Vantage Care Positioning System®: Make Your Case with Medicare Spending Data November 2014 avalere.com

2 New in FY 2015 / Hospitals Are Financially Accountable for Resource Use and Efficiency Across Episodes of Care Payment Reduction of 1.25% Payment Reduction of 1.5% Payment Reduction of 1.75% Payment Reduction of 2.0% FY 2014FY 2015FY 2016FY 2017 Hospitals can earn back an incentive payment percentage less than, equal to, or more than the reduction Efficiency(20%) Efficiency (25%) Inpatient stay (variable based on LOS) 30-days post-inpatient stay 3 days pre- inpatient stay HHAHospiceInpatient OutpatientSNFDMECarrier Efficiency Domain: Medicare Spending Per Beneficiary Measure (MSPB) VBP: Value-based purchasingLOS: Length of stayHHA: Home health agency SNF: Skilled nursing facilityDME: Durable medical equipment HOSPITAL VBP PROGRAM BASE OPERATING DRG REDUCTIONS

3 Less Is More / Lower Medicare Spending Per Beneficiary Ratio Indicates Greater Efficiency MSPB ScoreMSPB Score Translation MSPB < 1 Medicare spends LESS per patient for an episode of care initiated at the individual hospital than it does per hospital patient nationally MSPB = 1 Medicare spends ABOUT THE SAME amount per patient for an episode of care initiated at the individual hospital as it does per hospital patient nationally MSPB > 1 Medicare spends MORE per patient for an episode of care initiated at the individual hospital than it does per hospital patient nationally MSPB Measure MSPB Amount Median MSPB Amount MSPB: Medicare spending per beneficiary

4 What’s the Impact? / Hospitals Will Focus on Post-Acute Care Utilization to Bring Down Episode Costs MSPB: Medicare spending per beneficiary PAC: Post-acute care Shifting Focus to Episodes of Care A variety of Medicare payment and delivery reforms encourage a focus on episodes of care across settings rather than setting- specific care, including bundled payments, ACOs, and now the MSPB Measure. Increasing Need to Manage Episodic Risk In order to thrive under these new models, providers must collaborate to manage the risk associated with Medicare payments that are based on the expected cost of care over an episode. Opportunity to Collaborate with Downstream Providers Given the growth and variability in PAC spending, these providers are key players in the effort to reduce episode costs. PAC providers and hospitals have an opportunity to solidify their referral relationships with a shared commitment to reducing episode spending

What Can You Do? / Identify Opportunities To Be Part of the Solution 5 Assess the ImpactIdentify Opportunities to Improve Identify hospital’s MSPB score Is the hospital’s MSPB greater than the national median MSPB? Assess hospital’s average spending per care setting Is the hospital spending above average on certain PAC care settings compared to market and state averages? Know whether hospital faces penalties in Medicare value-based programs Is the hospital facing penalties for excess readmissions? Prepare market intelligence on hospital’s readmission rates Which conditions must the hospital focus on to reduce readmissions? Prepare market intelligence on hospital’s most frequently discharged DRGs Does your facility have strong clinical programs to support the hospital’s most frequently discharged DRGs? Demonstrate your efficiency What are your facility’s readmission rates? What is your average length of stay? MSPB: Medicare spending per beneficiary DRG: Diagnosis-related group PAC: Post-acute care

How Can Vantage CPS Help? / Medicare Spending Per Beneficiary & Value-Based Payment Performance Data 6 Hospital VBP & HRRP Scores Hospitals’ FY 2013, FY 2014, and FY 2015 VBP and HRRP payment adjustments, which are applied to hospitals’ base operating DRG payments Hospitals’ 2012 and 2013 Medicare Spending Per Beneficiary Scores Hospital Average Medicare Spending by Category Market and state average Medicare spending data by beneficiary across care settings (inpatient, outpatient, HHA, hospice, SNF, DME, and physician) Hospitals’ average Medicare spending per beneficiary across care settings (inpatient, outpatient, HHA, hospice, SNF, DME, and physician) VBP: Value-based purchasingMSPB: Medicare spending per beneficiaryHHA: Home health agency DRG: Diagnosis-related groupFY: Fiscal yearSNF: Skilled nursing facility DME: Durable medical equipment HRRP: Hospital Readmissions Reduction Program

Case Study / Fairfield County Hospitals’ MSPB Scores 7 IF MSPB SCORE > 1, MEDICARE SPENDS MORE PER PATIENT FOR AN EPISODE OF CARE INITIATED AT THE INDIVIDUAL HOSPITAL THAN IT DOES PER HOSPITAL PATIENT NATIONALLY Referring Hospitals 2012 MSPB Score 2013 MSPB Score 2013 National MSPB Score Avg. BRIDGEPORT HOSPITAL GREENWICH HOSPITAL ASSOCIATION NORWALK HOSPITAL ASSOCIATION DANBURY HOSPITAL Overall, Fairfield County hospitals had average risk-adjusted spending levels greater than the national median MSPB episode in 2013; Greenwich Hospital was the only hospital that significantly improved its MSPB score in 2013 MSPB: Medicare spending per beneficiary

