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New Hanover County Partnership Advisory Group

Meeting 2

November 13, 2019

22

Section Page Number

1. Approval of Minutes 3

2. Role of Advisors to the Partnership Advisory Group 4

3. Review of Process 8

4. Overview of Healthcare Landscape 11

5. NHRMC Strategic Direction 37

6. Meeting Calendar 68

7. Meeting 3 Preparation & Closing Remarks 69

Appendix 76

TABLE OF CONTENTS

3

APPROVAL OF MINUTES

4

ROLE OF ADVISORS TO THE

PARTNERSHIP ADVISORY GROUP

55

THE ROLE OF ADVISORS TO THE PARTNERSHIP ADVISORY

GROUP

• Ensure legal and regulatory

guidelines are followed during

strategic option exploration

• Lay out needed legal approvals

and timeline of legal process

• Assess strategic option feasibility

based upon NHRMC structure

and national/regional laws and

regulations

• Develop and review any legal

contracts related to strategic

opportunity exploration

Legal Advisor• Provide insights on national

healthcare & hospital business

trends, and regulatory changes

• Assist in communicating long-

term goals/objectives of NHRMC

• Assess strategic opportunities

across the spectrum from

remaining independent to

partnership arrangements

• Determine next steps in

successfully executing NHRMC

best-fit strategic opportunity

Strategic Advisor

• Develop and/or review any

financial considerations regarding

chosen strategic option including

but not limited to:

• Capital needs

• Financial position and

sustainability

• Financial projections

• Fair market value

Financial Advisor

Partnership Advisory

Group

Typical advisory functions include strategic, legal and financial support based upon

strategic opportunities being explored and the stage of the exploration process

66

POTENTIAL SCOPE OF SERVICES FOR FINANCIAL ADVISOR

Prior to RFP Evaluation

- Financial components of current state and internal restructuring review

RFP Evaluation

- Fairness opinion

- Comparative analysis of financial components of narrowed list of respondents

After Evaluation

- Financial due diligence during negotiations

77

TIMELINE FOR FINANCIAL ADVISOR RFP

County/NHRMC Send FA RFP

November 15th

County/NHRMC Receive

Responses

December 2nd

County/NHRMC Narrow List

Week of December 13th

PAG Make Selection

Week of December

16th

8

REVIEW OF PROCESS

99

PARTNERSHIP ADVISORY GROUP PROCESS

PHASE I PROPOSED CONTENT FOR MEETINGS

Goal: PAG members understand

responsibilities, legal process, and

current state of NHRMC

Process Overview and

Background

• Introduction to PAG

• Introduction to NHRMC and New

Hanover County

• Overview of process and PAG

charter

Education

Goal: PAG members understand

current state of NHRMC and

implications of industry trends

Healthcare Industry

Education

• Overview of healthcare landscape

• NHRMC education

• PAG Process

Education

Goal: Develop preliminary G&O and

list of prospective partners

Initial Goals & Objectives

and RFP Candidates

• Education Recap

• Discuss goals and objectives

(G&O) for NHRMC’s future and

legally mandated G&O (131e)

• Review list of organizations

requesting RFP

• Discuss other potential partners

Partnership

Goal: Finalize G&O and develop RFP

and participation criteria

Final Goals & Objectives and

Initial RFP Development

• Review refined goals & objectives

(G&O) based upon prior meeting

and public hearing

• Discuss request for proposal

(RFP) outline

Partnership

Goal: Finalize RFP and list of

prospective partners for outreach

Final RFP and Identification

of Participating Parties

• Review refined request for

proposal (RFP) based upon prior

meeting’s feedback

• Assess updated list of interested

parties and other potential

strategic partners to receive RFP

Partnership

Goal: Identify gaps between current

strategic plan and G&O and provide

opportunity for PAG questions

Initial Results of Strategic

Options Assessment

• Discuss approach for Strategic

Options Assessment

• Review NHRMC current strategic

plan against NHRMC achieving

G&O (gap analysis)

Strategic Options

Charter Task #1 Charter Task #1 Charter Task #2

Charter Task #2 Charter Task #3 Charter Task #4

1010

PARTNERSHIP ADVISORY GROUP PROCESS

PHASE I PROPOSED CONTENT FOR MEETINGS

Goal: Finalize Strategic Options

Assessment and RFP evaluation

priorities

Refined Strategic Options

Assessment

• Address PAG questions on

Strategic Options Assessment

results from prior meeting

• Identify solutions / investments to

be prioritized in RFP responses

based upon results of gap analysis

Goal: Assess PAG questions on

RFP responses. Identify RFP follow-

up questions

Initial Review of RFP

Responses

• Review summarized RFP

responses and provide forum for

PAG questions on responses

• Review RFP evaluation process

in connection to Strategic Option

Assessment from prior meeting

Goal: Align on selected partner list

based upon RFP response evaluation

RFP Follow-Up Discussions

and Selected Partner List

• Address RFP follow-up questions

identified in prior meeting

• Review list of selected partners

resulting from RFP evaluation

process defined in prior meeting

PartnershipStrategic Options Partnership

Goal: Finalize partner list being

considered for strategic options

Finalized Partner List for

Strategic Options

• Further assess RFP responses of

selected partners identified in

prior meeting

• Narrow selected partner list to

identify finalists for comparison to

stand alone options

Partnership

Goal: Finalize decision determining

selected strategic option and outline

key LOI expectations

PAG Vote on

Recommendation

• Review standalone option

compared to finalist partner

options

• Conduct vote to determine go

forward decision of remaining

standalone or further assessing

identified partnership options with

LOI

Decision

Pursue Partnership

Negotiate a Letter of Intent and

commence more detailed due

diligence

Remain Independent

Begin development of go

forward plan to support the

option to remain independent

Charter Task #4

Charter Task #6

Charter Task #5 Charter Task #5

Charter Task #7

11

OVERVIEW OF HEALTHCARE

LANDSCAPE

/ ©2019 NAVIGANT CONSULTING, INC. A GUIDEHOUSE COMPANY. ALL RIGHTS RESERVED1212

NAVIGANT IS A NATIONALLY RECOGNIZED HEALTHCARE

CONSULTING FIRM, AND HAS PARTNERED WITH NHRMC SINCE 2004

600+ CONSULTING

PROFESSIONALS

A MULTIDISCIPLINARY TEAM

WHAT WE DO:

DELIVERED TO:

• STRATEGIC ADVISORY

• TRANSACTION ADVISORY

• OPERATIONAL IMPROVEMENT

• GOVERNMENT HEALTHCARE SOLUTIONS

ON MODERN

HEALTHCARE’S

LARGEST HEALTHCARE

MANAGEMENT

CONSULTING FIRMS#3

HOSPITALS MEDICAL GROUPS PAYERS

CLINICIANS FORMER GOVERNMENT LEADERS

DATA ANALYSTS FORMER INDUSTRY EXECSKLAS 2018Seen as strategic,

experienced, and

capable of producing

results on time.

WHO WE ARE:

ACADEMIC

HEALTH SYSTEMS

PROVIDERS AND PAYERS

PARTNERING WITH NHRMC

ON ITS STRATEGIC PLAN

SINCE 2004


NAVIGANT IS NOW A GUIDEHOUSE COMPANY

HEALTHCARE EXPERTISE AND

SOLUTIONS

• STRATEGIC ADVISORY

• TRANSACTIONS

• REVENUE CYCLE

• PERFORMANCE IMPROVEMENT

FEDERAL, STATE, AND LOCAL

GOVERNMENT EXPERIENCE


GOALS FOR THIS SESSION

“Earlier this month, Ascension’s* Board of

Directors unanimously endorsed its new

"advanced strategic direction," CEO Tersigni

told his employees, as it faces

dwindling reimbursement from government

and commercial payers;

growing regulatory complexity;

skyrocketing pharmaceutical costs;

shifting from inpatient to outpatient care;

from fee-for-service to value-based care;

and increasing competition.”

