`
`Daniel Horowitz (SBN: 92400)
`3650 Mt Diablo Blvd, Ste 225
`Lafayette, CA 94549
`Phone: (925)283-1863
`Email: Horowitz@physiciandefense.lawyer
`
`Attorney for Tom Jong & Truc-Co Jong
`
`
`
`
`SUPERIOR COURT OF THE STATE OF CALIFORNIA
`FOR THE COUNTY OF CONTRA COSTA
`
`
`
`
` Case No.: C22-00633
`
`EXHIBITS 23-34 IN SUPPORT OF
`MOTION TO AMEND COMPLAINT
`
`[CCP §425.13]
`
`
`Hearing Date:
`Time:
`Dept:
`
`Judge: Honorable Charles S. Treat
`Dept: 12
`Complaint Filed: 04/06/2022
`FAC Filed: 08/10/2022
`
`
`TOM JONG, TRUC-CO JONG,
`
` Plaintiffs,
`
`vs.
`
`JOHN MUIR HEALTH, JAY BALAGTAS,
`
`THOMAS HUI, JEFFREY POAGE,
`
`
`
`
`
` Defendants.
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`- 1 -
`EXHIBITS 23-34 IN SUPPORT OF MOTION TO AMEND COMPLAINT
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`Electronically Received by
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`Superior Court of California,
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`Contra Costa County
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`3/27/2024 2:40 PM
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`By: A. Stewart, Deputy
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`EXHIBIT 23
`EXHIBIT 23
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`
`
`
`
`
`
`
`From: Mike Robinson
`Sent: Tuesday, October 30, 2018 10:00 PM
`To: Jack Thompson
`CC: Cal Knight
`Subject: Special Board Meeting Prep
`Attachments: JMH Board Pre-Reading - September 2018.pdf
`
`Jack,
`I’m pleased to hear you'll be able to join us for the special board meeting on November 14"° We
`are part way through the process of evaluating a significant partnership opportunity that will
`potentially allow John Muir Health to serve our community with greater capabilities at a lower
`
`cost. The attached white paper provides some background on the situation and why we are
`
`interested in the opportunity. There is also information about industry-wide challenges that are
`
`influencing this discussion and the decision. Please review these materials.
`
`Cal and | would also like to schedule some time with you to provide more “color.” Jackie Schroder
`
`will be in touch to coordinate calendars. | look forward to seeing you and sharing more
`information about our upcoming discussions.
`
`-Mike
`
`ps — Please sign the attached confidentiality agreement and bring it to our meeting. We have an
`
`NDA with the potential partner.
`
`JMH-052341
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`
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`3
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`JOHN MUIR
`HEALTH
`
`Sent from Mike Robinson and Cal Knight:
`
`Dear JMH Board Members:
`
`Our next Board meeting will be Wednesday, September 26"" at 5:00 PM. Packets
`
`for the meeting will be available this Friday through a link to Box.com (you will
`
`receive the link in your JMH email).
`
`We write separately today in order to forward several supplemental pre-reading
`
`items. The first item is a Board Member Confidentiality Agreement relating to a
`
`possible collaboration between Optum and John Muir Health. Please bring a
`
`signed copy of the Agreement to the Board meeting next week. We take the
`
`unusual step of requesting such an Agreement given the heightened need for
`
`confidentiality on this matter, the fact that we are party to a strict confidentiality
`
`agreement with Optum, and the extensive confidential dialogue we will have with
`
`the Board over the next few meetings as we continue to evaluate this possible
`
`collaboration.
`
`Attached you will find four additional items:
`
`1. A briefing paper for the Board, “Solving our Challenge while Creating New
`
`Opportunities” (background information for the Optum discussion).
`
`2, An article from Hammond Hanlon & Camp regarding Transformation and
`
`Scale (further background information for the Optum discussion).
`
`3. Adeck regarding the UCSF/JMH Cancer Program collaboration (this includes
`
`some confidential content).
`
`4. Apress release regarding the UCSF Cancer Program Collaboration. (We
`
`expect to distribute this publically on the same day as the Board meeting
`
`and we want you to see it in advance of the public release).
`
`Thank you in advance for reviewing these materials before the Board meeting
`
`next week. Please feel free to contact us if you have questions.
