Proposal for Reopening Palm Drive Hospital with Emergency and Acute Care Services

Transcription

1 Appendix B Proposal for Reopening Palm Drive Hospital with Emergency and Acute Care Services By: The Palm Drive Health Care Foundation and Allied Palm Drive Physicians Contact: Gail Thomas President, Palm Drive Health Care Foundation

2 Executive Summary This proposal is the work of community members, physicians, business leaders and specialists and has been developed with our best understanding of the interests of the community in mind. What is being proposed is not a takeover of Palm Drive by another entity but a collaboration between the Palm Drive Health Care District (the District), the Palm Drive Health Care Foundation (the Foundation), the allied Palm Drive Physicians (the Physicians) and the community to reinvent Palm Drive Hospital as a 21 st century medical center. The business model proposed focuses on maintaining the emergency and acute care services that the community wants and needs while expanding specialty and surgery services that capture market share from the greater North Bay region in order to make the new medical center financially viable. In order to express this new focus, rebranding of the operations to Sonoma West Medical Center (SWMC) and the introduction of medical institutes within the medical center environment is anticipated to build community support and attract patients from throughout the region. Specialties like Neurology, Endocrinology, Urology and Rheumatology are in short supply in Northern California and will act as magnets for the new operations while Orthopedic, Neurosurgery and Urology Surgery will be the primary financial drivers for success. This plan also anticipates alliances with local independent physicians, regional health care providers, local health clinics, Redwood MedNet, a Health Information Exchange (HIE) provider, OffSiteCare, a local telemedicine provider, EHRI Inc., and Electronic Health Record (EHR) provider, each of whom will be providing services at below market rates and/or donating services. In order to create operational excellence, a new non- profit, Sonoma West Medical Center, would be formed with a 13 member board to take over governance of the medical center. The board would be appointed based on expertise in the areas of business process management, medical informatics, medical services delivery, and related fields. The initial board would be approved by the District, the Foundation and Allied Physicians and be self appointing after startup. This model has been successfully used in other health care districts. The plan anticipates the district either leasing or transferring the hospital building, to SWMC and transferring the equipment and license. In the case of a lease of the property, the district would be expected to use tax proceeds to maintain and improve the building and major medical equipment. In the case of a transfer of the building, the district would be expected to use tax proceeds to support operations so that SWMC can afford to upgrade the building and major medical equipment. This plan anticipates philanthropy, district tax revenues, and lending to provide startup capital and to have operations provide positive cash flow within 12 months of

3 reopening. Financial analysis is currently underway to determine capital requirements for startup and ongoing profitability. Proposal Outline Introduction: This proposal is consistent with the District s charter to provide Emergency, Acute Care and Medical Services to the citizens and visitors of the District as well as the Measure W parcel tax initiative to ensure survival of Palm Drive Hospital and access to local emergency, acute care, medical and physician services. As such, we believe that this proposal is in the best interest of the district, its citizens, and residents and visitors of the North Bay Area. The proposed business model focuses on maintaining the emergency and acute care services that the community wants and needs while expanding specialty and surgery services that capture market share from the greater North Bay region to make the new medical center financially viable. The attached Business Plan illustrates this strategy. Business Plan The attached business plan above will continue to evolve as the organization moves closer to reopening the hospital. Financial pro formas will be delivered as they are completed with an early draft anticipated by September 14th. The attached work plan in Appendix B demonstrates the financial planning process. Description of Health Services to be Offered The business plan describes anticipated services to be offered. Additional services are currently under discussion and negotiation with alliance partners and medical providers. Hospital Management and Administration SWMC will be managed by a qualified team of hospital administrators under the governance of a 13 member board of directors, each of whom will be chosen for their business, medical delivery, and community experience and approved by the district board. All departments will be staffed in accordance with accrediting and licensing requirements. To the extent possible and practical, former Palm Drive staff will be recruited for clinical positions. Volume forecasts and payer mix data will be provided in upcoming financial plans. Marketing Sonoma West Medical Center will be a major priority with an emphasis on direct marketing of specialty services to the North Bay region. An emphasis on services that are in short supply in the region will attract patients from around the Redwood Empire to Sebastopol. Use of Buildings, Equipment Existing at Palm Drive Hospital

