Making healthcare remarkable

Novant HealthInnovation in Healthcare

Dr. William “Bill” Hammill, MDSenior Physician ExecutiveChairman and Service Line Leader – Department of PediatricsNovant Health

NOVANT HEALTH – Who We Are

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We are an integrated system of physician practices, hospitals, outpatient centers, and more – each element committed to delivering a remarkable healthcare experience for you and your family.

With world-class technology, personal connections, and care that’s easier to access and understand, Novant Health is with you every step of the way on your journey to health and wellness.

Our promise is to deliver remarkable healthcare. Part of that promise involves being proactive in the communities we serve and helping people to be healthier every day. We aren’t just here when our patients are sick; we’re with them every step of their journey toward health and wellness. That means reaching out, starting conversations and staying engaged. And most of all, it means inspiring and empowering communities to stay healthy.

Making healthcare remarkable

MissionNovant Health exists to improve the healthof communities, oneperson at a time.

VisionWe, the Novant Health team,will deliver the most remarkable patient experience in every dimension, every time.

Safety • QualityAuthentic personalized relationshipsVoice & choice • Easy for meAffordability

ValuesDiversity and InclusionTeamworkPersonal excellenceCourageCompassion

Our promiseWe are making your healthcare experience remarkable. We will bring you world-classclinicians, care and technology – when and where you need them. We are reinventing the healthcare experience to be simpler, more convenient and more affordable, so that you can focus on getting better and staying healthy.

Our peopleWe are an inclusive team of purpose-driven people inspired and united by our passion to care for each other, our patients and our communities.

How it All Fits Together

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Capital

RatingAgencies

Investments &Liquidity

Accounting

ExternalEnvironment

Competition

IncomeStatement

BalanceSheet

DebtMarkets

Banks

Revenue Cycle

Governance& Controls

Operations &Performance

Growth

Novant Health Environmental Look Back/Look Forward

Pressure on pricing

Increasingly uncertain state regulatory environment – changes to CON

Emergence of consumer

Emergence of value based care and population health

Improving financial environment

Payor mix changes with the enactment of the Affordable Care Act

Last 5 – 10 Years Next 5 – 10 Years

Reimbursement changes

‒ Site-neutral payments‒ Pay for performance

M&A activity has grown steadily and anticipate increased consolidation of hospital systems

Federal regulatory reform – changes to the Affordable Care Act

State regulatory reform

‒ Managed Medicaid program‒ CON fully/partially repealed?‒ Medicaid expansion?

Consumerism

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Changing Environment

Recent Past (2012 – 2016)

• No Medicaid expansion in any of our footprint states

• Significant investments in IT (EHR) and process improvement

• Decrease in self pay and indigent care patients

Near-Term (2017 – 2019)

• Regulatory/political uncertainty (future of ACA)

• Continued shift towards site-neutral payments

• Growth of services covered by bundled payments

• Evolution of impact of MACRA, MSSP, and Medicare ACOs

• Increased consumerism • Industry consolidation;

new partnership models

Medium-Term(2020 – 2025)

• Expect drug pricing to continue to be in the spotlight

• Increased focus on value-based reimbursements and bundled payments

• Continued industry consolidation; new partnership models

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CMS Payment Reform Impact on Novant Health

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Medicare, Managed Medicare, and Medicaid reimbursement changes have been impacting us unfavorably by about $20 million per year for the past few years.

CMS has a stated goal of 80% of their payments to be based on “value” by 2020 so we will be forced to do more of the bundled payment arrangements.

Currently losing approximately $5 million a year on bundled/cost sharing arrangements but expect that to improve as we gain experience with this new framework.

Managed care payors may catch up with CMS and force more value-based payments and narrow networks.

CIN/ACO development by health systems will also likely gain traction.

Current State: Declining Admissions, Rising Employment, Something Has To Give…

____________________Source: Medicare Administrative Data (CMS), Bureau of Labor Statistics

338

National, 270

2007 2008 2009 2010 2011 2012 2013 2014 2015

Inpatient Medicare Admissions (per 1,000 beneficiaries)

All Employees, Hospitals, Thousands, Seasonally Adjusted

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Across the health services sector, volume is rapid and multiples are increasing

Non-Acute Activity Is At Record Highs

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National Innovation in Healthcare

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Amazon

Last year, Amazon bought online pharmacy PillPack. It also announced a partnership with Warren Buffett’s Berkshire Hathaway (BRKB) and banking giant JPMorgan Chase (JPM) to create a new health care company that they touted would be “free from profit-making incentives and constraints.”