`
`JMH-052342
`
`
`
`QP JOHN MUIR
`>
`@ HEALTH
`
`Board Member Confidentiality Agreement
`
`Prohibited Disclosures. By signing this Confidentiality Agreement (“Agreement”), I commit
`not to disclose any of the following (collectively “Protected Information”: (i) the fact that
`John Muir Health (““JMH”) is engaged in discussions regarding a potential transaction with
`Optum Healthcare and its affiliates (‘Optum”), (ii) the fact JMH is considering the
`outsourcing of services to Optum or other third parties, or (iti) any non-public information
`learned about Optum or JMH outsourcing activities.
`
`Permissible Disclosures. [ further acknowledge that the above non-disclosure provision does
`not apply to a disclosure of Protected Information when made by me to (1) another member of
`the JMH Board, (ii) a member of JMH senior management whom I reasonably believe to be
`aware of the potential Optum transaction, or (iii) anyone identified to me by another JMH
`Board member or member of JMH senior management as being involved in evaluating the
`potential Optum transaction.
`
`I further agree that I will use my best efforts to safeguard the
`Reasonable Safeguards.
`confidentiality, accessibility, and integrity of the Protected Information made available to me.
`
`Duration of Obligation. [ understand that the disclosure prohibition shall remain in effect
`until the earlier of (1) a vote of the JMH Board terminating this Agreement or (ii) written
`notice from the JMH CEO terminating this Agreement.
`
`Board Member’s Signature
`
`Type/Print Board Member’s Name
`
`Date
`
`JMH-052343
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`
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`JOHN MUIR
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`D4 HEALTH
`
`Solving our Challenge while Creating new Opportunities
`
`“One thing | love about customers is that they are divinely discontent. People have a voracious appetite
`for a better way. Yesterday’s “wow” quickly becomes today’s “ordinary”. You cannot rest on your laurels.
`Customers simply won’t have it.” -Amazon CEO, Jeff Bezos, in 2017 letter to shareholders
`
`Macro Healthcare Challenges
`
`Rising Healthcare Spending:
`Per CMS, U.S. healthcare spending is projected to rise 5.3% in 2018 and an upward trend is forecasted
`for the next decade. The primary drivers of the increased spending include the aging baby-boom
`population that will increase enrollment in the Medicare health insurance program for the elderly and
`disabled, a climb in the prices of medical goods and services and more disposable personal income.
`CMS also projected that healthcare spending will rise approximately 5.5% annually from 2017 to 2026
`and will comprise 19.7% of the U.S. economy in 2026. This is up from 17.9% in 2016.
`
`Higher Premiums and Out-of-Pocket Expenses:
`Since 2013, the average individual health insurance premiums have increased 99% and family premiums
`have increased 140%. Annual major medical health plan deductibles are rising in an effort to keep pace.
`
`Higher deductibles mean consumers need to pay even more out-of-pocket before their major medical
`insurance may start paying benefits. The annual out-of-pocket maximum in 2017 was $7,150 for self-
`only coverage and $14,300 for family coverage. In 2018, the out-of-pocket maximums has risen to
`$7,350 for self-only coverage and $14,700 for family coverage.
`
`Healthcare Consumerism:
`Rising costs have compelled employers and payers to shift more of the cost to employees and members.
`When consumers start spending more they tend to pay more attention to value and price. They expect
`a consumer experience that is akin to a modern retail experience (Apple Store), digital engagement
`(Amazon), on-demand access (Netflix), vertical expertise (Luxottica), transparent pricing and simple
`payments (Paypal) all while leveraging the power of the internet, mobile, social media, and advertising.
`The resulting reality is that healthcare organizations face a far more informed public that is expecting
`increasingly more from their healthcare experience which require significant investment, innovation and
`a different orientation towards the customer... meeting the customer where they are providing the right
`service or experience to the right person at the right time. We must create those “moments” that leave
`a lasting and positive impression on that consumer.
`
`Health systems need to navigate and execute the changes needed to meet the new consumer demands.
`An effective consumerism plan requires a strong foundation of data and analytics to construct accurate
`views of consumer expectations (which will vary by customer segment) with regard to value and price.
`Understanding the nuances of these segments will enable the prioritization of leadership efforts across
`the organization to achieve better patient/customer experiences, at a more affordable price.