Modern Healthcare, March 2018

1. Increase familiarity with

hospital terminology and

critical drivers of economic

success

2. Identify key macroeconomic

pressures facing not only

NHRMC but other hospitals

across the country

3. Understand the impact that

each macroeconomic

pressure has on NHRMC’s

ability to provide

exceptional care for its

patients now and in the

future*Ascension Health is the largest not-for-profit health

system in the country, with over 2,600 sites of care

in 23 states, including 151 hospitalsSource: (1) Modern Healthcare.


HEALTHCARE IS GROWING AND CHANGING, PRESENTING MULTIPLE

CHALLENGES TO HEALTHCARE PROVIDERS

HEALTHCARE PROVIDERS ARE RECEIVING FEWER PAYMENTS FOR SERVICES

• Federal and state governments are the largest payers of hospital care, and will continue to be as

the population ages

• Governmental payers reimburse hospitals less than private payers

1

HEALTHCARE PROVIDERS ARE UNDER INCREASING REGULATORY SCRUTINY

• Hospitals have been pushed into the regulatory spotlight, with a range of regulations

2

PAYERS DRIVING SHIFT FROM FEE-FOR-SERVICE TO VALUE-BASED CARE

• Private payers are changing how they purchase care, increasingly driving value-based

arrangements and shifting costs to employees

3

DELIVERY OF CARE SHIFTING FROM INPATIENT TO OUTPATIENT SETTING

• Patients are using healthcare services differently, demanding lower costs, greater accessibility to

care, higher quality

4

IN RESPONSE TO THESE CHALLENGES, PROVIDERS HAVE INCREASED COLLABORATION

• Consolidation with other hospitals provide economies of scale and skill; greater capital pool

• Employment of physicians and alignment with physician groups (ACOs, CINs)

• Vertical affiliation with payers (narrow networks and value-based payments)

• Experimenting with innovative partnerships and restructuring of operating model

5


HEALTHCARE CONSUMES A GROWING PORTION OF THE

COUNTRY’S GDP

Healthcare expenditures comprise 18% of the country’s GDP and have increased every year – even

during recession years – averaging 6% growth each year since 1995

Source: American Hospital Association, Chartbook 2018

13.9%13.3%

15.4%

17.3%17.9%

10%

12%

14%

16%

18%

20%

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Healthcare Expenditures as a Percentage of U.S. GDP1995-2016


THE LARGEST CATEGORY OF HEALTHCARE EXPENDITURES ARE

HOSPITAL CARE AND PHYSICIAN SERVICES

Hospital Care and Physician Services comprise over half of national healthcare expenditures

National Healthcare Expenditures by Category2016

Hospital Care

• Services provided in an inpatient setting by or under the

supervision of physicians, including medical, surgical, or

diagnostic treatment

2016

Physician Services

• Services provided by an individual licensed under state

law to practice medicine

Prescription Drugs

• Pharmaceuticals requiring a medical prescription

Other

• Dental and non-physician professional services including

home health, nursing home care, some medical

equipment, etc.

Source: (1) AHA Chartbook 2018.

Hospital Care

34%

Physician Services

21%

Other

35%

Prescription Drugs

10%


AS PROVIDERS OF CARE, HOSPITALS AND PHYSICIANS ARE ONE

PART OF THE HEALTHCARE INDUSTRY STRUCTURE

Patients

Payers(e.g. insurance companies,

Medicare, Medicaid)

Pharma /

BiotechProviders

(e.g. Hospitals,

Physicians)

Providers

• Deliver medical care to patients

• Hospitals submit claims to

insurers for the cost to provide

medical care to patients in

facilities

• Physicians submit a separate

claim to insurers for the cost of

their services

• Consumers purchase health

insurance from payer through an

Exchange or an employer

• Private health insurers (e.g.

Aetna, BCBS, United) sell plans

to consumers/patients

• Governmental payers (Medicare,

Medicaid) cover enrolled

beneficiaries

• Insurers pay providers for care

delivery, based on claims

submitted by providers – Fee For

Service

Patients

Payers

Source: (1) Centers for Medicare and Medicaid Services (CMS)


Governmental payers comprise over 60% of hospital costs, but do not pay rates necessary for

hospitals to break-even

OVER TIME, GOVERNMENTAL PAYERS HAVE BECOME THE LARGEST

HOSPITAL PAYER WHILE REIMBURSING LESS THAN PRIVATE PAYERS

87%

88%

145%

0% 50% 100% 150%

Medicare

Medicaid

Private Payers

Hospital Break-even

35% 38% 41%

10%13%

19%

42%39%

33%

14% 10% 8%

1980 2000 2016

Medicare Medicaid Private Payers Other

Distribution of Hospital Cost by Payer Type1980-2016

Payment to Cost Ratios by Payer 2016

Payment to Cost Ratio (%)

Source: (1) AHA Chartbook 2018.


HOSPITAL PAYMENTS FROM GOVERNMENTAL PAYERS HAVE

DWINDLED OVER THE PAST 20 YEARS

Declines in payments from governmental payers has put pressure on hospital contracts with private

payers to cross-subsidize costs

Source: American Hospital Association, Chartbook 2018

99%104%

87%

94%

124%

149%145%

60%

80%

100%

120%

140%

160%

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Hospital Payment-to-Cost Ratios by Payer Type1995-2016

Medicare Medicaid Private Payers

Hospital

Break-

even


THE INCREASING COST BURDEN ON GOVERNMENTAL PAYERS HAS

PUSHED HOSPITALS INTO THE REGULATORY SPOTLIGHT

Regulation Impact on Hospitals

Certificate of Need

(CON)

State regulations adopted in the 1970s designed to limit the number

and capacity of healthcare facilities (e.g. inpatient beds in hospitals)

and thus prevent excess capacity and cost inflation

Stark Law A set of federal laws which prohibit physicians from “self-referring” –

sending patients to facilities or services in which the physician or closely

related family has a financial interest

Medicare

Modernization Act of

2003

Overhauled Medicare and introduced Medicare Advantage; adjusted

Medicare’s hospital payment system; increased prescription drug

access through Medicare Part D; introduced health savings accounts

Patient Protection

and Affordable Care

Act (PPACA) of 2010

Expanded patient health insurance coverage while proposing to reduce

$43 billion in total funding to hospitals for uncompensated care

between 2018 and 2025; directed Medicare to shift hospital payment

method toward value-based arrangements

Florida 2011 and 2012

Budgets

In 2011, Florida reduced hospital payments by $750 million, cutting

hospital payments by 12% and eliminating price increases; in 2012

reduced hospital payments by another 6%

Illinois SMART Act of

2012

Reduced Illinois Medicaid spending by $1.6 billion, including $240m in

provider rate cuts

Federal

State

Source: (1) Becker’s Hospital Review; (2) US National Library of Medicine – National Institutes of Health; (3) Modern Healthcare; (4) Illinois General Assembly; (5) Florida State Budget.


RECENT AND PENDING REGULATIONS ALSO WEIGH ON HOSPITAL

AND PHYSICIAN PAYMENTS

340B Pharmacy

Regulation Implication

Medicare Access and

CHIP Reauthorization

Act (MACRA)

North Carolina

Managed Medicaid

• CMS reduced reimbursement of certain 340B Program Drugs from the average sales

price (“ASP”) plus 6% to the ASP minus 22.5% for 2018 and 2019

• Ongoing litigation from parties such as the American Hospital Association are

challenging these rate reductions and pushing for remedial measures

• Hospitals eligible for the 340B program face significant declines in reimbursements

if legislation is repealed or weakened

• Doctors, hospitals, and other clinicians will need to structure and negotiate contracts

to treat Medicaid population approximately 18% of NC population

• Five managed-care groups to receive $6 billion in annual Medicaid contracts moving

1.6 million people to managed-care with approximately 565,000 Medicaid patients

transitioning on November 1

• Medicaid Reform has potential to have a negative financial impact on North Carolina

hospitals

• Estimated to decrease Medicare spending on physician services by approximately

$35 to $106 Billion (-2.3 to -7.1%) over 15 years

• Merit Based Incentive Payment System (MIPS)- Most participants will be required to

direct resources and report up to 6 quality measures

• Advanced Alternative Payment Models (APMs)- Participants receive 5% bonus and

other rewards to drive adoptions of Advanced APMs with stricter governance criteria,

performance metrics, and risk sharing

Source: (1) North Carolina Health News; (2) North Carolina Government; (3) NHRMC Website; (4) Policymed.com.