Experts expect more deals like this in the future since nobody in Silicon Valley will want to let Amazon get a big head start on health care.

“Tech companies can either sit back and wait to see if Amazon messes up in health care or they can get involved now,” said Don Townswick, director of equities portfolio management at Conning.

Microsoft and Walgreens

Microsoft (MSFT) announced a partnership with Walgreens Boots Alliance (WBA).

As part of the deal, Microsoft will become Walgreen’s new cloud provider.

The two said they will also work on solutions to lower health care costs.

Walgreens will open up 12 “digital health corners” in stores that will sell health care-related gadgets.

The two companies said the partnership will help Walgreens gain personalized data about their customers’ health, which will allow pharmacists to give better, customized nutrition and wellness solutions.

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United Healthcare’s Value-Based Care Results –Screen More, Use Hospitals Less…

https://www.uhc.com/content/dam/uhcdotcom/en/ValueBasedCare/PDFs/UHCvaluebasedcare_factsheet.pdf

And this is just for onepayer…

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Novant Health and Innovation in Healthcare

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Doing More with Less Healthcare Reform and federal/state budget pressures have forced not-for-profit

hospitals to deliver higher-quality care with reduced reimbursement

Hospitals and health system must be proactive in implementing various strategies in order to do more with less

‒ Redesign delivery of hospital care to achieve lower costs‒ Increase physician alignment‒ Implement growth strategies to increase scale and reduce costs‒ Improve balance sheet by increasing reserves and reducing risk‒ Add expertise to board and executive management

“The strategic shift now taking place will challenge business models and require forward thinking strategies to manage

through a transition period that will unfold over the foreseeable future.”

– Moody’s Investors Services

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Novant Health and Innovation in Healthcare

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CNA to RN Program

Charlotte, N.C. – August 29, 2018 – Novant Health and Atrium Health are announcing an initiative to support the professional development and advancement of certified nursing assistants (CNAs) to the position of registered nurse (RN). Atrium Health and Novant Health are piloting this CNA-to-RN scholarship program for CNAs in the Charlotte area as a joint ONE Charlotte Health Alliance effort. The first scholarships have been offered to 10 CNAs – five at each health system – interested in becoming registered nurses.

The two health systems collaborated to identify CNAs as a segment of team members to pilot career growth programs. This pilot program serves as an upward mobility initiative to support internal advancement and improve financial well-being among team members, particularly those living in priority zip codes as identified in the Charlotte Opportunity Task Force.

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Novant Health and Innovation in Healthcare

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Project 658/Smith Family Wellness Center

Movement Family Wellness Center

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Novant Health and Innovation in Healthcare

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Michael Jordan Clinics

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Novant Health and Innovation in Healthcare

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Mecklenburg County / CRC Partnership

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Novant Health and Innovation in Healthcare

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ONE Charlotte Health Alliance

In 2016, Novant Health partnered with Atrium Health and Bank of America to form ONE Charlotte, an initiative bringing partners together to address some of our community’s most critical challenges: investing in neighborhoods in need, and removing barriers to education, employment and healthcare.

Growing out of this effort is the ONE Charlotte Health Alliance. Working with Atrium Health and the Mecklenburg County Health Department, we’re teaming up in a long-term collaboration to bring primary care to the highest-need pockets of our community.

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Attributes of Innovative Healthcare Organizations

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Be willing to partner with nontraditional partners

Be willing to move quickly to make the necessary changes and innovations that lead to better patient-focused outcomes.

Be willing to believe what the data is saying about what patients want instead of relying on instinct and experience alone.

Be willing to base strategic business decisions on what patients and communities need rather than what financial needs dictate.

Be willing to accept that change will be difficult but necessary to succeed in the new health care economy overflowing with new market entrants and vertical integrators.

Be willing to take risks if they present genuine opportunities to more effectively serve patients and communities.

Be willing to embrace new digital health technologies and create a fully informed, patient-centered digital health strategy.

Be willing to build a sustainable innovation infrastructure that’s well-supported by budget, talent and processes.

Questions?

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“When we are closed to ideas, what we hear is criticism. When we are open to criticism, what we get is advice.”

Simon Sinek