS Strategic Moves for Vision 2010 People The NCHS “Results Hierarchy” Nurture a Culture of Respect & Value What is our goal How accomplished Top Bemidji Employer Earn Physician Pride & Loyalty* How measured Chamber of Commerce Annual Survey Celebrate People Stories Often* Earn Employee Pride & Loyalty* Lead Strategy Sub-strategies Lead Manager Who Workplans and Budgets of Each Unit Matrix Connections & Support Across NCHS *Several actions defined under separate cover

NCHS Strategic Moves for Vision 2010 FinanceGrowthQualityServicePeople Action Plans & Budgets for Each Division, Department or Unit Each unit leader asks and answers 2 questions: 1.How can our unit/team best contribute to the achievement of the NCHS “Results Hierarchy”? 2.How can I best earn the work & enthusiasm of my followers to best accomplish my monthly & annual workplans and budgets? The NCHS “Results Hierarchy” Values Guided Principled Passion Mission Based Operate Performance Driven Processes Expand Role in ED & Chronic Diseases Put the Patient First Recognize & Reward Service Excellence Nurture a Culture of Respect & Value What How What How What How What How What How “A” Credit Rating5% More Market Share Top 100 US Rural Hospital Systems 97% Patient Satisfaction Top Bemidji Employer Focus on Cash Smart Care Management Processes Build Philanthropy Recruit Physicians Invest in Specialty Centers Active Marketing Blame Free Work 24/7 Education Evidence Based Medicine Assess Moments of Truth Center for Patients & Visitors Transparent Reporting Earn Physician Pride & Loyalty Earn Employee Pride & Loyalty Celebrate People Stories Often

NCHS Strategic Moves for Governance Matters Governance Building Blocks What are the key building blocks for an excellent governance system? Better Health Gain Better Health Care Better Health System Performance Better Governance Better Governance Yields Better Performance

NCHS Strategic Moves for Building Blocks for Great Governance? Ongoing Assessment and Refinement Board Composition KSA Matrix Size & Structure of Board Excellent Committees Board Information System Great Meetings: Calendars Agendas Board Job Descriptions Terrific Orientation Process Excellent Ongoing Education Program Market Needs & Strategic Plans The Board of NCHS intends to continuously review and refine its work in all these areas to assure the effective governance of the community’s assets entrusted to its use for community and patient health gain

NCHS Strategic Moves for Financial Planning Matters:  NCHS will develop its capital plan and budget for the period October 1, 2005 through September 30, 2010 over the Summer and Fall of Board review and approval is to be in August and September  The NCHS operating budgets for our next fiscal year will be built up from each unit, department, service and division during the Summer and Fall for final review and approval by the board in September and October 2005  Our financial planning drives us toward achieving the financial vitality captured in the fiscal ratios of an “A” rated credit as measured by Standard & Poors, Moodys or Fitch