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Hospital for Special Surgery ISOC CEO Meeting

April 29 – May 1, 2010

2

Louis A. Shapiro, FACHE

• HSS President and Chief Executive Officer . 2006-Current

• 27 years of healthcare experience

­ Previously served as Executive Vice President and Chief Operating Officer at Geisinger Health System in Danville, Pennsylvania . 2002 - 2006

­ McKinsey & Company health care practice leader. 1999 – 2002

­ Allegheny General Hospital/System based in Pittsburgh served in a number of capacities. 1986-1999

­ Greater Canonsburg Health System. 1984-1986

­ Presbyterian University Hospital (UPMC). 1983

• Associations and Credentials

­ Fellow of the American College of Healthcare Executives

­ Member of the Regional Policy Board for the American Hospital Association

­ Executive Committee member at the Greater New York Hospital Association

­ Board member for the non profit Crutches for Kids

­ Member of the Young Presidents Organization

­ Bachelor of Science and Master of Health Administration from the University of Pittsburgh

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U.S. Hospitals

US Healthcare System

58%

20%

Non-profit

For-profit

Regulatory Bodies

• Centers for Medicare and Medicaid Services (CMS)­Federal agency that administers government

insurance programs (Medicare and Medicaid)

• Joint Commission­Private sector not-for-profit organization operating

accreditation programs that are a condition for licensure and reimbursement

• OSHA, NRC, FDA, etc.

36% 34%

15%11%

4%

0%

10%

20%

30%

40%

50%

Comm'Insur'

FedGov't

Self-pay State &Lcl Gov't

Other

Mixed Payment Types

Uninsured represent 45.7 million or 15.3% of population

16.2%17.3%

19.5%

10%

15%

20%

25%

2008 2009 2017E

Health Costs as % GDP

~$2.5 Trillion ($8,047 per person) in 2009

Health Care Reform

• Recent legislation will expand coverage to 32 M people through changes to the health insurance market

• Impact of reform will vary greatly at the hospital-level, owing to differences in certain hospital characteristics

State & Local Gov’t

22%

Total in 2008 = 5,010 Hospitals

4

Founded in 1863 as The Hospital for the Relief of the Ruptured and Crippled; HSS is the oldest existing orthopedic hospital in the United States

Mission: Provide the highest quality patient care, improve mobility, and enhance the quality of life for all and to advance the science of orthopedic surgery, rheumatology, and their related disciplines through research and education

Vision: Lead the world as the most innovative source of medical care, the premier research institution, and the most trusted educator in the field of orthopedics, rheumatology, and their related disciplines

From a small rehabilitation-oriented facility to an internationally renowned center for the treatment of musculoskeletal diseases

From a small rehabilitation-oriented facility to an internationally renowned center for the treatment of musculoskeletal diseases

History of Hospital for Special Surgery

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Overview

OrganizationOrganization

• Not-for-profit academic teaching hospital

• Governed by 40-person Board of Trustees­9 subcommittees

• Board of Advisors

• Not-for-profit academic teaching hospital

• Governed by 40-person Board of Trustees­9 subcommittees

• Board of Advisors

Facilities and VolumesFacilities and Volumes

• 162 beds growing to 212 beds by 2011

• 28 ORs growing to 32 by 2011

• 8 MRIs

• Number of Surgeries: 24,145 (2009)

• Number of outpatient visits: ~300,000 (2009)

• Average Length of Stay: 4.01 days (2009)

• 162 beds growing to 212 beds by 2011

• 28 ORs growing to 32 by 2011

• 8 MRIs

• Number of Surgeries: 24,145 (2009)

• Number of outpatient visits: ~300,000 (2009)

• Average Length of Stay: 4.01 days (2009)

StaffStaff

• 230 active medical staff, including:­89 Orthopedic Surgeons­43 Rheumatologists­37 Anesthesiologists

• 86 Scientists­22 full-time bench research

faculty­9 full-time clinical investigators ­55 part-time clinician MD

scientists

• ~3000 full time equivalent employees (includes physicians and their staff)

• 230 active medical staff, including:­89 Orthopedic Surgeons­43 Rheumatologists­37 Anesthesiologists

• 86 Scientists­22 full-time bench research

faculty­9 full-time clinical investigators ­55 part-time clinician MD

scientists

• ~3000 full time equivalent employees (includes physicians and their staff)

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Location: Upper East Side, Manhattan, New York

Our region is a unique environment:

