LLC Background on Activities Current Projects * 2870 Peachtree #493 * Atlanta, GA 30305 404-239-8416 * www.cedarventures.com 1
LLC Investment Banking, Mergers & Acquisitions Capital raises, Management Consulting Broker Dealer associated. Sale/Lease back of Medical Real Estate Federal Tax Credit Program low income/rural areas Venture Capital investing experience; partnership with $100 mm life science fund Developing relationships with investors in the MENA region. 2
Introduction to Cedar Ventures: Current and Past Memberships Member National Venture Capital Association Birmingham Venture Club, Nashville Healthcare Leadership Council Member Alabama Hospice Org. Founding Member of Advisory Board for Women Business Leaders of the US Health Care Industry, www.womenleadinghealthcare.org 3
Introduction to Cedar Ventures: Team Experience Operating and Sales Experience in large and small companies. Industry experience: medical device information technology Data storage telecommunications insurance, managed care, behavioral Health Care Services: Hospitals, surgery centers, radiation oncology, imaging, benefit administration, CME 4
Introduction to Cedar Ventures Management Consulting Services Functional Areas: Corporate Strategy, Corporate Development Growth Strategy Market Strategy Strategic Management Operational Improvement Team prior experience: Accenture, Cargill Corporation, BP Amoco and Dow Corning. 5
Introduction to Cedar Ventures Representative Transaction Experience: Advisor to Ochsner HMO Sale of HMO in Alabama with $100 MM in sales to HealthSpring (NYSE: HS ) Feasibility study and Merger of 2 surgery centers in Louisiana Sourced buyer of Medicare book of business of Texas HMO. Advised radiation oncology company Advised start-up data storage technology company in Alabama and medical device co. in Georgia. Advised on sale of American Work Behavioral company in Ga. To NYSE:PRSC ; Advisor on sale of hospice company in Alabama and internal accounting on hospice company in Georgia. 6
Introduction to Cedar Ventures The Team Karen Kassouf, Founded 2000 Initiated Cedar Equities, venture fund, 1993-2001 for Texas insurance company. Business Development for Medical Malpractice Insurance company in Texas Initiated Health Care Investment Banking, for Chemical Banking Corporation [JP Morgan Chase] in Texas, 1984-1990: $2 billion of health care facilities financings Securities Lawyer, Mudge Rose Guthrie Alexander & Ferdon, New York City. BA Bucknell University, cum laude, JD Villanova Law School, Law Review Editor. Member, New York and Texas Bar Associations. Principal with Bridge Capital Associates, broker dealer 7
A Partner : Even in a tough market, we will get the job done right! A partner for helping to increase strategic opportunities. 8
Providers & Payors: Evolution of Models October, 2011
Payor Models Risk Averse Buyers better to pay up for less risk than to buy low for high risk, no one is moving quickly, though acquisitions still continuing. Private Equity/Venture Capital hungry for companies with revenues > $10 mm as they avoid start up/earlier stage risk. 10
Payor Models Buyers/Investors watching to see What Washington does, will HCR be modified? Some entities have exited the health insurance market Consolidation as larger parties seek scale, aim to fill skill and geography gaps; Smaller entities exit or are bought. 11
Payor Models. Payors seeking products that are exempted from HCR, e.g. old limited benefit plans. Belief among payors that cost of health insurance will increase Payors focused on behavioral preventative care, e.g. wellness, 12
Payor Models Parity has triggered Carve In mentality Large Carve Outs sitting on the sidelines Many plans seeking to bring behavioral in house Consolidation in process, fewer buyers will remain For smaller managed care sellers: evaluate lower valuations with potential upside with partial stock transaction. 13
Payor Models Buyer Interest for Managed Care Specialty Managed Care owned by larger entities: e.g. private equity or medical payors Providers seeking diversity as we see payor/provider integration again. Venture backed companies seeking to expand for scale or exit Pure play private equity /venture Overall fewer Strategic Buyers as industry consolidates 14
Payor Models May issue of Health Care M&A (Irving Levin & Associates) : Managed Care Diversifies : Aetna buys Prodigy Health Group for $600 MM; Prodigy is a TPA of self funded health care plans. Of 15 Managed Care deals announced in the past 15 months, only 4 involved in acquisition of vanilla health plans. Remaining acquisitions targeted businesses whose services can (1) help better manage risk and contain costs of its own health plans; and (2) can be marketed as products to other organizations as well. 15