PAYERS ARE CHANGING HOW THEY PURCHASE CARE, SHIFTING TO

VALUE-BASED PAYMENTS THAT PRESS PROVIDERS TO ASSUME RISK

Value-

Based

Payment

Fee-For-

Service

Separate

payments for

each service

Doctor

Services

Pre-Admission

Services

Inpatient

Services

Post-Acute

Costs

Readmissions

One payment to

cover all services

for a patient

Pre-Admission

Services

Readmissions

Inpatient

Services

Doctor

Services

Post-Acute

Costs

23%29%

34% 36%

77%71%

66% 64%

2015 2016 2017 2018

Hospital Payments by Type2015-2018

*Fee for Service includes pay-for-performance

Source: (1) Health Care Payment Learning & Action Network (LAN) APM Measurement Effort Infographic 2016-2019.

Valu

e B

ased

Paym

en

tsF

ee f

or

Serv

ice

Hospital

assumes

risk

Defined

payment

algorithms


AS AN EXAMPLE, BCBS OF NC RECENTLY LAUNCHED BLUE

PREMIER EARLIER THIS YEAR

Blue Premier is a statewide Blue Cross and Blue Shield of North Carolina (BCBS of NC) program

announced January 11, 2019 that plans to tackle 3 critical areas:

Source: (1) CMS; (2) BCBS NC; (3) The News & Observer.

Changing how they pay for care: participating systems will share in cost savings if they meet

patient health benchmarks and share in the losses if they fall short

Putting primary care first: collaborating with Aledade to support 100s of independent primary

care physician clinics and physician-led Accountable Care Organizations (ACOs). Through ACO

arrangements, physicians will have access to technology and data analytics tools as well as a

more comprehensive view of their patients’ total cost of care, gaps in care and their experiences

throughout the care continuum

Integrate mental and behavioral health: better integrate behavioral and mental health into

primary care for more holistic, patient-centered care

The following five health systems and their ACOs have joined BCBS of NC Blue Premier program:

BCBS of NC is committed to having all customers covered under Blue Premier’s

value-based care contracts within 5 years


IN ADDITION, PAYERS ARE SHIFTING A GREATER SHARE OF

HEALTHCARE COSTS TO EMPLOYEES THROUGH DIFFERENT PLANS

As employers continue shifting to high-deductible plans, employees increase their burden of costs

$3,515

$4,823

$6,015

2009 2014 2019

Average Annual Health Insurance Premiums -

Employee Contributions

Source: (1) Kaiser Family Foundation “2019 Employer Health Benefits Survey”

8%

20%

30%

2009 2014 2019

Percentage of High-Deductible Health Plans


HOSPITALS HAVE SHIFTED DELIVERY OF CARE AWAY FROM

INPATIENT SETTINGS BY STRENGTHENING AMBULATORY SETTINGS

Source: (1) AHA Chartbook 2018; (2) Becker’s Hospital Review.

95

100

105

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7

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1

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Inpatient Admissions per 1,000 People1995-2017

0

100

200

300

400

500

600

700

800

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5

199

7

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200

1

200

3

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1

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3

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5

Total Outpatient Visits (millions)1995-2016

As volumes shift away from the inpatient setting, health systems are expanding their reach to all

aspects of the “care continuum”, though this often requires new investments


THIS CREATES A CHALLENGE FOR SYSTEMS AS OUTPATIENT

REVENUE PER UNIT IS MUCH LESS THAN INPATIENT

Financially, it takes nearly 50 new outpatient visits to replace one inpatient admission

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Distribution of Hospital Revenues (IP/OP)1995-2016

Ou

tpati

en

tIn

pati

en

t

48%

52%

Source: (1) AHA Chartbook 2018; (2) The Institute for Health Metrics and Evaluation.

$478

$22,543

Outpatient

Inpatient

Average Cost by Setting2017


HOW HAVE HEALTHCARE PROVIDERS ADAPTED?

Vertical

Affiliation

• Healthcare providers have strengthened affiliations with physician

partners, with a trend toward employing physicians (specialists as

well as PCPs)

• Some healthcare providers have created provider-sponsored health

plans to better control hospital payments, others have increased

participation in “narrow networks”

Innovation

• A few healthcare providers have experimented with new partnerships

and organizational arrangements beyond traditional hospital

services to provide better access, quality, and patient satisfaction

Embracing

Changes to

Payment

Models

• Healthcare providers have increasingly formed accountable care

organizations (ACOs) and clinically integrated networks (CINs) with

physician partners to participate in federal value-based contracts

• Healthcare providers have participated in value-based contracts with

private payers

Consolidation

• Many healthcare providers have sought to partner or merge with other

hospitals to gain economies of scale & skill, reduce expenses, and to

access capital for equipment/technology required to comply with recent

regulations

+ =

Managing

Settings of

Care

• Healthcare providers have shifted patient care from traditional, higher-

cost hospital settings to lower-cost outpatient facilities where clinically

appropriate

• Healthcare have expanded footprint of facilities & services beyond

hospital campus, providing patient-focused, seamless and high-quality

care


HEALTHCARE PROVIDERS HAVE INCREASINGLY FORMED ACOS

WITH PHYSICIAN PARTNERS TO PARTICIPATE IN NEW PAYMENT

ARRANGEMENTS

Source: (1) HealthAffairs “Recent Progress in the Value Journey” - reflects Q1 counts.

58

168

440

613

734

835

923

0

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200

300

400

500

600

700

800

900

1,000

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11

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15

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16

20

17

Nu

mb

er

of

AC

Os

Number of Accountable Care Organizations (ACOs)2011-2017 What is an ACO?

ACOs are groups of doctors,

hospitals, and other health care

providers, who come together

voluntarily to coordinate high-quality

care for their patients. Hospitals

typically anchor an ACO.

The group seeks to coordinate care

to ensure that patients get the right

care at the right time, streamlining

services and preventing medical

errors.

ACOs collectively negotiate

contracts with payers to share in

cost savings, receiving a payment

when it succeeds both in delivering

high-quality care and spending health

care dollars efficiently.


HOSPITALS HAVE CONTINUED TO SEEK PARTNERSHIPS WITH

PEERS THROUGH HORIZONTAL CONSOLIDATION

Many hospitals have sought to partner or merge with other hospitals to gain economies of scale, to

gain economies of skill, to reduce expenses, and to access capital for equipment/technology

Source: (1) AHA Trendwatch Chartbook 2018; (2) Ascension audited financial statements; (3) Organization Webpages; (4) Elsevier.com; (5) HealthAffairs.org.

Percent of Community Hospitals in Hospital Systems1999-2016

51%

67%

20%

30%

40%

50%

60%

70%

80%

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% o

f To

tal

Co

mm

un

ity H

os

pit

als

2,500

hospitals

3,200

hospitals

Partnerships Continue to Expand

Ascension • Today: 151 hospitals

• 2015: 141 hospitals


Common

Spirit(CHI + Dignity

Health)

• Today: 142 hospitals



Premier Inc. (Group

Purchasing

Organization)

• Today: over 4,000

member hospitals

• 2015: 3,400 members

• 2010: 2,300 members


HOSPITALS ARE ALSO INTEGRATING WITH PHYSICIANS PARTNERS

THROUGH INCREASED EMPLOYMENT

Source: (1) Physician Advocacy Institute Physician Practice Acquisition Study 2012-2018.