`
`Healthcare organizations, on the whole, are still catching up but consumer expectations are not waiting
`which has accelerated external disruption and significant investment in new ideas to attempt to solve
`this challenge,
`
`External Disruption in Other Industries & Healthcare:
`External disruptions have rapidly taken place in many other industries that have affected those delivery
`models and consumers in many fundamental ways. These disruptions have had the material effect of
`
`JMH-052344
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`JOHN MUIR
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`D4 HEALTH
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`forcing down unit cost (e.g., airfares, hotel rooms, banking fees, retail goods and services, etc.), thus,
`forcing out “old ways of doing things” ~ while, simultaneously, improving the overall user experience.
`
`Disruptive forces in healthcare are very present (e.g., Amazon & Apple announce health clinics for their
`employees; Walmart seeking to acquire Humana; JP Morgan, Amazon and Berkshire Hathaway joining
`forces to reduce healthcare costs; Google’s parent company — Alphabet — invests $375 million in Oscar
`Health, a small insurer that thinks it can use big data to revolutionize the industry). Care is increasingly
`moving away from acute centers. While traditional Healthcare M&A continues at an increase of 91%
`
`over the first half of 2017, non-traditional partnerships are also proliferating to gain scale and leverage.
`
`The healthcare industry is facing an existential threat.
`
`JMH Problem Statement
`
`JMH continues to experience challenges related to shifting payer mix, declining PPO volume, cost
`
`increases to support technology & innovation, and a growing administrative operation to improve
`quality, safety and the customer experience that has created cost deficits that cannot be offset by
`higher pricing for consumers and employers.
`This has become increasingly challenging to solve and will be insurmountable in the future without
`significant changes. Comparable products are available in the local market at a 20-25% lower cost with
`an equal or superior customer experience. A disruptive change will be required to battle the cost
`pressures, market risks and deliver on customer expectations for JMH to remain the system of choice in
`the East Bay.
`
`Context for the New JMH Mandate
`JMH has been very successful both clinically and fiscally and continues to grow but it must address the
`increasing complexity, challenges and the pace of change in the health care environment.
`“For John Muir Health to continue to grow and to remain a successful and independent health system for
`our patients, community, physicians and staff, we must continue te deliver outstanding quality and
`service, but at a more affordable cost. This is our challenge and this is our opportunity”.......Cal Knight
`We believe patients come to JMH because of the outstanding quality and experience that we provide
`but, as the environment rapidly changes, quality and experience are not enough. More patients are
`choosing less expensive options which impacts our payer mix and our ability to continue to invest in our
`
`mission.
`
`JMH is simultaneously experiencing declining PPO volume [since 2014, HMO/PPO Compounded Annual
`Growth Rate (CAGR) declined 4.9% while Medi-Cal CAGR has increased 4.7% and Medicare CAGR
`increased 2.0% during the same period] and rising incremental costs to support our technology and
`innovation. This reality has resulted in a more expensive administrative support operation to improve
`the customer experience, creating cost deficits that are becoming increasingly insurmountable without
`intentional interventions.
`
`JMH launched organization-wide Transformation in 2017 to deliver the same or better quality and a
`
`better patient experience but at a lower cost. Many important initiatives are taking place across the
`health system. While progress is being made, even more disruptive internal change is required to battle
`
`the cost pressures, the market risks, the regulatory uncertainties and other external disruptive forces.
`Anew JMH support services delivery model is required to help to significantly address the current level
`of spending. Before launching into a specific approach to address the future support service delivery
`
`model and the various options considered to date, it will be constructive to understand some of the
`ongoing JMH strategies that have been successful as well as the JMH due diligence efforts to date.
`
`JMH-052345
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`JOHN MUIR
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`D4 HEALTH
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`JMH Partnerships
`Strategic alliances are about “connecting the dots” and building durable and lasting relationships. For
`healthcare providers, these partnerships allow organizations to access and leverage expanded benefits
`of scale that can help streamline processes, improve patient care, reduce costs and lead to innovation.