4 This proposal anticipates the full use of Palm Drive Hospital, all equipment, which has not been repossessed, and any available and usable supplies. In addition, the reopening of the hospital anticipates rehabilitation and repair of the facility including but not limited to deferred maintenance. Additional equipment will be acquired on an as needed basis. Accreditation will be obtained from AOA consistent with former accreditation by Palm Drive Hospital. The plan anticipates the transfer of the existing Palm Drive acute care license, which is currently in suspense. Key Personnel Key Personnel will be hired once the district has made a commitment to reopen the hospital. Recruitment is underway for a hospital CEO. Organizational Relationship History and Business Structure The organizational relationship between the District and Sonoma West Medical Center and the Palm Drive Health Care Foundation is found in Attachment A. The history and organization of the proposing organization, Palm Drive Health Care Foundation, is available upon request and is well known to all parties. Ses Appendix A for relationship diagram. How Sonoma West Medical Center will benefit District Residents District residents will have access to 24/7 emergency services, stat lab, and medical imaging, which are otherwise not available west of highway 101. Access to a variety of specialty care institutes will provide a higher level of medical expertise in the local community. Integration with local primary care physicians will support the delivery of primary care in the community. Conflict of Interest The proposal does not anticipate conflicts of interest that are not easily managed by recusal of SWMC board members from decisions that might affect their personal or corporate finances. Since board members for SWMC have not been appointed, it is not possible to evaluate possible individual conflicts of interest at this time. Electronic Medical Records System The proposal anticipates the free use of HarmoniMD, a cloud based EMR platform, connection to the Rain Tree Billing System of EA Health, the existing PACS system, an LIS system and other software applications that are connected through HL7 health information exchange protocols. Insurance coverage for facility operation and management. The Sonoma West Medical Center will carry full insurance appropriate to a medical facility and will carry appropriate coverage for management and board members. Palm Drive Health Care District will be named as a co- insured. Demonstrated experience in providing high quality health services.

5 The proposal is developed in partnership with the physicians of Palm Drive Hospital and intends to employ former staff to provide the same caring and outstanding clinical service that has been a hallmark of the hospital for 70 years. Appropriate contract termination provisions. The proposal anticipates a transfer of district assets as defined by the California Health and Safety Code, which allows for the reversion of assets to the District if SWMC discontinues medical services or fails to meet agreed upon goals.

6 Sonoma West Medical Center Business Plan Our Mission: To save lives, to comfort the hurting, to heal the sick, and to educate all with skill, compassion and technology A New Small Hospital Concept for the 21 st Century With the closure of Palm Drive Hospital, our medical community has rallied to introduce a new small hospital concept focused on outpatient services while maintaining critical emergency and acute care services. This model is unique because of the availability of world- class physicians in our area who will provide an array of specialty services not otherwise available locally. While it has often been believed that Palm Drive suffered because of its proximity to Santa Rosa and major local hospitals, this plan exploits this proximity by reversing the flow of patients and drawing on the large population centers of Petaluma, Cotati, Rohnert Park and Santa Rosa for outpatient and surgery business. At its heart, the plan relies on the high quality of clinical care that Palm Drive has had in place while expanding specialty services that build on this excellence. Direct marketing of these services is anticipated to attract patients from across the North Bay Area and enhance revenues across all service lines. The plan also anticipates close alliances with local and regional healthcare providers by adopting technologies that expand specialty patient care into local clinics, other hospitals in the region and world wide through telemedicine. Cloud based technologies for telemedicine, lab results, imaging and electronic health records will connect physicians and patients from any location including at every bedside. This unique opportunity to be a hub for telemedicine for Northern California will be led by Dr. James Gude, the renowned pioneer of telemedicine, and a team of specialists he has recruited.