Payor Models Other non health plan businesses targeted: PPOs, employee assistance programs, expatriate benefit providers, managed dental plans, niche carve outs: wellness, disease management, and technology focused such as risk assessment tools, information technology. United Health Group s Ingenix subsidiary has made 5 acquisitions in the e-health area since March 2010, largest being the $1.5 billion acquisition of Executive Health Resources, a company that aids hospitals and health systems to manage compliance with government health plans. 16
Payor Models Humana purchased $500 mm for Medicity, a health information exchange company last December (2010). Humana also purchased a large worker s compensation company, Concentra for $804mm in cash. This brings Humana squarely into the business of occupational medicine and makes them a key player in the future of workers compensation. Concentra operates in 42 States with more than 300 medical clinics. 17
Payor Models Medicaid payor Molina Healthcare paid $135 mm to buy Unisys Corp. s Medicaid health information management unit. United Health, through its OptumHealth subsidiary, acquired Logistic Health, a provider of health care support services such as medical readiness exams and occupational health services. 18
Payor /Provider Models June 29, 2011: Pittsburgh insurer Highmark Inc. struck a deal to acquire the second-largest hospital chain in its region, an ambitious, controversial step that would further blur the lines between those who pay for medical care and those who provide it. 19
Payor/Provider Models SEPTEMBER 16, 2011 Massachusetts hospital operator Steward Health Care System LLC will launch a new insurance plan that requires consumers to use it for nearly all routine health-care needs, a sign of health-care providers' growing interest in such products. Steward, owned by Cerberus Capital Management LP, plans to work with the nonprofit Tufts Health Plan to create Steward Community Choice, which will be aimed at small businesses and is expected to go into effect Jan 1, assuming regulatory approval. The partners are betting that the plan's price which they say will be as much as 15% to 30% below comparable products will be appealing enough to overcome potential consumer concerns about the limited choice of medical providers. "It's keeping the care in the community, where it's less expensive," said Ralph de la Torre, Steward's chief executive. All routine adult care would have to come from Steward-affiliated doctors and facilities. 20
Payor & Provider Evolving Models Providers: Leveraging the Real Estate Medical real estate: hospitals, surgery centers. Medical Office Buildings, imaging centers and other provider facilities - favored by investors Aging baby boomers and increased insured population with health care reform; Volatile stock markets, European debt crisis and US deficits = more demand for hard assets such as medical real estate; Medical office buildings boast more stable tenants, lower turnover than others; 21
Payor & Provider Evolving Models Providers: Leveraging the Real Estate Publicly traded REITS popular, creating demand for medical real estate as a target investment; Medical Real Estate: a cash cushion for providers in an age of Medicare reimbursement cutbacks Sale/leaseback of Medical office buildings: capitalization rates of 7-9%; Credit Tenant lease financing with rates less than 6% in some cases; Federal Tax Credit program: below market lending rates if located in a low income/rural area. 22
Medical Real Estate: Recent Transactions Swedish Health Services: Leased 2 ambulatory centers, plans to lease a 175 bed hospital that will be leased from a developer; Last July 2010, Ventas REIT paid $381 million for Lillibridge, which owned some of or all of 95 medical office buildings and counted a few of the largest and most highly rated U.S. health systems as tenants including Ascension Health. Currently limited supply of sellers in the medical real estate sector 23
Payor Models Summary for Payor/Provider Delivery Models : Goal of being More Affordable Technology focused to achieve efficiency Consumer focused to meet their needs and an increasing role in consumers managing their care Return to the integration of payors, providers and physicians, fewer carve outs in behavioral; Focus on Medicare/Medicaid and other government sponsored programs: e.g. BCBSSC recently purchased Cigna s Government Services subsidiary; Providers leveraging real estate, less capital intensive 24 models.