`Over the past several years, JMH has been pursuing various strategic partnerships to remain a very
`successful independent regional health care system. During this period of strategic investment, JMH
`significantly strengthened its franchise in the East Bay and is building a competitive integrated delivery
`network in the broader San Francisco Bay Area. Below are some of the noteworthy partnerships:
`
`JMH and Stanford Children’s Health:
`Entered into JV in 2012
`PICU opened in April 2015
`Achieved California Children’s Services (CCS) Certification in 2017
`Continued build out of additional pediatric specialties and programs
`
`oo 0 0
`
`oo
`
`JMH and Tenet:
`Entered into partnership in 2013
`Focus to improve care and align OP and physician-focused care throughout Tri-Valley region
`© Covers areas to the south of JMH’s PSA and SSA
`©
`Initial investment has generated ~$50 M dividend and funded Network JV capital investments
`
`JMH and UCSF Health:
`o BayHealth
`— Developed an OPC in Berkeley that opened in mid- 2018
`- Created interoperability solutions (Epic to Epic as a start)
`o Canopy Health
`—
`License granted in August, 2015
`~ Over 22,000 members and growing
`~ Contracts with WHA, United Healthcare & HealthNet
`© Planning a joint East Bay Cancer Program
`
`JMH continues to pursue its strategy to become the health system of choice in the East Bay and will
`continue to address other strategies to grow market share and access increased scale via partnerships.
`
`Might a partner for support services be the solution?
`
`JMH Revenue Cycle (As a proxy for Smart Source Evaluations and Shared Services Development)
`
`The broader strategies and opportunities for rethinking the administrative services model began a few
`years ago with serious consideration of outsourcing the Revenue Cycle in 2015. Due diligence was
`conducted with national firms: Cymetrix (now owned by Navigant), Parallon (developed inside of HCA),
`Conifer (developed inside of Tenet) and Accretive Health (developed in partnership with Ascension).
`Finalists were Cymetrix and Conifer. In mid-2015, JMH received board approval to contract with Conifer.
`Ultimately, JMH withdrew from these discussions due to concerns the originally arranged business deal
`would not materialize as originally planned. Too many hidden fees had emerged in contract review and
`potential risks of this relationship began to outweigh the cost savings/benefits of the deal on the table.
`Following these discussions, a different/internal direction was taken. Revination was launched. This was
`initially an innovation tournament with the dual purpose of broadening awareness of opportunity areas
`while engaging staff in a more meaningful and creative manner. Revination received nearly 400 ideas all
`generated by the revenue cycle employees.
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`JMH-052346
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`JOHN MUIR
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`D4 HEALTH
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`Revination was approved in the Fall of 2015 as a 2-year Revenue Cycle transformation effort primarily
`focused on the hospitals with dedicated ITS resources to help implement winning ideas. This delivered a
`1%+ improvement in net revenue lift (2016 vs 2015) which was sustained and further improved upon in
`2017. Cumulative benefits to date exceed $25M with an ROI of more than 6:1. Additional Revination
`benefits included process and cost efficiencies and the achievement of a top-quartile “cost-to-collect”
`performance of 2.5% of net patient revenue.
`
`Shift from “Outsourcing” to “Smart-sourcing” Mindset (Revenue Cycle, IT and beyond)
`Some processes within Revenue Cycle, IT and other administrative areas have become “commoditized”
`and, therefore, there are many vendors in the market who provide management of these functions.
`Improved approaches to contracting with vendors in the revenue cycle (e.g., “Champion/Challenger”,
`vendor assignment optimization, embedding vendor SME’s in denials management processes, etc.),
`
`combined with more innovative approaches being deployed within the IT Department, have saved on
`costs and given rise to new “smart-source” arrangements. Other examples of smart-sourcing within IT
`include a near shore/offshore agreement with Deloitte for report development and support as well as
`an arrangement with Health Catalyst to enable labor arbitrage for certain Analytics functions. Other
`smart-sourcing partner scenarios are being evaluated to identify other sources of arbitrage and/or
`efficiency.
`Additional efforts have been focused on high reliability (HRO), brand promise, Medical Center
`integration, direct physician contracting, strategic partnerships, clinical redesign and other initiatives to
`drive down costs. JMH adopted “Fit for Growth” strategies, zero-based budgeting was implemented,
`FTE reductions have materialized and a savings path has materialized.