Fairfield Hospitals’ Spending Per Beneficiary By Care Setting 8 Referring Hospitals MSPB 2013 Score 2013 SNF $2013 HHA $ 2013 Hospice $ BRIDGEPORT HOSPITAL1.04 $4,379$947$128 GREENWICH HOSPITAL ASSOCIATION 0.98 $4,092$822$95 NORWALK HOSPITAL ASSOCIATION 1.02 $4,380$916$94 DANBURY HOSPITAL1.03 $4,715$821$85 Market Average (Fairfield County) 1.03$4,474$880$93 FAIRFIELD HOSPITALS’ 2013 AVERAGE SPENDING BY PAC SETTING Bridgeport Hospital has high episode spending, and particularly high SNF and HHA spending. Bridgeport may begin to target SNF and HHA utilization in an effort to reduce episode spending HHA: Home health agencySNF: Skilled nursing facility PAC: Post-acute careMSPB: Medicare spending per beneficiary

Hospital VBP and Readmissions Reduction Programs' Financial Impact on Fairfield Hospitals 9 Referring Hospitals 2015 HVBP Adjustment Factor 2015 HRRP Adjustment Factor BRIDGEPORT HOSPITAL GREENWICH HOSPITAL ASSOCIATION NORWALK HOSPITAL ASSOCIATION DANBURY HOSPITAL FAIRFIELD HOSPITALS CAN BENEFIT FROM PAC PARTNERSHIPS Fairfield County hospitals are facing payment reductions. For example, if Greenwich Hospital Association’s base DRG payment for pneumonia is $8,149, the hospital will lose around $62 per patient in FY 2015 If less than 1, payment adjustment is negative amount (i.e., base rate * * ) VBP: Value-based purchasing HRRP: Hospital Readmissions Reduction Program LOS: Length of stay PAC: Post-acute care

Where Can Bridgeport Hospital Improve? 10 BRIDGEPORT HOSPITAL COULD BENEFIT FROM PAC PARTNERSHIPS TO REDUCE READMISSIONS Condition Bridgeport Hospital’s Rates National Average Relative to National Average Acute Myocardial Infarction (AMI) 20.16% (26/129) 17%Higher Congestive Heart Failure (CHF) 21.24% (41/193) 22%Lower Pneumonia (PN) 17.95% (28/156) 17%Higher Chronic Obstructive Pulmonary Disease (COPD) 24.75% (25/101) 20%Higher All-cause 15.76% (560/3553) 15%Higher The Vantage Care Positioning System includes Medicare 100 Percent Standard Analytic File (SAF) fee-for-service claims data from the Centers for Medicare and Medicaid Services (CMS). PAC: Post-acute care

PAC Solution / Our Facility’s Readmission Rates 11 PAC Provider All-cause Readmission Rate Care Setting Market Average Relative to Market Average OUR FACILITY (SNF) 11/74 (14.86%) 1247/7330 (17.01%) Below BRIDGEPORT HEALTH CARE CENTER (SNF) 13/67 (19.40%) 1247/7330 (17.01%) Above HEWITT HEALTH & REHABILITATION CENTER, INC (SNF) 44/149 (29.53%) 1247/7330 (17.01%) Above SNF: Skilled nursing facility IRF: Inpatient rehabilitation hospital HHA: Home health agency Our Facility’s Commitment to Reducing Readmissions: We have clinical and quality protocols to reduce readmissions Our specialty units include wound treatment and rehabilitation We also have innovative medication management strategies and admission policies to ensure our shared patients have successful transitions of care The Vantage Care Positioning System includes Medicare 100 Percent Standard Analytic File (SAF) fee-for-service claims data from the Centers for Medicare and Medicaid Services (CMS).

PAC Solution / Our Facility’s Length of Stay 12 PAC ProviderAverage LOS Care Setting Market Average Relative to Market Average OUR FACILITY (SNF) (SNF)Below BRIDGEPORT HEALTH CARE CENTER (SNF) (SNF)Above HEWITT HEALTH & REHABILITATION CENTER, INC (SNF) (SNF)Below SNF: Skilled nursing facility LOS: Length of stay Our Facility’s Commitment to Appropriate Utilization and LOS: Our SNF’s LOS is shorter than the market average, which leads to lower SNF payments. Even though our LOS is near the market average, we deliver clinically appropriate care to high-acuity patients While our facility has a shorter LOS, this does not lead to increased readmissions which would increase episode costs The Vantage Care Positioning System includes Medicare 100 Percent Standard Analytic File (SAF) fee-for-service claims data from the Centers for Medicare and Medicaid Services (CMS).

PAC Solution / Our SNF Is a Lower Cost Setting Than IRFs 13 USE THE BUNDLED PAYMENT CALCULATOR TO IDENTIFY HOSPITAL DISCHARGE DESTINATIONS FOR STROKE PATIENTS, 2012 Our Facility’s Strong Clinical Programming We have strong clinical programming around stroke, major joint replacement, hip and femur procedures, etc. that allows us to effectively treat patients that are often discharged to IRFs Our readmission rates show no significant difference between IRFs and SNFs for these conditions SNF: Skilled nursing facility IRF: Inpatient rehabilitation facility HHA: Home health agencyLTACH: Long term acute care hospital Bridgeport Hospital, 90-day Stroke Episodes Market Area, 90-day Stroke Episodes

More Information on Medicare Spending Per Beneficiary 14 If you have questions about Vantage CPS® or would like more information on Medicare spending data, please contact Molly Farber, Our Vantage experts are here to help you craft your value proposition…