Percent of Physicians Employed and Practices Owned by Hospitals2013-2018

27%30%

36%

41%43% 44%

15%17%

24%

30% 30% 31%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

20

13

20

14

20

15

20

16

20

17

20

18

% Physicians Employed % Practices Owned

% o

f To

tal

Hospitals have been increasingly employing physicians and acquiring physician practices to manage

a greater scope of services for patients


INCREASED VERTICAL CONSOLIDATION / AFFILIATION IS ALSO

TAKING PLACE AS PAYERS AND PROVIDERS JOIN TOGETHER

Providers Payers

Health

Systems

Retail /

Urgent Care

Post Acute

Pharmacies

Physician Groups

Other Affiliations / Relationships M&A Same Entity


HEALTH SYSTEMS ARE ALSO EXPERIMENTING WITH INNOVATION IN

DIFFERENT ARENAS

Labor & Supply Optimization

Overseas call centers in Israel and the Philippines staffed

with U.S. licensed nurses to address patient questions

Overseas Call Center

Patients with HBA1C levels greater than 8 and identified

as being food insecure are given a referral to access

healthy foods at the Farmacy

Dedicated physician resource across inpatient episode and

post-hospitalization period to ensure a return to health

Fresh Food Farmacy

Extensivists

eTrak

Leverages RFID tags to track mobile medical equipment

Surgical Schedule

OptimizationBlock Scheduling Optimization (BSO) tool prevents high

inpatient census days and optimizes use of operating rooms

and surgical robots

KP Health ConnectPatient portal with care delivery support, ancillary services

connection, health plan administration connectivity shown

to improve preventive screening rates and chronic care

Workflow Efficiency Access

Social Determinants of HealthCare EffectivenessPatient Experience

Reduced cardiac cath lab costs by implementing cost-

guiding labels for supplies, saving $990,000 annually

Cost-Guiding Labels

Creates efficiency in the appointment check in process by

providing patients with a QR code that can be scanned at

check in kiosks to verify demographics, pay copays, verify

insurance eligibility, and sign documents

Appointment Pass

POC gathering tool collects consistent and standardized

data on patient concerns and triggers remediation actions

in real time across Baylor Scott & White’s 49 hospitals

POC Survey

Home Telehealth program monitors 160 patients per

month in their homes following a hospitalization to reduce

readmits

Home Telehealth

Inova’s Concierge Medicine program provides patients

with 24/7 access to care for a upfront membership fee

VIP 360

CAPABLE provides RN, Occupational Therapy, and

home improvement services to keep seniors safe at

home.

CAPABLE

Care platform with connectivity to interdisciplinary mental

health team including family members

Alluceo

Command Center

Operational command center that aggregates hospital

wide data in real time and leverages predictive

analytics and AI to optimize throughput

Virtual reality (VR) based therapy for PTSD treatment

Bravemind

Sensely PartnershipOur Care WishesOnline platform to streamline the documentation of

advance directives. Platform may eventually link to EHRProgrammed triage protocols on Sensely

avatar to identify appropriate level of care

Source: (1) Organization Webpages; (2) Press Ganey; (3) PR Newswire; (4) Health Leaders Media.


AS NEW ENTRANTS AND TECHNOLOGY DISRUPT EXISTING

HEALTHCARE INFRASTRUCTURE, NEW MODELS EMERGE

New

Entrants

• Established healthcare companies

expanding into adjacent

businesses (e.g., Aetna/CVS,

Optum/DaVita/WellMed, etc.)

• Large organizations directly

offering healthcare solutions, (Apple, Amazon / JP Morgan Chase /

Berkshire Hathaway, Verizon, Microsoft,

etc.)

• Digital health startups entering the

fray backed by significant venture

capital

New

Technology

• Next generation analytics

capabilities (e.g., big-data, predictive

modeling, AI) applied across clinical, social,

behavioral and financial domains

• The promise of “anytime, anywhere

access” enabled by emerging

technologies (e.g., Blockchain, Cloud

computing, Connected Devices, IOT)

driving increased portability

• Repeatable tasks being eliminated to drive

greater productivity (e.g., workflow

automation)

New

Opportunities

for Current

Models

Emerging

Healthcare

Models

• Increased Standardization

and Efficiency (e.g., systems

have been successful with

standardization of back-office;

and with investments in IT,

physicians, and managed care)

• New Configurations (e.g.,

UnitedHealthcare is now the

largest employer of physicians.

The MA value chain looks very

different than the traditional

Medicare one)

• New Models (e.g., OneMedical -

tech-enabled concierge primary

care company)


TECHNOLOGY WILL CONTINUE TO CHANGE CARE DELIVERY BUT

REQUIRES FURTHER INVESTMENT AND RESEARCH

Source: (1) Definitive Healthcare

Telehealth

• Over 70% of consumers prefer use of video

over visiting their primary care provider in-person

• Accounted for approximately $22 billion in 2017

and it is expected to account for approximately

$93.5 billion by 2026

Consumerism

• 65% of commercial insurance respondents

considered cost a top factor when seeking care

• Increasing amounts of patients using online

resources to evaluate treatment options

including online reviews, ratings, and pricing

Artificial Intelligence (AI)

• Public and private sector investment in

healthcare AI expected to reach $6.6 billion

by 2021

• AI applications projected to drive annual

savings of $150 billion by 2026

Wearables

• Less than 25% (approximately 1,800) of all U.S.

hospitals using mobile applications

• Wearable market projected to reach $12.1

billion by 2021 with remote monitoring

growing to $31.3 billion by 2023


HEALTHCARE IS GROWING AND CHANGING, PRESENTING MULTIPLE

CHALLENGES TO HEALTHCARE PROVIDERS

HEALTHCARE PROVIDERS ARE RECEIVING FEWER PAYMENTS FOR SERVICES

• Federal and state governments are the largest payers of hospital care, and will continue to be as

the population ages

• Governmental payers reimburse hospitals less than private payers

1

HEALTHCARE PROVIDERS ARE UNDER INCREASING REGULATORY SCRUTINY

• Hospitals have been pushed into the regulatory spotlight, with a range of regulations

2

PAYERS DRIVING SHIFT FROM FEE-FOR-SERVICE TO VALUE-BASED CARE

• Private payers are changing how they purchase care, increasingly driving value-based

arrangements and shifting costs to employees

3

DELIVERY OF CARE SHIFTING FROM INPATIENT TO OUTPATIENT SETTING

• Patients are using healthcare services differently, demanding lower costs, greater accessibility to

care, higher quality

4

IN RESPONSE TO THESE CHALLENGES, PROVIDERS HAVE INCREASED COLLABORATION

• Consolidation with other hospitals provide economies of scale and skill; greater capital pool

• Employment of physicians and alignment with physician groups (ACOs, CINs)

• Vertical affiliation with payers (narrow networks and value-based payments)

• Experimenting with innovative partnerships and restructuring of operating model

5

37

NHRMC STRATEGIC DIRECTION

3838

OUR AMBITION

NHRMC MISSION, VISION, AND VALUES

Our Mission…

Leading Our Community to Outstanding Health

Vision for the Future…

NHRMC is an industry leader in a new era of healthcare delivery. Our thriving community

serves as a national model of achieving excellence for all.

We are committed to:

• Fostering a culture of transformation through empowerment, innovation, and inclusivity.

• Delivering exceptional quality, affordability, and personalized experiences throughout the

wellness continuum.

• Advancing health and vitality for all through a community integrated model of collaboration.

• Cultivating a diverse and extraordinary workforce dedicated to our mission.

And Values…

Ownership, Teamwork, Communication, Compassion

Source: NHRMC Website and Data

3939

NHRMC STRATEGIC PLAN ON A PAGEMAJOR DEVELOPMENT EFFORTS: ACCESS, VALUE, HEALTH EQUITY

4040

SUMMARY OF CHALLENGESINDUSTRY AND LOCAL

➢Need to shift business model to be ready for value-based reimbursements

➢ Timing of shift is uncertain

➢Rapidly growing and aging population in SE NC with more intense health care

needs

➢ Behavioral health (including opioid crisis) a prominent health need

➢Care coordination, preventative and sick care, across urban and rural settings

➢National shortage of nurses and physicians

➢New competitors entering health care market, with substantial financial backing

4141

NHRMC MARKET FORCESGROWING & AGING POPULATION

Source: U.S. Census Bureau

Population

(% Change)

Over age 65

(% Change)

New Hanover

County14.6% 17.7%

Pender County 19.1% 18.0%

Brunswick

County27.3% 31.5%

North Carolina 8.9% 16.3%

Projected Market Growth Projections

(2017-2030)

24%

48%

54%

INPATIENT

OUTPATIENT

EMERGENCY

DEPARTMENT

Historical Market Population Growth

(2010-2018)