`However, these efforts have also highlighted challenges in addressing all the potential opportunities in
`the JMH environment due to competing priorities, limited management bandwidth, scarcity of uniquely
`skilled resources (e.g., EPIC SME’s) as well as the need for ongoing technology & innovation investments,
`Smart-sourcing strategies with individual partners should continue to yield positive results but there is
`concern that the existing limitations on management bandwidth and the heightened scarcity of skilled
`technical resources may limit the potential level of impact of smart-sourcing and/or act to impede our
`ability to integrate smart-source solutions. Lack of integration could lead to additional layers of cost.
`Therefore, the cost reduction path, while positive, is far from our required cost take-out trajectory.
`Given this reality, JMH has ventured further into researching larger scaling opportunities and strategies
`(e.g., shared services/NewCo & bundled Smart-sourcing of administrative functions ~ “single partner”).
`
`Exploring “bundled” Smart-Sourcing functions
`Hospitals are increasingly evaluating the sourcing of functions as they work to reduce costs. According to
`a Black Book Market Research survey, their 2nd-quarter 2018 outsourcing survey polled C-suite, hospital
`boards and senior managers from 709 hospitals. Nearly all hospitals (98%) are considering sourcing with
`third-party partners to gain cost efficiency (in clinical and non-clinical functions) so they can increase
`
`their focus on value-based care delivery. "Leading vendors have recognized the need to bundle services
`that are relevant to hospitals such as IT, cybersecurity, analytics, facility management, real-estate, etc."
`Black Book said areas in the diagnostic imaging service lines (e.g., tele-radiology and medical imaging
`equipment) are among the most popular sourcing areas currently being vetted by hospitals because
`many of them don't have financial means to invest in replacement, new and advanced imaging centers.
`80% of respondents said they were considering or vetting full Revenue Cycle management outsourcing.
`Black Book also indicated that the average overall cost reduction targets of hospital respondents was 20-
`24%.
`
`JMH-052347
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`JOHN MUIR
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`D4 HEALTH
`
`Exploring Operating Model for Shared Services/NewCo
`As a component of our Unity (Workday ERP) implementation, JMH worked with PwC in the latter half of
`2017 to better understand the evolving models available to structure health system administrative
`support services. Through these efforts, a Target Operating Model (TOM) for multi-tier Shared Services
`Capabilities (SSC) was contemplated whereby JMH would transition certain administrative functions
`(e.g., HR, IT, Finance, Revenue Cycle, Supply Chain, etc.) into a SSC — a new entity (“NewCo”). There are
`opportunities to achieve new value by organizing around this model to achieve further centralization,
`process efficiency, automation, FTE and cost efficiency.
`It has been contemplated that the initial NewCo transition would be virtual (limited physical moves) and
`that some functions would be centralized in the near/mid-term (locally). It has been contemplated that
`there would eventually be a new physical structure identified for a SSC — potentially located out of state
`(potentially in partnership with another health system) if JMH decides on this decision path. Based on
`current performance and the level of predictable outcomes, Revenue Cycle could be positioned for
`transition to such a NewCo, as a proxy for potential future expansion of the above SSC related functions.
`
`Ascension / Agilify (Due Diligence and Overview of Learning)
`Due Diligence has taken several forms thus far. Beyond the SSC work performed with PwC, JHM has
`participated in Shared Services conferences (best practices), conducted market research (e.g., Advisory
`Board case studies, SS webinars, etc.), and visited other Shared Services operations (inside and outside
`of healthcare). JMH leaders visited Ascension Ministry Services Center (MSC) leadership in Indianapolis
`to observe advanced shared services capabilities and the strong “lean” culture Ascension has developed.
`Examples of MSC end-to-end processes include the “Hire-To-Retire” team and the “Procure-To-Pay”
`team (both of which manage functions previously residing in multiple silos), By structuring end-to-end
`teams (rather than functional silos) and applying automation, Ascension has made break-through gains
`in process improvement and cost-efficiency and is one of the more advanced health systems applying
`automation to administrative functions. Over several years, they have created capabilities for assessing
`processes as candidates for automation and also building the automations {100+ at the Ascension MSC).
`This has led them to develop a wholly-owned company (“Agilify”) that serves Ascension MSC as well as
`other shared services organizations outside of Ascension. JMH due diligence also included visiting the
`Agilify offices to observe demonstrations of their automations and the platform they are utilizing (Blue
`Prism). JMH is currently reviewing a pilot scope of work for automation with Agilify while continuing to
`research other automation approaches and automation platforms (Automation Anywhere, UiPath).