7 24/7 No Wait Emergency Services Foremost in the minds of West County residents is the loss of the Palm Drive Emergency Room, which has served the community for over 70 years as the only emergency room west of highway 101. The ER saw over 7,000 patient visits a year, many, life threatening in nature. This plan will expand the services available in the ER with on site and telemedicine specialists who are part of the Gude telemedicine team. Our plan is to upgrade the emergency room and to adopt new protocols that will shorten wait times and add comfort to patients by adopting an observation bed model. This No Wait model seeks to move patients from the emergency room into an observation bed once they are stabilized and if they need to be to be observed before going home. The No Wait concept draws on the experience of St. Helena Napa Valley Hospital where it was responsible for an increase of 50% in ER visits when marketed in the region. With Sutter moving north of Santa Rosa and Memorial being increasingly impacted by heavy emergency room traffic, there is every reason to believe that SWMC will see an even greater increase from the Cotati, Rohnert Park and West Santa Rosa areas. With increases in ER visits, the facility will see additional revenue from imaging, lab and admissions, which will help make the operations financially viable.

8 Upgraded Inpatient Services SWMC will be focused on outpatient services but will run an efficient inpatient service as well concentrating on support for specialty surgery including Neurosurgery, Orthopedics, Urology, and General Surgery while continuing to accept admissions from local physicians and the Emergency Room. Each patient room will be equipped as a telemedicine portal so that patients can conference with physicians and specialists from off site locations. When specialists are onsite, they will be available for consults as well. Inpatient rooms will all be single bed care with amenities that make patient stays as comfortable as possible and make it welcoming to family members. Meals will be served from a menu and be made to order from organic local food when possible to improve nutritional benefits. Integrative medicine options such as acupuncture, massage, and behavioral health will be available by patient request and with physician approval. All aspects of patient needs will be managed by a patient advocate who will be responsible for patient satisfaction from the point of admission to the time of discharge. physician. Transition to the home will include coordination with local home care programs and patient s primary care This inpatient program will build on the high quality of nursing care that Palm Drive Hospital has been nationally recognized for in the past and will coordinate with discharge planning to assure continuity after the hospital stay. The primary focus for inpatient services will be to support the active surgery institutes for overnight surgery stays. This destination medicine approach will make Sonoma West Medical Center the ideal place to have elective surgeries and promote the surgical institutes as well as creating a superior experience for patients admitted from the Emergency Room.

9 ICU and Telemedicine Services Dr. James Gude, the renowned intensivist will manage the ICU with onsite daytime coverage and telemedicine coverage nights and weekends. This program mimics Petaluma Valley Hospital and San Leandro Hospital where Dr. Gude manages the ICUs and reduces the cost of managing an ICU while continuing high quality care. Dr. Gude will return to Palm Drive with an expanded telemedicine program that will serve Palm Drive as the recipient of telemedicine for the ER, ICU, and ward programs as well as the hub for services for other rural hospitals. The telemedicine program at Palm Drive was instrumental in bringing stroke intervention, pediatric critical care, and other specialties to Palm Drive in the past and with additional specialties, will make SWMC unique in the region. Telemedicine will also be used to moderate the cost of call coverage for the ER while providing a higher level of services. Dr. Gude s telemedicine programs also provide an opportunity for physicians and nurses to learn from hospitals around the world and to participate in consultations outside of the US. With every bed equipped for telemedicine and every physician office able to be a telemedicine hub, patients will have more access to their family doctors and the specialists working with SWMC whether they are at home or in the medical center. An important aspect of Dr. Gude s work is Continuing Medical Education for nurses and physicians, which provides CME credits at no cost with grand rounds every Wednesday. Residents from UCSF will also round at SWMC for education in rural hospital care. With specialists onsite, there will be more options for nurses and physicians to gain from specialty education.

10 Specialty Institutes At the heart of SWMC is the Specialty Institute led by a foremost physician team practicing within the medical center environment. Each of these will encompass clinical care, education and research and will be presented to the community through a comprehensive patient outreach program. While it has often been said that Palm Drive Hospital suffered by being close to the major hospitals in the region, these institutes will benefit by having access to world- class physicians and patients who live in Sonoma County and beyond. While some specialties will act more as magnets for patients, others will be critical to the financial engine of SWMC. As an example, the North Bay Neuroscience Institute led by Dr. Allan Bernstein will offer many services not available in the area including: Memory disorders and brain health, headache and migraine, neuropathy, movement disorders, epilepsy and stroke as well as community education and research that includes drug trials and clinical research. Working with Dr. Bryan Periera, a noted neurosurgeon, the North Bay Neuroscience Institute will be one of the only neurology centers in the North Bay and draw patients from Mendocino and Lake Counties where there are no neurologists at present. Working with the Gude telemedicine hub concept, Dr. Bernstein s team will provide neurology consults to the hospitals north of SWMC. Dr. Bernstein and Dr. Periera are already planning a pain management program at SWMC as well. Other institutes will include: Bollinger Orthopedic and Sports Medicine Institute Periera Brain and Spine Institute Bretan Urology Institute North Bay Endocrinology Institute North Bay Rheumatology Institute North Bay Wound Care Institute And others currently under negotiation