• Densely populated

• Ranging from the very wealthy to the underserved

• Costly real estate

• Financially distressed state

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Medical/Surgical Services

Surgical Musculoskeletal CareSurgical Musculoskeletal CareSurgical Musculoskeletal CareSurgical Musculoskeletal Care Non-surgical Musculoskeletal CareNon-surgical Musculoskeletal CareNon-surgical Musculoskeletal CareNon-surgical Musculoskeletal Care

• Adult Reconstruction & Joint Replacement

• Foot and Ankle

• Hand and Upper Extremity

• Limb Lengthening and Deformity

• Metabolic Bone

• Orthopedic Trauma

• Pediatric Orthopedic Surgery

• Scoliosis

• Spine

• Sports Medicine and Shoulder

• Infectious Disease

• Neurology

• Pain Management

• Pediatrics

• Peri-operative Medicine

• Physiatry

• Physical Therapy

• Primary Care Sports Medicine

• Radiology & Imaging

• Rheumatology

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Patient Origin and Volume Growth

2009 Surgical Volume by Geography

50.2%

37.3% 1.0%

11.6%

RegionalNational

Local

Int’l

xNorthernNJ

Lower Hudson Valley

(NY)

So. Conn.

LongIsland

x

x

x

x HSS Main Campus

x HSS Affiliated Offsite

x

x

xxxx

Select Volume Trends

2006 2009 % Change

Surgeries 18,494 24,145 30.6%

MRI 19,057 26,672 40.0%

X-ray 132,574 172,673 30.2%

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Financial Performance

(All $ in millions) 2007 2008 2009

Hospital Operating Revenue $433.8 $496.1 $557.7

Hospital Operating Expenses $424.5 $475.4 $522.6

Hospital Gain from Operations $9.3 $20.7 $35.1

Net Research Operations ($2.0) ($1.3) ($3.0)

HSS Operating Margin 1.6% 3.7% 5.5%

Realized gains (losses)* $7.2 ($10.6) ($7.8)

HSS Net Gain $14.5 $8.8 $24.3

* Includes realized gains and losses on investments and change in unrestricted interest in the HSS Fund

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Research and Innovation

Example in Innovation: BiomechanicsExample in Innovation: BiomechanicsExample in Innovation: BiomechanicsExample in Innovation: BiomechanicsResearch Program OverviewResearch Program OverviewResearch Program OverviewResearch Program Overview

• Pioneer in biomechanics

E.g. total condylar knee, Insall / Burstein knee I & II, Ranawat/Burstein hip, elbow replacement, 913 knee, unicondylar knee, anatomic hip, artificial disc spine system, Optetrack logic knee system etc.

• Collaborate with important industry partners

• Research spans the full continuum, from bench to bedside to population

• Approximately a $30M budget. Multi-year NIH represents a major funding partner with over $55M in grants

• Core Research Programs Arthritis and Tissue Degeneration

Autoimmunity and Inflammation

Musculoskeletal Integrity

Registries & Related Outcomes Research

Tissue Engineering

Biomechanics

• Over 30,000 patients enrolled in 30 HSS Registries

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• Established in 1887, the Hospital’s orthopedic residency training program was the first in the United States

• Over 100 residents and fellows annually; 18 international clinical fellows 2008-2009

• 383 academic visitors in 2009; 165 from international community

• National CME grand rounds program reaching approximately 3,750 community-based physicians in 2009. Included 85 live grand round sessions, as well as five web-based e-Journal sessions

• Several annual education programs hosting international physicians at HSS

Education and Academic Affairs

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• Core business. High focus on initiatives that drive quality care, service excellence and employee engagement.

• Grow in Place. Focus on growth and current site expansion

• Extend the Brand. Geographic expansion, knowledge and expertise dissemination, and commercialization of intellectual property

• Efficiency. Higher levels of efficiency as a means to not only drive down costs, but improve patient satisfaction, employee engagement and physician alignment

• Alignment. Physician alignment to maintain legacy

• Teaching. Continue to build on and innovate around our education programs

• Research. Fill gaps in research programs. Advancement of patient registries, outcomes and comparative effectiveness

Challenges and Strategic Priorities

• Economics. Reimbursement environment under pressure

• Quality and Service. Maintaining high quality, high service during periods of high growth

• Capacity. Physical expansion difficult due to space and capital

• Efficiency. Finding ways to achieve and sustain higher levels of efficiency

• Alignment. Increasing Alignment between physician and hospital

• Teaching. Adapting operations as a result of changing Graduate Medical Education

• Research. Driving research excellence despite declining NIH funding

Challenges Strategic Priorities