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

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

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

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

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

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

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

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

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

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

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)

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

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

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

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

15 Peter Myhre MarCap Corporation 200 West Jackson, Suite 2000 Chicago, Illinois Robert Goodman The Mansfield Group 6 Oak Tree Court Westampton, NJ