11 Other Service Lines Additional service lines will be included in the SWMC business model including but not limited to: Laboratory Medical Imaging Surgery Infusion Center PICC Line Service Lifestyle and Longevity Programs Nutritional Healing and Exercise Behavioral Health Women s Health Physical Therapy Each of these programs will reflect the focus on quality patient care that Palm Drive has exemplified in recent years and will be led by the SWMC physician team. Market Positioning SWMC will be positioned across the North Bay Region as Your Intelligent Care Hospital Digital intelligence will be our signature for compassionate care at every step, from opening relationships and providing education through social media, to managing diagnostics and care delivery, and even the follow- up services required. The telemedicine connections between specialists, patients, and the care delivery team will provide extraordinary ease of access, safety, and medical precision. Each patient bed and care station will include intelligent tablets allowing for advanced access to the most appropriate sources of care needed, while optimizing patient records and assuring tactical care delivery, exactly as the physician team orders. Further, prospective patients from across the North Bay Region will learn about our services through surfing the internet and finding our web identity at the top of their search engine lists, as they request key content. SWMC will be a robust customer of Google, moving our reach onto the virtual stage in a manner that will effectively capture attention of patients for up to a hundred miles in every direction. The Intelligent Care Campaign will include micro- websites for each key service offered at SWMC, including No Wait ER, the clinical institutes, and the centers of excellence. As patients visit the sites they will experience a call to action that could include their responding through , texting, or telephone. In all cases their communication will be beamed into our Intelligent Care Call Center with patient advisors available to deliver thoughtful education and logistical details necessary to secure appropriate support from

12 the SWMC clinical experts. The Intelligent Communications that patients experience with us will produce overall satisfaction and word of mouth reputation at a level that will have a priceless influence in behalf of the success of our mission at SWMC for generations to come. Business Process Improvement Primary in the design of the SWMC business plan is the need for business process improvement, especially in the areas of contracting, charge capture, billing and collections. As a small hospital, Palm Drive has had difficulties negotiating favorable contracts with insurers and lost considerable revenue due to inefficient charge capture and collections. SWMC anticipates working with alliance partners to improve contracting rates and upgrading to an EMR platform that will integrate charge capture into the clinical documentation process and will connect directly to billing and collections. Purchasing and supply cost management has also been a major factor in Palm Drive s financial challenges over the past few years with supply costs having escalated to 23% of net revenue in fiscal This will be improved by limiting the type of elective surgeries that are performed as well as by partnering with regional providers to develop better purchasing and insurance contracting. Central to managing business processes will be a paperless process in clinical care that is based on SWMCs protocols as adopted from Palm Drive s policies and procedures. By developing digital process management instead of scanning paper forms, SWMC will greatly improve clinical care efficiencies and enhance reporting and billing options. Appendix D illustrates additional changes to operations that will improve overall financial performance.