`In addition to the platform, a key element in developing an automation roadmap is identifying the prime
`processes as candidates for automation. In concert with the current transformation and performance
`improvement initiatives, there is an opportunity to identify within JMH those sets of processes that lend
`
`themselves to automation. Criteria include the amount of manual work steps, the repeatability of the
`process and the predictability of outcomes. An effort is underway to identify/inventory such candidates
`both as we evaluate Shared Services development as well as evaluate smart-sourcing these functions.
`It should be noted that partnering with Ascension to perform JMH shared services functions in the
`Ascension MSC would require conforming to their highly standardized functional models. For example,
`MSC utilizes PeopleSoft Human Capital Management whereas JMH recently implemented Workday.
`
`JMH would not receive the benefits from standardization and scale without conforming to the MSC
`models.
`
`Optum as Potential Strategic Partner
`In August 2017, JMH approached Optum (which is owned by UnitedHealth Group, “UWHG”), as a possible
`option to address our support services solution. It was during this diligence that JMH identified that
`
`JMH-052348
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`
`JOHN MUIR
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`D4 HEALTH
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`deeper Optum capabilities existed; particular in the functional areas of IT operations (Optum Connect),
`Revenue Cycle (Optum3600, Care Coordination (Optum Care) and many other advanced consumer
`capabilities.
`
`This marked the beginning of exploration of Optum (“Project 42”) as a strategic smart-sourcing option
`and the launch of a capabilities assessment. Key capabilities and infrastructure being reviewed include:
`- Revenue Cycle Management (end-to-end HB and PB functions)
`- Information Technology (Application Management, Info Sec, IT contract/vendor management, etc.)
`- Care Coordination (Proactive Care Management, Episodic Care Coordination, Care Delivery Alignment)
`- Analytics & Transformation of above scope areas and support of Supply Chain, Strategy, CIN, MSO, etc.
`- Perpetual technology investments and co-investment opportunities
`- Consumer driven innovations to drive performance as a market leader
`
`- Ability to effectively align and manage multiple administrative services
`
`We are currently in the midst of a more in-depth phase of opportunity evaluation with Optum. This
`process involves a significant investment of JMH leadership {i.e., JMH executives for potential in-scope
`functions) time in the process and a deeper review of the value proposition (i.e., pressure test the
`assumptions),
`The broader topics surrounding SSC/NewCo, Single Partner Smart-sourcing and automation touch
`multiple parts of the organization. As such, it is important JMH leadership and the Board of Directors to
`have as much information as necessary to make informed decisions regarding the best support services
`delivery approach to achieve a world class customer experience and the new cost mandate.
`This review will also include a thorough consideration of projected benefits and identification of
`potential risk scenarios and mitigation strategies. We would expect the following activities to occur
`through the balance of the year:
`Governance Updates (May be modified as process progresses)
`
`« September Board Update
`e October Board Retreat
`
`« December Board Meeting
`
`e Executive Committee as appropriate
`
`Major Diligence Activities
`
`e Establish scope
`
`Employee impact assessment
`
`Governance and future org structure
`
`Business deal structure
`Physician location assessment
`
`Risk mitigation and strategies
`
`* ¢¢se 8#® @# @# @ @
`
`
`
`Communication plan
`
`Legal review
`
`Financial business case
`
`Summary
`In summary, JMH is facing numerous macro, regulatory, cost and operational complexities in the
`healthcare environment. These are posing significant changes and risks which, if left unmitigated, may
`eventually lead to larger problems that will become increasingly expensive and possibly too big to solve.
`
`JMH-052349
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`JOHN MUIR
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`D4 HEALTH
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`Out of the four options considered to address the current set of market conditions, Single Partner Smart
`Sourcing emerges as the best possible source for JMH with the assumption that the due diligence
`process will yield results that will validate our initial analysis and understanding.
`Optum’s overall infrastructure, scale, technologies, capabilities, human capital, experience base, and
`depth and breadth of market presence — combined with their interest and vision in changing healthcare
`aligns well with JMH’s overall goals and objectives.