4242

VOLUME DEMANDSOCCUPANCY RATES AT 17TH STREET MAIN TOWER

FY14 FY19

Ppt. Change

FY14-FY19

Adult Surgery (2) 85.1% 95.4% 10.3%

Nephrology (3) 88.8% 95.7% 6.9%

Neuro/Surgery (4) 85.6% 94.7% 9.1%

Medical (5) 92.1% 95.1% 3.0%

Hospitalists (6) 94.3% 91.3% (-3.0%)

PCU/Stoke (7) 89.5% 91.7% 2.3%

Cardiac Med Tele (8) 84.8% 95.1% 10.3%

Cardiac Med/Surg Tele (9) 74.5% 90.5% 16.0%

Pulmonology/Oncology (10) 88.6% 89.9% 1.3%

Average Occupancy

North Carolina Urban Hospitals 67%

Case Mix Index Increased 10.3%

5 years

Average Length

of Stay Increased 7.8%

5 years

Average Occupancy Rate By Unit

4343

ACCESSAFFORDABLE CARE THAT IS EASILY ACCESSIBLE

Patient will have reliable

access to information and

services in an environment

where the patient is the driver;

the patient is empowered; the

patient can receive the right

service in the right place at the

right time; there are multiple

points of entry; the system is

price conscious, innovative,

transparent, proactive,

collaborative, and understands

the consumer mind-set

Access

Access Goals:

• System utilization: patients receive the right service in the

right location at the right time

• Consumer centric options: establish our system as

consumer focused where people can learn, engage, and easily

transact their healthcare and/or wellness needs; whether it is in

person, online or mobile

• Ambulatory / facility footprint: to meet consumer

expectation of quality health and wellness services that are

convenient, readily available, affordable, cost-effective, and

accessible

• Transparency: cost and quality data is available to our

internal consumers and external customers that is accessible,

reliable, understandable, meaningful, concurrent, actionable,

and provided with context and benchmarks

• Retail / employer offerings: increase access to NHRMC

services through employer offerings and retail strategies using

innovative customer-focused developments

• Digital strategy / virtual platform: promote wellness,

improve internal efficiencies, and explore new lines of business

4444

Imperative to place

services to align with,

ACCESSAMBULATORY STRATEGY

Projected Population Growth By County

(2017-2030)

Brunswick

Wilmington

Onslow

Duplin

Pender

Columbus

Bladen

Population

growth

Shift from

inpatient to

outpatient

Consumer

preferences

4545

ACCESSFACILITY PRIORITIES

Position NHRMC main campus to be focused on

highest acuity care

- Centralize higher acuity care on main campus,

consider moving lower acuity services to other

locations

- Accommodate growth in cardiovascular and

neurosciences

- Ensure sufficient parking for patients

Offer care options that are convenient to access

- Grow services on Scotts Hill site and in other

population-dense hubs throughout service area.

Facilities throughout are would range from advanced

ambulatory offerings to full-service community

hospitals.

- Fit to purpose Pender Memorial, Rehabilitation and

Behavioral Health hospitals

- Provide digital options

- Build emergency department to replace Orthopedic

Hospital ED

- Support growth of provider network in needed areas

including primary care

Ensure patients are cared for in highest quality, lowest

cost site of service for their clinical needs

NHRMC needs to move from

hub-and-spoke model centered

on 17th Street campus to a

matrix model emphasizing care

closer to home with all sites of

service interconnected through

digital strategies

TODAYHub-and-Spoke

TOMORROWMatrix Model

4646

ACCESS

FACILITY STRATEGY EVALUATION

Recent evaluation of facility plan asked

“What if we”:

• Accelerate growth of cardiovascular

and neurosciences centers at NHRMC

• Save millions of capital dollars

• Build orthopedic services in a more

accessible location, keeping outpatient

& inpatient together

Change in plan to:

• Make new patient tower Heart &

Vascular Hospital

• Expand neurosciences in existing

space

• Make orthopedics anchor of new

hospital in Scotts Hill

Even with this likely pivot, $1B+ master

facility plan required to meet region’s

health needs over next 10-15 years

4747

ACCESSSYSTEM UTILIZATION

Telehealth – NHRMC Home Care

• Manage patients with chronic conditions

(congestive heart failure, high blood pressure,

COPD or emphysema)

• First year:

• 223 patients, 159 of whom had prior

hospitalizations

• Of those 159, only nine were readmitted for

congestive heart failure within 30 days, one-

third the rate for similar patients who were

readmitted in 2013

• Earned Critical Access Hospital Recognition by

The National Rural Health Resource Center for

Innovation

Manage current volume through operational

improvements:

• Care coordination

• Multidisciplinary rounds

• Digital standardization

• Real-time location tracking system

Desire to grow telehealth, but current

reimbursement environment creates

barriers for infrastructure investment

4848

ACCESSDIGITAL PLATFORM & CONSUMER-CENTRIC FOCUS

Future: Customer Relationship Management (CRM)

platform

Enhanced consumer functions:

• E-visits

• “Reserve my spot” for NHRMC ExpressCare

• E-Check in

• Direct scheduling

Future: Price estimator for common

scheduled procedures

NHRMC App with interior, exterior wayfinding

Growing the digital platform requires

investment to procure and install new

technology

4949

VALUERELIABLE, HIGH QUALITY CARE DELIVERED COST EFFICIENTLY

To deliver value throughout

the NHRMC system by

decreasing clinical variation,

increasing care coordination

(both inpatient and

ambulatory), using evidence-

based medicine, cost

accounting, increasing

covered lives, transparency

(both internally and

externally), and provider

engagement

Value

Value Goals:

• Clinical excellence: transform care delivery system by

eliminating unnecessary variation, establishing a system to

evaluate, implement, monitor and maintain evidence-based

standards of care to improve outcomes and reduce costs

• Post-acute care network: Create a post-acute care network

allowing acute care admission to have seamless transfers of

care between levels

• Cost to deliver care & internal efficiencies: right care, right

time, right place; standardized pathways that allow for outlier

variation; reliable, accurate data; etc.

• ACO / population health / PQP initiative: successfully drive

quality performance across the ambulatory network; Ensure

patients receive appropriate assistance with care transitions;

Educate providers and ensure appropriate risk adjustment;

Evaluate and Implement value-based contracting programs

• payer strategies: seek opportunities to build capabilities to

take on more risk and move upstream on premium dollar

5050

VALUECLINICAL EXCELLENCE

First Year Impact

• Reduced ED dental pain return visits from

8.45% to 3.48%

• Reduced length of stay for spine surgery

cases saving 190 days

• Reduced unnecessary blood transfusions by

864 units of blood, avoiding 9 complications

and saving $386,208

• Increased use of CHF evidence-based order

sets from 47% to 98%

• Reduced cost of care for CHF patients saving

$692,333

• Improved appropriate use & cost efficiency for

spine braces saving $129,886

• Improved appropriate use of Acetaminophen

saving $242,683 in 6 months

• In 3 months, Transitions Clinic has prevented

15 readmissions

Outcome Examples

Mortality

Readmissions

Infections

Functional Status

Morbidity

Patient Experience

Cost Examples

Supply Costs

Pharmaceuticals

Over / Under Utilization

LOS Reduction

Advanced analytics requiring significant investment (personnel and

platforms) can accelerate quality improvement and cost reduction

5151

VALUEACCOUNTABLE CARE

Physician Quality Partners serves as NHRMC’s ACO

Medicare Shared Savings Program designed to move

system away from volume and toward value and

outcomes. Offers providers the opportunity to create an

Accountable Care Organization (ACO) for an assigned

Medicare population

An ACO is measured across three key metrics:

Quality

Cost

Experience of Care

Physician Quality Partners –

ACO Program Performance

Medicare Spending Savings (2018)

$5.3 M

Quality Score (2018)(highest available merit-based incentive,

two consecutive years)

95.12%

Reduction in Cost of Care

per Beneficiary (2018)(national average $180)

$282

Earned Shared Savings (2018)

$2.5 M

Providers

406Covered Lives

18,951Practices

34

NHRMC’s ACO has successfully driven value, but

greater expertise, scale & investment are required

to continue to develop population health

capabilities

5252

VALUEPAYER STRATEGY

New Medicare Advantage Health Plan for New Hanover County

• Annual Enrollment Period started October 15

• Membership open to New Hanover County residents with coverage starting January 1, 2020