13 Affordable EMR Technologies There should be no doubt that one of the primary drivers of Palm Drive s financial failure was the adoption of an EMR platform that was not only very expensive but also cumbersome and prone to errors. SWMC clearly cannot afford to repeat this process. To be prepared with a fully implemented system by the time of opening, the Foundation has already begun the implementation process for SWMC working with EHRI, Inc. a local developer of EMR systems and has assembled a volunteer IT implementation team with expertise in all areas of IT management. EHRI has agreed to provide SWMC with secure hosting and use of the HarmoniMD EMR platform for the period of 5 years as well as the configuration, implementation, training and support of SWMC staff at no cost. The savings from this will be substantial and provide an important element in the financial viability of the organization The EMR system is anticipated to be connected electronically to EA Health, a leading healthcare data processor form San Diego who will provide billing and collection of SWMC bills in exchange for a percentage of collections currently estimated to be at 5.5%. This is a major savings over prior year collection costs. The HarmoniMD system relies on low cost tablets and other mobile devices for clinical process management and uses state of the art cloud- computing technologies for secure data storage and access. Working with Redwood MedNet, a local Health Information Exchange provider, the HarmoniMD platform will be connected through HL7 communications to lab services, imaging, physician offices, clinics, and other providers. This system will not only save costs but make the clinical environment much more efficient by connecting physicians and specialists to SWMC from any location including through cell systems. Because the HarmoniMD system has been meaningful use approved, SWMC will enjoy full reimbursement from MediCare but as a new entity will not be eligible for meaningful use grants. By beginning the process of configuration now, there will be adequate time to go through a full quality assurance and user acceptance testing protocol prior to going live. As mentioned above, this process of developing clinical process management for Palm Drive s physician order sets has already begun with ICU protocols already complete and tested. These and other clinical forms will be user tested for acceptance and approved by the medical exec team prior to adoption so that all digital clinical process capture will match SWMC s policies and procedures. By configuring systems and training staff and physicians before reopening, SWMC will avoid the high cost of overtime for staff during training and all staff will be fully trained on the first day of service on a fully tested and configured platform. This will avoid the

14 usual risks of implementing complex EMR systems in a working environment and allow time to reconfigure if user testing identifies necessary modifications.

15 Alliances and Partnerships Alliances with regional medical providers will be an important element in the SWMC blueprint. Discussions with potential alliance partners are underway and have indicated a number of potential shared goals and services. With the emphasis on population management of the Affordable Care Act (ACA) SWMC will be a strategic partner for one or more of the regional hospital systems in a manner that will help all parties provide population health services. With the new emphasis on outpatient services, education, and research, SWMC will be aligned with the goal of the ACA to reduce hospitalization while managing population health in a cost effective fashion. Alliances with university health programs like UCSF will bring additional benefits to SWMC through existing relationships with institute physicians. Because these discussions are sensitive in nature, they are addressed here in only a general fashion but will be announced as agreements are completed. Philanthropy This plan relies on major philanthropy and other sources for startup capital and uses annual giving to bolster capital improvements and purchase of major medical equipment above and beyond tax revenues. We are currently awaiting a startup budget, which is under development and which will determine the amount of capital required to complete upgrades, replace equipment that has been repossessed and provide working capital. Our current estimated need is for $9Million in startup capital. While it may be challenging to raise capital in the short period of time allowed for a startup in Q1 of next year, initial indications are positive for this to happen. Once a decision is made by the district board to move forward to reopen the hospital, we believe the community, having now realized the impact of the loss of emergency care, will provide the necessary funds. We are also anticipating an annual giving program of $1million per year going forward. This is not unusual for a small community hospital.

16 Governance and Excess Tax Revenue This plan anticipates the creation of a new 501c3 non- profit that would be the governing entity of SWMC with a 13 member board of directors chosen for their business and healthcare knowledge, community involvement, and governance skills. The initial board members would be approved by the District and Foundation such that all new board members would be approved by both boards. After initial appointments, the SWMC board would appoint replacement board members and be able to remove board members with 2/3 majority vote. In this model, the district might lease the hospital real estate to SWMC and transfer the license and equipment to SWMC or transfer the real estate as well under the terms of a transfer of assets spelled out in California Health and Safety Code section 32121p2. In the case of a lease of the property by the District to SWMC, this plan anticipates that the district provides tax revenues in excess of district operations to maintain and upgrade the hospital building and grounds and to purchase major durable medical equipment. In the case of a transfer of the property to SWMC, the plan anticipates excess tax revenue to be made available to provide for these needs. Steps to Opening Reopening a closed hospital is a monumental task that will require the coordination and cooperation of the many parties in parallel efforts. The following list is a status report of some of the activities that are currently underway. Development of the business strategy: This process is ongoing and the current state is represented by this document. Guidance from Terry Newmyer, Dr. James Gude, Dr. Richard Powers and others and will continue to inform the process. Messaging to the community: The Open Our Hospital campaign has drawn wide interest from the community including volunteers, donors, potential board members and others. This campaign will continue with the release of this plan to the community for continued refinement and discussion. Recruitment of board of directors for SWMC: Nine candidates for this role have shown interest and others are being approached. Once the district board makes a decision to proceed to reopen the hospital, the initial board can be selected from the list of candidates and start the governance process. Recruitment of specialists and surgeons: This process is ongoing with Dr. James Gude leading the effort. Commitments have been received for all of the services listed here and additional services like cardiology are in the works. Financial modeling: Paul Selivanoff has been hired by the Foundation and is working on a high level pro forma to be delivered prior to the scheduled September 14 th meeting to discuss finances. Capital development: The Foundation has two fund development managers, Jill Lowrey and Don Spradlin working on a major pledge program under the

