Cost Management & Financial Performance

December 14-15, 2015

Letters of reference are not required at this time.

Dallas, TexasPEOPLE QUALITY EFFICIENCY GROWTH

-200

-100

0

100

$200M

CMC operating margin

2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

3%

-12%

2018 op. margin

Source: CHST Patient and Financial data; Scenario model

CHST OPERATING MARGIN RANGE WITHOUT INTERVENING ACTION(ASSUMES NO ACTIONS BY CHST/UTSW)

ForecastActual

2013 op margin: ~12%

Why are we here?

2

Dallas, TexasPEOPLE QUALITY EFFICIENCY GROWTH

We offer programs in:

Asthma Management

Weight Management

Injury Prevention

Behavioral Health

The Health and Wellness Alliance

$65 million in direct charity care

3

Large, Growing Market

• 1 of 9 children in U.S. live in Texas

Significant Community Needs

• 29% of  Dallas County children live in poverty

• 2 of 3 children need financial assistance

• 7 out of every 10 public school children in Dallas County eligible for free and reduced-price meals

• 18% of  Dallas County children are uninsured

• Only 31% of TX physicians accept new Medicaid patients (Down from 42% in 2010)

Significant Pediatric Medical Needs

• 50,000 children in N. Texas with asthma

• 36% of Dallas County kids are overweight

• or obese

• 28% of  Dallas County children are malnourished

• 30% of toddlers not fully immunized

Invest for the future: To extend care into our community

Dallas, TexasPEOPLE QUALITY EFFICIENCY GROWTHPrivileged and Confidential

Benchmarking

Dallas, TexasPEOPLE QUALITY EFFICIENCY GROWTH

Why Benchmark?

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If you cannot measure it, you cannot improve it

- Lord Kelvin• Objectively identify opportunities:– staffing improvements– operational efficiencies – cost reduction opportunities

• Systematically develop and communicate:– business case for change– quantitative baseline analysis of existing processes,

technology and KPIs– reference point for implementing and managing change

Dallas, TexasPEOPLE QUALITY EFFICIENCY GROWTH

Why Truven / ActionOI?

1. Scale: Largest healthcare network

• Database of more than 750 healthcare organizations

• Over 300 departments, ranging from Nursing and Surgery to Supply Chain and Community Outreach

2. Scope: Opportunities for population health, physician/clinic services

3. Timeliness: Quarterly data submissions & reports

4. Economy: History of quantifiable impact on performance improvement/ROI

• Advantage Community provides access to network of 22,000 professional to help identify best practices

5. Integrity: Robust data analysis & normalization

• Independent reviews & audits

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Dallas, TexasPEOPLE QUALITY EFFICIENCY GROWTH

Understanding and Using Cost Information

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• Organizational view– Global, directional– Indirect expense

• Departmental view– Focused– Direct expense

• Foundational view– Value of balance– Opportunity for forecasting– Underscore our mission

Organizational

Departmental

Foundational

Dallas, TexasPEOPLE QUALITY EFFICIENCY GROWTH

The Budgeting Process

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Volume Projections

Revenue Challenges

Expense Management

Flexibility & Speed

Challenges and Future Goals

Dallas, TexasPEOPLE QUALITY EFFICIENCY GROWTH

Establish Methodology and Build Reports

Collaborate to Test

Establish Feedback loop and timelines

Continuous Review Cycle

Flexible Budget Reports

Dallas, TexasPEOPLE QUALITY EFFICIENCY GROWTH

Conclusion