• FirstMedicare Direct in partnership with New Hanover Health Advantage is offering Medicare Advantage

and Prescription Drug Coverage plans

• These plans build on the strength of NHRMC’s network of providers and facilities to provide cost

effective care that improves the health of our community

To advance payer strategy, greater expertise in

advanced analytics and actuarial capabilities,

along with financial means and population health

capabilities to take on full risk is needed

5353

HEALTH EQUITYATTAINMENT OF THE HIGHEST LEVEL OF HEALTH FOR ALL PEOPLE

We intend to improve the

overall health of the region by

working with partners to

eliminate the factors that lead

to poor health, making

healthcare more accessible

and equitable, and creating a

diverse and extraordinary

workforce committed to

meeting the unique needs of

every individual

Health Equity

Health Equity Goals:

• Cultural competence: develop a team that has a deeper

understanding of every segment of our community and how we

can best care for them

• Hiring and recruitment: diverse, inclusive, transparent hiring

and recruitment practices to support our mission

• Managing risk, starting with employees: to have highly

engaged medical plan participants who have no barriers to

receiving quality care in a timely manner at an affordable cost

for themselves and their family members

• Community partnerships: a unified community effort to

advance health and wellness through collaborations with

health providers, non profits, local governments, educators,

private businesses, faith communities, etc.

• Target disparities that have wide-ranging impacts and

develop initiatives to eliminate them: create a healthcare

system where access to healthcare is equitable, health

disparities created by SDOH are eliminated, care integration is

evident across the community systems, NHRMC staff provides

culturally competent care and the staff represent a similar

composition of the community

5454

HEALTH EQUITYCULTURAL COMPETENCE, HIRING & RECRUITMENT

• Every Day Bias for Healthcare Professionals

• Employee Resource Groups

• Healthcare Explorers – inspiring future careers

5555

HEALTH EQUITYIDENTIFYING DISPARITIES

• Screening for Social Determinants of Health

• Connecting to resources through Our Community Link / NC Care 360

Greater investment in infrastructure, community partnerships & capabilities is required

to address health disparities at a larger scale

5656

HEALTH EQUITYTARGETING DISPARITIES

0%

5%

10%

15%

20%

25%

30%

Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19

Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 19-Aug

All-Cause 11.6% 11.2% 11.2% 11.1% 11.5% 11.2% 12.3% 11.6% 10.6% 11.2% 10.8%

Malnutrition 23.3% 25.6% 21.4% 19.8% 17.5% 14.8% 16.7% 21.5% 16.5% 18.8% 16.5%

All-Cause Malnutrition

National Average

Malnutrition

Readmissions

Rate

NHRMC Malnutrition Pilot

• Nationally, 30-day

readmission rate for

malnourished patients is

23%

• NHRMC obtained grant to

hire Clinical Outreach

Dietitian

• Dietitian visits malnourished

patients in their homes to

reinforce nutrition care plan

and connect to needed

resources

Malnutrition-specific 30-day Readmission Rates

17% reduction in 30-

day readmission rate

over 8-month period(Jan-Aug 2019)

5757

HEALTH EQUITYCOMMUNITY PARTNERSHIPS

Healthy Food

Food Pharmacy

- Provides healthy food for food insecure patients to take

home when discharged from NHRMC inpatient units

- Funding from Eastern North Carolina Food Bank and

NHRMC Foundation donors

Food Boxes

- Provided by NourishNC to patients of NHRMC Zimmer

Cancer Center and Nunnelee Pediatric Clinics

NHRMC staff participation in NourishNC food drives and

MarKids events

Housing

9th Habitat for Humanity House

Support for WARM

New Hanover County Resiliency Task Force

Address “toxic stress”

Training on Community Resiliency Model

5858

HEALTH EQUITYMANAGE RISK, STARTING WITH EMPLOYEES

NHRMC employee

contributions for health

benefits have remained flat

for 9 years

NHRMC Medical Plan single

coverage employee

contribution $401.70 / year

Open 24/7

$5 per pay period for

employees, or $10 per pay

period for a family

membership

6,597 members

700-800 visits/week

$10 co-pay

Free flu vaccines and health

risk assessments

Video visits

Employee Nutrition Services

Free consultation and

guidance from a wellness

dietitian and can enjoy many

healthy cooking classes

Discounted fresh & healthy

meal options delivered to 12

system locations

Employee Pharmacy

Retail setting offering some

over-the-counter

medications, and NHRMC

pharmacists will be on site to

educate and review

medications

Healthy Lifestyles

1303 employees enrolled,

wellness programs for

managing condition,

$0 co-pay for diabetes and

hypertension-related visits,

select medications &

supplies

Employee Fitness Center Employee Health and ClinicHealth Benefits

5959

OTHER STRATEGIC PRIORITIESEMPLOYEE AND PROVIDER ENGAGEMENT

Employee Recruitment, Development and Retention

• Staffing models to address our increasing acuity of patients

• RN Recruitment Center to focus on RN and CNA recruitment

• Pay rates that ensure NHRMC is competitive (highest starting rate for RNs in North Carolina)

• Benefits plans well above the market average

• Leadership development programs for different levels of leadership to build teamwork and personal

development

• Culture transformation / breakthrough training

Provider Engagement

• Provider leadership training / Dyad model

• Enhanced communication tools

• Resiliency programming

Even after almost $30M investment,

more dollars needed to keep pace with

staffing and development needs

Provider shortages among nearly all

levels and specialties and recruitment

costs projected to increase

6060

OTHER STRATEGIC PRIORITIESINNOVATION

NHRMC is creating an internal culture of innovation with an agile, fail-fast mentality, as well as a strong

external collaborative network locally, nationally, and internationally, designed to:

a) Encourage, generate and manage ideas from within NHRMC through our Speed of

Health business modeling program

- Delivered in either a multi-team, or tailored single-team format to internal and partner organizations

- Supported by an online platform to collect, evaluate, and manage submitted ideas from employees as

well as run "grand challenge” programs. Each year the most promising ideas will be offered mentorship

and legally appropriate investment support for start-up or product development

b) Drive an external innovation pipeline introducing and piloting the best ideas originating outside

NHRMC simultaneously identifying and addressing structural NHRMC barriers to adoption

- Examples from last year or currently in progress include a digital human health coach, tele-pharmacy,

oncology clinical decision analytics; a diabetes management platform, and molecular nutrition software

c) Develop and execute imaginative new business opportunities adjacent to the current NHRMC

business model

- This year we have examined sensor-embedded home monitoring for the elderly, community data-

sharing models to targeting SDOH, and new AI-based commercial wellness applications

d) Create new external revenue opportunities by integrating LEAN and Innovation approaches

leveraging synergies and providing co-branding and operational efficiencies

Further scale and expertise needed to proliferate and achieve

success rate that yields return on investment

6161

NHRMC FINANCIAL PROJECTIONSIMPACTS OF POTENTIAL SIGNIFICANT EVENTS

Potential Significant Event FY18 Impact ($) FY19 $ Impact ($)

340B: Impact of loss of drug discounts and

downward pressure on reimbursement

amounts

$41 million $50 million

SCH: Potential Sole Community Hospital

(SCH) benefit and reimbursement decreases$46 million $37.5 million

Sales Tax: Legislative uncertainty around

sales tax implementation and assessment caps$11.8 million $12.4 million

Total $98.8M $99.9M

Other potential impacts:

1. Managed Medicaid (projected $20M/year reduction once implemented)

2. Disproportionate Share Hospital payments anticipated total $11.1M

reduction over next 5 years

3. CON de-regulation (would mean loss of likely only non-safety net

services like surgical procedure, imaging and possibly beds)

4. Increasing shift of inpatient care to outpatient in next 5 years

6262

S&P: A+

RatingFY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY25-FY35

Operating Margin 3.80% 6.98% 6.40% 5.00% 4.00% 3.00% 3.00% -

Cash Generated - $144,745 $150,908 $139,519 $126,708 $115,974 $120,099 -

Cash Projected Spend on

Capital- ($69,558) ($171,273) ($114,721) ($103,241) ($113,227) ($149,116) ($1,585,662)