17 guidance of Terry Newmyer. Donors are being asked to make a pledge contingent on the hospital reopening. Facility planning: Rob Cary and Tom Boag are working with Clark Austin to develop a facility upgrade plan for reopening. A preliminary budget will be included in the September 14 th financial plan and it is anticipated that work will begin soon on critical upgrades funded by the Foundation. IT planning: An IT planning team has been established and includes a number of paid and volunteer consultants including a certified ICD- 10 instructor, a local physician who has managed multiple EMR implementations, a chief technology officer for major hospitals and others. Medical equipment: A major local hospital has agreed to loan staff for a review of medical equipment, which will determine capital requirements and start the planning process for acquisition of needed equipment. Alliance partners: Discussions led by Terry Newmyer are ongoing with health system partners and have been fruitful and substantive to date. We anticipate supportive alliances to be forthcoming as the planning process continues. Licensing and compliance: The Foundation has hired Holley Johnson, a Sacramento attorney who specializes in healthcare licensing to assist with licensing and compliance matters. A local compliance expert, who was a former Palm Drive employee is also being recruited to manage the AOA and CMS surveys necessary to restart. Staff recruitment: The Foundation has begun a recruitment process for physicians and important staff positions necessary to reopen. This list is only partial but should give a flavor of the many parallel efforts underway. The Foundation anticipates the hiring of a healthcare project manager in the near future to coordinate and manage the myriad of details required to reopen. Summary There can be no doubt that small hospitals are challenged throughout the United States but our community has a set of unique opportunities that do not exist elsewhere including: $2 million in annual tax revenues after bond service. A well equipped hospital building that is free of debt. Access to a large, mobile patient population. Well- managed primary care clinics. Access to telemedicine and EMR systems. World- class physicians, specialists and surgeons. A supportive and generous community. Savvy business leaders willing to govern. Regional alliance partners. These and other attributes create the context for this plan. As we move forward, we have no doubt that additional resources will become available to augment this business

18 strategy. There are, of course, many challenges as well, but none appear to be insurmountable given the commitment of the community to have access to local Emergency and Acute Care. In submitting this proposal, we are asking the District to commit to partnering with the Foundation and the Physicians to reopen Palm Drive Hospital as soon as possible. While this will not in and of itself guarantee success, it will send a message that our community is united toward one goal; Opening Our Hospital.

19 Appendix A Proposed Roles and Responsibilities Diagram OPEN OUR HOSPITAL PROPOSED ROLES AND RELATIONSHIPS Palm Drive District (Divest of Hospital Property, while maintaining tax district for Future Public Support of Hospital) Tax District Subsidies Set and Monitor Quality Goals Approve Hospital Board Members Palm Drive Foundation (Secure Start-Up Funding and Annual Campaign) Philanthropy Support Approve Hospital Board Members Sonoma West Medical Center (New 501C3 Not For Profit Corporation Acquires and Operates the Hospital) Provider Service Agreement(s) Physician Service Organization(s) (Assure Clinical Integration and Optimal Care Effectiveness) 1 P age