`
`JMH-052350
`
`
`
`Hammond
`Hanlon
`Camp LLc
`
`+The Elements of Capital and Strategy
`ATLANTA | CHICAGO | NEW YorK | SAN DIEGO
`
`H2C PERSPECTIVES
`
`The Evolution of Healthcare Transformation:
`From Scale to Integration
`
`September 2018
`
`What happens when economies of scale are not enough? We believe it likely the
`era of consolidation among hospitals will begin to slow as markets mature and
`attention shifts to the next stage of health care’s evolution
`
`D
`
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`2.
`
`}
`
`|
`
`ACA Implementation
`to Today
`: en
`
`pom
`
`E
`= 25
`a ern ACA Irodlementation
`&
`to Today
`yp
`B 20
`/
`fs
`
`50,000,000
`
`4
`
`[
`0
`-
`Li
`2000
`2010
`2020
`2030
`2040
`2050
`vom Commercial & Other «mm tYedicad/CHIP
`Medicare
`Uninsured
`
`7"
`
`Ee 15
`
`3 a
`= 10
`
`2000
`
`2010
`
`2020
`
`2030
`
`2040
`
`2050
`
`wae Medicare
`
`1m All Non-Medicare
`
`Source US Census, Centers for Methcore & Medicaid Services, Kaiser Fomily Foundation, Notional institutes of Health/Centers for
`Disease Control and Prevention, Forecast assumes (1) constant utilization rates: (2) maintenance of current relationship between
`Medicare seniors and Medicare blind and disatiled populations; (3) growth of Medicaid enrollment at the same rate as overall
`population growth; and (4) flac uninsured population
`
`HAMMOND HANLON CAMP LLC
`
`H2c Perspectives « The Evolution of Mealthcare Transformation
`
`JMH-052351
`
`
`
`2
`© SERVE COMMUNITIES
`ce « & ADVANCED TECHNOLOGY
`DELIVER j = | @ IMPROVE PATIENT EXPERIENCE
`GREATER fe 2 G & IMPROVED QUALITY AND EFFICIENCY
`VALUE 2 Oo 2 Z HeattH INTEGRATED CARE MODEL
`SCALES | COST SYNERGIES | 3 5
`Lower be
`> Zw
`cOsTs uy PERSONALIZED PATIENT CARE
`cs <
`COORDINATED SERVICES
`ACCELERATE GROWTH
`MODERNIZE HEALTH CARE
`REDUCE COSTS
`VALUE-BASED APPROACH
`ACCESSIBLE CARE
`ATTRACT TALENT
`ENHANCED SCALE
`
`Lal
`
`hud
`
`Mu
`
`had Ss
`
`ws
`
`the absolute certainty that
`demographic trends will result in
`sudstantial and disproportionate
`
`increases in the utilization
`of healthcare services by
`lower-paying, higher-utilizing,
`government-insured patients.
`
`This puts enormous pressure
`on healthcare providers to
`better manage their costs or to
`cost shift to the commercially
`insured. Neither alternative
`is pleasant, nor is it easy.
`50, itis only reasonable that
`healthcare providers would try
`to develop mitigating strategies
`amidst these increasingly dire
`circumstances, Some of these
`strategies are based on the
`premise that technological
`innovation will somehow present
`a solution. Others assure that
`mergers, whether horizontal
`(providers acquiring providers
`and health plans acquiring health
`plans) or, more rarely, vertical
`{providers acquiring health plans
`and vice-versa), will help address
`this enormous problern,
`
`Healthcare Transaction Volume and Value Trends (Announced)
`
`$400
`
`$350
`
`Analysis of Horizontal
`Mergers
`
`There are few horizontal mergers
`announced in the healthcare
`industry today that do not identify
`in their press releases the Four Key
`Virtues of (1) cost synergies, (2)
`improved efficiency, (3) improved
`quality, and (4) better customer
`service as the key drivers of
`the merger. Patients are often
`
`explicitly cited as the principal
`beneficiaries of the merger, though
`consumers (those who pay for
`services, whether they are patients
`or not) are implicitly identified
`as beneficiaries of the proposed
`merger, too. But do horizontal
`mergers deliver on these goals?
`
`Surveys attempting to measure the
`benefits of mergers reflect mixed
`results. The American Hospital
`Association (AHA) and Charles
`
`
`
`{#) SUUNjOA
`
`2003
`
`2008
`
`2013
`
`I) Value
`
`common Volume
`
`$300
`
`$250
`
`
`
`
`
`
