2. Hospital — Physician Relationship Factors Causing Tumult and Turmoit Challenge of Competition Symbiotic Increasing Regulatory Complexity

3. Purpose of Presentation Recognize Strategy and Tactics of Each Side Identify Collaborative Solutions Failing That — Identify Competitive Responses

4. Historically Cottage Industry Characterized by High Utilization and Profits High Margins Full Beds Long Stays Doctors’ Workshop Health Care “Boss” Focused on Care Unlimited Resources Limited Paperwork Little Regulatory Managed Care Interference High Income/ Community Status HOSPITALSPHYSICIANS

5. Tightening Vise Rising Costs Employer Rebellion Best Care / Worst Care / Highest Cost Governmenta l Response

6. Impact Hospitals — Eliminated Beds; Shorten Length of Stay Physicians — Taking Managed Care Med School Applicants Declined Focus on Outpatient Care Both — Competing for Limited $$

7. Current Considerations Respond to Compliance / Reimbursement Pressure Focus on Developing IT Assure Staff Loyalty Develop Strategies for Integration Fight Declining Compensation/Status Deal with Managed Care Hassle Contemplate Redistribution of Power/Income Find Some Friends HOSPITALS MUSTPHYSICIANS MUST

8. Hospital Actions Medical Director / Staff Leadership Agreements Coverage Agreements Management Agreements Exclusive Provider Agreements Employment Agreements Independent Contractor Agreements Recruiting Incentives Gain-Sharing Agreements Form PHOs

9. Physician Reaction ASCs Specialty Hospitals Diagnostic Facilities Rehab Facilities In-Office Ancillaries Inpatient Procedures Ceased Medical Staff Volunteerism IPAs and Group Mergers

10. Ohio Health Example Orthopedic Hospital Created System — Duty to Protect / Preserve Charitable Mission Fiduciary Duty of Trustees Profitable Services Offset Charity Care Physicians “Skimming” Profitable Procedures Ensure Privileging Supported Mission Went Public

12. New Reality  Requiring Disclosure of Financial Interests  Disqualifying Doctors from Leadership  Restricting Staff Membership / Voting  Recruiting Competing Doctors  Declining Assistance to Competing Groups  Refusing to Deal with Competitors  Entering Exclusive Contracts  Frantically / Creatively Seeking $$  Searching for Security / Control  Looking for Leverage PHYSICIANS AREHOSPITALS ARE

13. Legal Parameters Supporting Competitive Efforts Community Service Obligations — 501(c)(3) Fiduciary Duty Conflict of Interest Policy Corporate Authority of Board to Govern

14. Legal Parameters Limiting Competitive Efforts Anti-Trust Illegal tying arrangements Exclusive dealing Group boycotts Attempted monopolization Monopolistic leveraging Private Cause of Action State Unfair Competition Laws

15. Legal Parameters — Limiting Competitive Efforts Medical Staff Bylaws State law requirements HCQIA JCAHO Medical Staff Bylaws Vs. Right to Make Management Decisions

16. Legal Parameters — Limiting Competitive Efforts Contracts Covenant Not to Compete Bylaws Corporate Medical Stark II Anti-Kickback Statute

17. Managing the Competitive Environment Collaboration vs. Competition Still a Symbiotic Relationship Remember the Mission Strategy First Escalating Tactics

18. Community Awareness Campaign Explain Corporate and Tax Structure Discuss the Mission Work on Relationships

19. Collaboration Join the “Flotilla” Set Common Goals Respect Physicians’ Expertise Motivate by Vision / Alignment of Goals Shared Vision and Goals Respect Independent Goals and Action Direction Determined Issue by Issue Partnership When Goals / Visions Align

22. Collaborative Tools Joint Ventures Exclusive Contracts Employment Independent Contractor Medical Director / Staff Leadership Positions Management Agreements Coverage Agreements Recruiting Assistance Malpractice Subsidies

23. Confrontational Options Tighten Conflict of Interest Policies Recruit Doctors to Compete Enter Exclusive Managed Care Contracts Leverage Patient Steerage Refuse to Contract or Require Additional Terms Engage in “Economic Credentialing” Amend Bylaws Close Department / Exclusive Contracts Limit Privileges Land Use Restrictions

24. Build an Ark Refuse to Deal with Competitors Decline Assistance to Competitors Invite “Friends” on Board Shut the Door

25. Evaluating the Appropriate Response Designate a Planning / Review Body Board Members Community Leaders Key Loyal Physicians Administrators

26. Key Points of Analysis Existing Providers in Market Needs Assessment Nature of Competition ID Friends — Secure Them Analyze Impact of Competition ID Physicians’ Motivations

27. Solicit Input Physicians with Competing Interests Medical Leadership Community Leaders

28. Board’s Decision Form a Flotilla Build an Ark Go to War

29. Jeffrey O. Ellis, J.D. Lathrop & Gage L.C. 10851 Mastin Boulevard Overland Park Kansas 66210-2007 913.451.5100 jellis@lathropgage.com Jeffrey O. Ellis, J.D. Lathrop & Gage L.C. 10851 Mastin Boulevard Overland Park Kansas 66210-2007 913.451.5100 jellis@lathropgage.com