20 Appendix B Financial Planning and Workflow Strategies Now has been engaged to perform a financial analysis for Sonoma West Medical Center to assist management in determining the right strategy to reopen the hospital, as well as identify key financial issues that will need to be addressed in the reopening. Work will consist of a written report in.pdf form, describing our methodology and any assumptions made, including limitations that were encountered and 4 key documents as follows: 1. Forecast Cash required to open the hospital and sustain operations for 12 months 2. Forecast Net Income by no more than 5 natural expense classes on a GAAP basis for the first year of operation, and for 2 subsequent years 3. Offer and analyze operational improvements that come to our attention during the engagement that might be made using industry standard or best practice practices. 4. Forecast Balance sheet for each period for which Net Income is provided. To complete this project, we will undertake the following activities: Analyze the existing financial statements to determine fixed and variable costs Adjust these costs by inflation and other market assumptions Compute the average cost for billed services in each department of the hospital Identify the expected volumes of patients by type to be seen by the hospital during its first year Build a resource consumption profile (bill of materials) for each type of patient to be seen Combine the resource consumption profiles with case volumes to derive total variable cost and charges Create a net revenue calculation model Consolidate all of the above into the 4 key documents previously described We will also need access to all of the doctors who are expected to care for patients at the hospital and we will require that they provide us with detailed information about their practice plans, including volumes, trends, payer mix, and standardized order sets in a timely manner. We are relying heavily on obtaining patient level detail from the hospital system. We will also need access to key individuals who are or may have been employed by the hospital for resolving questions and validating assumptions.

21 Appendix C Financial Planning Schedule 11- Aug- 14 Project Planning and Initiation 18- Aug- 14 Compute Variable Cost Per Department 25- Aug- 14 Develop Fixed Cost Assumptions Identify doctors involved. Meet with doctors to identify volume potential, payer mix, and resource consumption profiles. Develop Volume Assumptions. Assess availability of required data sets. Identify alternative procedures for unavailable data. Identify Fixed costs. Begin discussions about fixed cost revisions. Dependent on receiving general ledger, charge master volumes, and payroll data Work on fixed cost assumptions and finalizing doctor sourced data 1- Sep- 14 Build Case Volume Projections Dependent on meeting with and updating assumptions for all key doctors on project. Continue to revise fixed cost model 8- Sep- 14 Build Resource Consumption Profiles 14- Sep- 14 Present High Level Report 15- Sep- 14 Consolidate resource consumption 22- Sep- 14 Compute Net Revenue 29- Sep- 14 Compute Capital Requirements Dependent on input from doctors and receiving patient bill level detail from hospital. Continue to revise fixed costs model Present high level financial projections based on information gathered to date Consolidate resource consumption profiles and volume assumptions to compute total gross charges, total costs, and total unit of service workload at department level. Also build contractual model based on historical collection rates by financial class Break out revenue and volumes by payer and apply contractual model to compute net revenue Review building, equipment, and inventory item data. Review results and validate. Board presentation 10/2 6- Oct- 14 Finalize Assumptions Finalize assumption list for client approval. Continue results review and validation. 13- Oct- 14 Final Report Prepare and deliver final report

22 Appendix D Outline of Strategies Leading to Changes in Published PDH 2013 Net Income Restatement of Operations: 1. Elimination of certain positions 2. Improvement in staff productivity 3. Elimination of overtime expense 4. Elimination of management contract expense 5. Elimination of spine supplies and/or improved purchasing effectiveness 6. Restructure debt to lower interest rate 7. Cost to bill and collect from 8 or 9% to 5.5% 8. Suspension of company match on pension 9. Opportunity on the employee health plan 10. Consulting, legal fees, and travel cost reduction 11. Restructure service contracts to expense reimbursement contracts 12. Transcription automation strategy 13. LOS savings 14. Eliminate EHR implementation and maintenance costs Strategic Items 1. Capitated/outsourced lab 2. Vendor participation", which may include capitated implants, etc 3. Outsource dietary, all HR functions including staff training, quality/compliance 4. Costs of new medical foundation and PSAs 5. No Wait ER financial impacts 6. Added marketing and public awareness expense 7. Revised hospitalist/intensivist cost (Dr. Gude offsitecare.com) 8. Foundation philanthropy contributions 9. Impact of: Dr. Bretan - Urology Dr. Pereira Neurology and Pain Pump Clinic Dr. Gude - Pulmonary Function Lab Dr. Bollinger & partners - Orthopedic Dr. Minkoff - Endocrinology Dr. Zweig = Rheumatology Dr. Hulkower - Psychiatry Dr. Field - Women's Health Institute Dr Clarence Finley - Cardiology Institute Dr. Barry Silberg- Wound Care Dr. Bernstein Neurology and research trials 10. Changes in payer mix/payment rates. 11. Affiliation with regional hospital system which includes participation in their network and/or insurance products 12. Medicare, ACA and Sequestration Impacts