1. FESC National Partners Meeting January 25, 2007 Modeling the Frontier Extended Stay Clinic Conditions of Participation and Reimbursement Methodologies: Financial Analysis for Year One Eric Shell, MBA, CPA The Beacon Hotel Washington DC

2. 2 Presentation Overview Overview Financial Modeling –Iliuliuk Family Health Services –CrossRoad Medical Center –Inter Island Medical Center Areas to be Clarified Summary

3. 3 Overview Modeling the Frontier Extended Stay Clinic (FESC) Conditions of Participating and Reimbursement Methodologies –Assess the year one financial impact of FESC Scope of Work –Assess year one financial impact of FESC for: CrossRoad Medical Center; Iliuliuk Family Health Services; and Inter Island Medical Center –Separate contract with David Mather to assess financial impact of FESC on tribal clinic – Klawock Participants –Eric Shell, Stroudwater Associates –David Mather, Mather and Associates Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

4. 4 Illiuliuk Family Health Services, Dutch Harbor, AK Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary Financial Modeling – Iliuliuk Family Health Services

5. 5 Illiuliuk Family Health Services, Dutch Harbor, AK (continued) Financial Modeling – Iliuliuk Family Health Services Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

6. 6 Illiuliuk Family Health Services, Dutch Harbor, AK (continued) –Geography 800 miles from nearest available hospitals in Anchorage Extreme weather conditions often delay/cancel flights Center for Bearing Sea fishing industry Population: 4,300 –Services Offered include primary care, diagnostic X-Ray and laboratory, 24-hour urgent care, minor procedures, mental health counseling, and frequent overnight stays –Observation room: Financial Modeling – Iliuliuk Family Health Services Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

7. 7 FESC Assumptions –Fixed Costs Financial Modeling – Iliuliuk Family Health Services Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

8. 8 FESC Assumptions (continued) –Variable Costs Financial Modeling – Iliuliuk Family Health Services Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

9. 9 FESC Assumptions (continued) –FESC Revenue Financial Modeling – Iliuliuk Family Health Services Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

10. 10 FESC Assumptions – FESC Revenue Financial Modeling – Iliuliuk Family Health Services

11. 11 FESC Assumptions – Medevac/Hospitalization Costs Financial Modeling – Iliuliuk Family Health Services Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

12. 12 FESC Assumptions – Medevac/Hospitalization Costs Financial Modeling – Iliuliuk Family Health Services Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

13. 13 FESC Assumptions – Summary Financial Modeling – Iliuliuk Family Health Services Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

14. 14 Financial Modeling – Iliuliuk Family Health Services Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

15. 15 Impact on Medicare Program Financial Modeling – Iliuliuk Family Health Services Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

16. 16 Cross Road Medical Center, Glennallen, AK Financial Modeling – CrossRoad Medical Center Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

17. 17 Cross Road Medical Center, Glennallen, AK – Background/Geography FQHC owned/operated by faith-based organization Downsized from a Hospital during mid 1990s Copper River Basin nearly 200 road miles from Anchorage Population: 3,000 in the service area –Services Offered include primary care, diagnostic X-Ray, laboratory, 24-hour emergency care, minor procedures, pharmacy, observation services– 2 physicians and 1 part-time NP Financial Modeling – CrossRoad Medical Center Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

18. 18 FESC Assumptions –Fixed Costs Financial Modeling – CrossRoad Medical Center Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

19. 19 FESC Assumptions - Variable Costs (from prior year**) FESC Assumptions – FESC Revenue Financial Modeling – CrossRoad Medical Center Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

20. 20 FESC Assumptions – FESC Revenue Financial Modeling – CrossRoad Medical Center

21. 21 FESC Assumptions – Medevac/Hospitalization Costs (2005 Data**) Financial Modeling – CrossRoad Medical Center Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

22. 22 FESC Assumptions – Summary Financial Modeling – CrossRoad Medical Center Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

23. 23 Financial Modeling – CrossRoad Medical Center Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

24. 24 Impact on Medicare Program Financial Modeling – CrossRoad Medical Center Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

25. 25 Inter Island Medical Center, Friday Harbor, WA Financial Modeling – Inter Island Medical Center Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

26. 26 Inter Island Medical Center, Friday Harbor, WA – Background/Geography Non-profit RHC owned/operated by community of Friday Harbor –Community provides over $1.2M in tax support to maintain clinic 40 mile ferry ride to closest hospital in Bellingham, WA San Juan Island Population: 7,200 plus tourists –Services offered include primary care, diagnostic X-Ray and laboratory, 24-hour urgent care, pharmacy, and limited observation services – 4 MDs, and 1 NP s Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary Financial Modeling – Inter Island Medical Center

27. 27 FESC Assumptions –Fixed Costs Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary Financial Modeling – Inter Island Medical Center

28. 28 FESC Assumptions - Variable Costs Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary Financial Modeling – Inter Island Medical Center

29. 29 FESC Assumptions – FESC Revenue Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary Financial Modeling – Inter Island Medical Center

30. 30 FESC Assumptions – FESC Revenue Financial Modeling – Inter Island Medical Center

31. 31 FESC Assumptions – Medevac/Hospitalization Costs Financial Modeling – Inter Island Medical Center

32. 32 FESC Assumptions – Summary Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary Financial Modeling – Inter Island Medical Center

33. 33 Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary Financial Modeling – Inter Island Medical Center

34. 34 Impact on Medicare Program Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary Financial Modeling – Inter Island Medical Center

35. 35 FESC Revenue –Payment amount per Billable Unit How to address variation in FESC volume by site –Definition of Billable Unit –How to accommodate variation in FESC volume Budget Neutrality –To be compared to current state operations or regular clinic operations?? Medevac and Avoided Hospitalizations –Better information to determine true cost savings Areas to be Clarified Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary

36. 36 Financial models have been developed with 12 months of FESC data Variances in FESC Models –Iliuliuk and Inter Island include <4 hour stay reimbursement –Cross Roads excludes <4 hour stay reimbursement FESC costs are primarily fixed costs –Variation in FESC volume impacts whether FESC services contribute to bottom line of FESC Lower volume FESC clinics do not cover fixed costs FESCs are currently billing for ancillary services related to extended stay patients –Thus, FESC payment is for routine care only Savings on avoided/downsized transportation and hospitalization have been significant –Payers and patients are currently being rewarded for FESC services that are not being paid –Issue when looking at Budget Neutrality FESC FY 2005 volume does not vary significantly from FY 2006 –Indicates patient need rather than reimbursement drives volume Summary/Key Findings Overview Financial Analysis Iliuliuk Clinic CrossRoads Inter Island Areas to be Clarified Summary