Routine - ($44,445) ($83,809) ($60,938) ($61,581) ($57,677) ($57,581) ($686,930)

Current Special

Projects- ($25,113) ($35,551) ($1,950) $0 $0 $0 ($2,819)

Future Strategic

Projects- $0 ($51,913) ($51,832) ($41,660) ($55,550) ($91,535) ($895,912)

Beginning Cash Balance - $763,769 $838,955 $818,590 $843,389 $866,856 $869,604 -

Ending Cash Balance - $838,955 $818,590 $843,389 $866,856 $869,604 $840,587 -

-

Days Cash on Hand 324.6 242.7 237.4 231.0 222.3 209.3 191.5 -

NHRMC FINANCIAL PROJECTIONSPROJECTED CAPITAL CASH FLOW NEEDS

Demand for capital, inability to continue funding

reserves, and expected increases in operating costs

create financial headwinds

6363

People

To cultivate a diverse and extraordinary workforce, we need to attract and retain

employees and providers with a work environment that is rewarding personally and

professionally

Technology

To offer consumers a seamless and personalized care experience, we need to invest in

advanced technology systems that provide digital access to services, interconnectivity

between providers, and analytics that can identify and anticipate changes that will lead to

better care and health for every population we serve

Expanded

Services

To improve the health of the region, we need to offer a wide array of services that

promote wellness and make care easy to access and more affordable while also building

our capabilities to treat the most complex conditions.

Financial

Security

To meet the challenges of today’s growing population while also investing in new models

of care, we need access to capital and the financial strength to withstand cuts to

reimbursements and fluctuations in the market.

NHRMC is clinically, financially and operationally strong today. We have great people

who are working together to improve the health and well-being of our entire community.

To build on this momentum and succeed, we need additional resources for:

NHRMC CRITICAL SUCCESS FACTORS

6464

GUIDING PRINCIPLES

1. Improving access to care and wellness through more consumer-centric options

2. Advancing the value of the care we provide through higher quality and lower costs,

effectively managing the health of our region to not only treat the sick but keep them well

3. Achieving health equity through community partnerships and activities that remove

barriers to care, enabling our residents to achieve their own optimal health

4. Supporting our staff and the culture that has made NHRMC one of the top places to work

in the country

5. Partnering with providers to make southeastern North Carolina an excellent place to

practice medicine so we can continue to attract talented and compassionate providers to

care for our growing population

6. Driving quality care throughout the continuum and helping facilitate transitions with other

providers to deliver more seamless and coordinated care models

7. Growing the level and scope of care already in place for all, regardless of ability to pay

8. Investing to ensure the long-term financial security and future of our health system

6565

Transition NHRMC into regional health (SystemCo)

• Create IRC 501(c)(3) SystemCo with County-Appointed Board

• SystemCo is new sole corporate member of NHRMC (currently no corporate member)

• Move PMH, other entities under SystemCo, to address lost revenue and other liability implications

• SystemCo may borrow, lend, capitalize more freely outside of New Hanover County

• SystemCo may focus more on strategic planning, other matters, without open meetings, books and

records (researching scope)

Ability to

Respond to

Competition

Diplomatic

Hurdles

Investments

Outside of

County

No legal

structure

change

Issues

remain

Education,

bylawsLimited

Create System

Parent

Partial/full

resolution

Education,

bylaws

Partial/full

resolution

REMAINING INDEPENDENTSYSTEM CO – POTENTIAL RESTRUCTURING

Source: First Tryon Advisors

Current Organizational Concerns

Org

an

iza

tio

na

l

Le

ga

l S

tru

ctu

re

Potential restructuring does not address need for scale,

development of capabilities, or access to capital

6666

Access to Operational Expertise / Intellectual Property / Provider Talent

RANGE OF STRATEGIC PARTNERSHIP

Specific Purpose

Contractual RelationshipsEnterprise-Wide

Transaction Structures

Lower degree of integration/investment Higher degree of integration/investment

Post-Transaction Operating Characteristics

Financial Consolidation

Single-Signature Contracting

Incentives for Strategic Alignment

Shared Capital Investment

Permanency

Affiliation /

Clinical

Services

Alignment

Service Line

Co-Management

Agreement

Contracting

Organization /

ACO / ClN

Management

Services

Agreement

Specific Purpose

Joint Ventures

Service Line

Joint Venture

Equity JV

(Minority

Interest)

Collaborative /

Support Services

Organization

Sale of

Assets

Or

Majority of

Capital Stock

Whole

Enterprise

Lease

Joint

Operating

Agreement

Equity JV

(Majority

Interest)

Change of

Corporate

Member /

Sole Member

Substitution

Merger of

Legal

Entities

Independent Organization

6767

OUR AMBITION

NHRMC MISSION, VISION, AND VALUES

Our Mission…

Leading Our Community to Outstanding Health

Vision for the Future…

NHRMC is an industry leader in a new era of healthcare delivery. Our thriving community

serves as a national model of achieving excellence for all.

We are committed to:

• Fostering a culture of transformation through empowerment, innovation, and inclusivity.

• Delivering exceptional quality, affordability, and personalized experiences throughout the

wellness continuum.

• Advancing health and vitality for all through a community integrated model of collaboration.

• Cultivating a diverse and extraordinary workforce dedicated to our mission.

And Values…

Ownership, Teamwork, Communication, Compassion

Source: NHRMC Website and Data

68

MEETING CALENDAR

69

MEETING 3 PREPARATION & CLOSING

REMARKS

7070

PARTNERSHIP ADVISORY GROUP PROCESSRESPONSIBILITIES OVERVIEW

Request for Proposal (RFP) Strategic Options Assessment

Purpose Explore future sale, partnership, change in structure, or status quo of NHRMC

Process

• Develop an RFP to solicit proposals from

potential partners to understand if they

could further NHRMC in achieving goals

and objectives as a community healthcare

organization

• Review and evaluate RFP responses and

potential partners

• If a sale or partnership is chosen, PAG

would oversee the transaction steps with

the designated strategic partner(s)

• Understand NHRMC’s progress against

its strategic objectives

• Determine additional initiatives, resources

needed, and organizational changes

required to achieve goals and objectives

as a community healthcare organization

• Evaluate strategic outlook of NHRMC as

an independent entity

ResultRecommend a go forward plan for NHRMC to New Hanover County and NHRMC Board

of Trustees including the possibility of a sale, partnership, change in structure, or

remaining independent

During this process, the PAG will explore both potential partnerships and scenarios to

remain independent

7171

PARTNERSHIP ADVISORY GROUP PROCESSHIGH-LEVEL TIMELINE

SEPTEMBER

16Commissioners

pass resolution to

explore options

2 MONTHSPotential partners

develop and submit

proposals while PAG

explore options for

remaining independent

RFP responses due

by March 1, 2020

2-3 MONTHSEvaluate proposals and

narrow field to 2-3

respondents for further

dialogue and due diligence.

After public hearing (below),

PAG will vote to make a go-

forward recommendation

PUBLIC HEARING Public has chance to comment

on proposals received

BOC and

BOT vote

on

proposed

direction

and

agreement

OCTOBER 14Partnership

Advisory Group

(PAG)

announced

2 MONTHSPAG develops priorities and submits

RFP to at least five potential

partners and RFP is posted to

website

RFP to be issued by Dec 31, 2019

PUBLIC

HEARING Public has chance

to comment on

priorities for

health system and

RFP

JULY 23NH County &

NHRMC announce

vote to consider

resolution allowing

exploration of

options for system

1-2 MONTHSLeaders hold 2

community forums

and speak at

dozens of events to

inform and answer

questions from

public and staff

3-5 MONTHSIf the PAG recommends

pursuing a strategic

partnership, complete

letter of intent, complete

final due diligence,

complete definitive

agreement for approval by

the county, and make all

necessary regulatory

filings

Completed

Completed

Completed

CompletedCompleted

PUBLIC

HEARING Public has chance to

comment on

proposed direction

for NHRMC

7272

MEETING 3 PREPARATIONPRELIMINARY MARKET RESEARCH

Strategy1

Are there organizations that have strategic priorities

and plans that could benefit southeastern North

Carolina?

Community Benefit and Access

to Healthcare Services2

Are there organizations with strong community &

population health programs, along with charity care,

that could be extended to other regions?

Clinical Programming3

Are there organizations with experience in growing

service lines and provider base to meet the unmet

needs of the communities?

Organizational Commitments4

Are there organizations that have demonstrated commitments

to employees and providers, as well as long-term operational

sustainability, financial commitments, and access to capital

when adding new organizations to their system?

Governance5

Are there organizations that maintain local

governing roles across partnership arrangements?

Preliminary market research focused on the following questions:

Partnership Advisory Group now to identify specific

organizations and how they may benefit NHRMC and

southeastern North Carolina

7373

The Goals and Objectives are specific actions required for NHRMC to achieve the

desired outcomes as stated through Guiding Principles. They serve as the basis

for the development of RFP questions and the criteria against which each

strategic option will be evaluated

A Request for Proposal (RFP) is a document to collect required information

from potential partners to enable evaluation of proposals against defined

partnership goals and objectives

The Guiding Principles serve as a framework of desired outcomes across key

dimensions (i.e. operational, clinical, etc.) to guide the partnership exploration

process

Our goal in this process is to better position NHRMC to achieve its strategic

imperatives

MEETING 3 PREPARATIONAPPROACH TO RFP DEVELOPMENT

Strategic Plan

Goals and

Objectives

Request for

Proposal

Guiding

Principles

Next Step: The PAG will develop Goals and Objectives to guide the RFP

7474

The Questions and Issues section will

comprise the majority of the RFP, and

will include:

• Proposing Organization’s system overview,

including qualifications, past experience in

strategic partnering, etc.

• Questions derived from the Goals and

Objectives

The RFP questions will be derived from

the Goals and Objectives to ensure that

all responses to each question will allow the

PAG to understand how proposing

organizations can benefit NHRMC, New

Hanover County, and the region

MEETING 3 PREPARATIONKEY COMPONENTS OF A REQUEST FOR PROPOSAL

Request for Proposal Outline

1. Background on NHRMC (brief history, mission, organizational

overview)

2. Purpose and high-level goals

of NHRMC strategic

partnership exploration

3. RFP Process Overview (timeline, preliminary due diligence

disclosure, etc.)

4. Legal Elements

5. Outline of Questions and

Issues to be Addressed in

Proposals

7575

CLOSING REMARKS

Thank You

76

APPENDIX

7777

ACCESSMAJOR AMBULATORY ACCESS POINTS

Emergency Department - North

• New Hanover Regional Medical

Center Emergency Department-

North offers 24-hour, 7-day a week,

full-service emergency care at a

location convenient to residents of

New Hanover, Pender and Onslow

counties

Surgical Pavilion

(Main Campus)

• Advanced surgical services,

including same-day surgery

services, in a convenient,

comfortable 186,500-square-foot

facility; 26 operating rooms

Zimmer Cancer Center

(Main Campus)

• Designated as a teaching cancer

program by the American College of

Surgeon’s Commission on Cancer

Heart Center - Outpatient Services

• 2,300-square-foot facility provides

patients a centralized location to

meet with cardiologists and

advanced clinical practitioners as

well as have easy access to cardiac

imaging and rehabilitation services

Orthopedic Hospital

• The NHRMC Orthopedic Hospital,

designated as a Blue Distinction

Center+ in Knee and Hip

Replacements by BCBSNC,

• Recognized as a Total Joint

Replacement Specialty Center by

UnitedHealth Premium®

NHRMC Atlantic SurgiCenter

• Provides a comfortable, high-quality

option for surgeries not requiring a

stay in the hospital

• Specializes in same-day surgeries

including pediatric and adult

procedures

7878

ACCESSMAJOR INPATIENT ACCESS POINTS

NHRMC Medical Center / ED

• Public, not-for-profit hospital is a

teaching hospital; and tertiary care

center for a seven-county area

• Emergency Department is the

region's only Level II Trauma Center

and is open 24 hours a day, seven

days a week

Betty H. Cameron Women’s and

Children’s Hospital (Main Campus)

• 195,000-square-foot facility offering

expert women’s and children’s care

including obstetrical care for routine

and high-risk deliveries

• Offers region’s only pediatric and

neonatal intensive care units

Rehabilitation Hospital

(Main Campus)

• 60-beds providing patients with

treatment and support in a spacious

and welcoming environment

• 3,000 square foot therapy gym with

specialized equipment

Behavioral Health Hospital

(Main Campus)

• Open 24/7, psychiatric crisis

stabilization hospital offering

inpatient psychiatric programs for

adults with mental health disorders,

older adults and co-occurring

substance abuse disorders

Pender Memorial Hospital / ED

• Public, not-for-profit hospital is a 86

bed critical access community

hospital in Pender County

• Pender Memorial is owned by

Pender County and managed by

New Hanover Regional Medical

Center

Orthopedic Hospital

• The NHRMC Orthopedic Hospital,

designated as a Blue Distinction

Center+ in Knee and Hip

Replacements by BCBSNC,

• Recognized as a Total Joint

Replacement Specialty Center by

UnitedHealth Premium®

7979

ACCESSINPATIENT AND AMBULATORY FACILITY LOCATIONS

Facility Type: Count

Acute Care Facilities and ED

NHRMC Medical Center 1

Pender Memorial Hospital 1

Other Major Facilities

Emergency Department - North 1

Surgical Pavilion 1

Zimmer Cancer Center 1

Heart Center - Outpatient Services 1

Orthopedic Hospital 1

NHRMC Atlantic SurgiCenter (ASC) 1

Betty H. Cameron Women’s and

Children’s Hospital 1

Inpatient Rehabilitation Hospital 1

Behavioral Health Inpatient Hospital 1

Other Ambulatory Locations

Physician Practice 41

Health and Diagnostic Center 9

Urgent Care 2

Radiation Oncology 2

Pediatric Outpatient Services 1

Outpatient Rehabilitation Services 1

Home Health Services 1

Wound Care Clinic 1

Sleep Center 1

Note: count does not represent individual locations

Main Hospital Campus

Medical Center

Surgical Pavilion

Zimmer (Cancer)

Betty H. Cameron

Inpatient Rehab

Behavioral Health

Heart Center

Pender Memorial Hospital

Map represents unique locations (39) not facility / service type count (70) as depicted in table, including:

• 6 unique locations for acute care facilities and ED / other major facilities

• 8 other ambulatory facility / services are collocated at these site

• 33 unique locations for the remaining other ambulatory locations

• 22 locations maintain one (1) ambulatory facility / service type

• 11 locations maintain more than one ambulatory facility / service type

Main Hospital

Campus

8080

OPERATING STATISTICSINPATIENT TRENDS

Note: Acute CMI and ALOS excludes normal newborns

36,669 38,191 36,574

10,07010,236

10,611

1,9382,041

2,047801

808 7874,262

4,422 5,247

FY16 FY17 FY18

ExtendedRecovery

Rehab

Behavioral

Observation

IP Acute

53,74055,698 55,266

+2.8% Acute Case Mix

Index (CMI)*

Inpatient Discharges by Type*

Acute Average Length

of Stay (ALOS)*

1.78

4.84Days

FY18

Performance

Service

Line:FY18

% of

Total

FY16-18

% Growth

Medicine 7,950 18% +3.8%

Cardiac 5,735 13% +4.6%

Obstetrics 4,367 10% +1.6%

Orthopedics 3,614 8% -5.0%

Neurological 3,610 8% +0.4%

Top 5 Clinical Service Lines by Volume

CMI informs complexity of care

ALOS informs patients days and throughput

8181

OPERATING STATISTICSOUTPATIENT TRENDS

Outpatient Surgery Procedures

414,909461,005 479,291

104,778

132,578163,307

FY16 FY17 FY18

Clinic Visits

NHRMCPhysicianGroup

519,687

593,583

642,598

24,687 25,448 26,210

FY16 FY17 FY18

Emergency Department Visits

141,967 146,452 147,349

FY16 FY17 FY18

+6.2%

+3.8%

Outpatient Registrations by Type

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