The document discusses opportunities and obstacles in the healthcare technology industry. It notes that healthcare spending is increasing significantly due to recent reforms and that technology adoption remains low despite being seen as key to transforming the system. While many providers have invested in technologies like EHR, the returns are unclear under current reimbursement models. The reforms will increase demand for services as more people gain coverage, but providers still face financial pressures. Emerging trends like telehealth and analytics offer opportunities for advisors to help providers cut costs and enhance revenues through improved operations and new services. However, the unique nature of healthcare requires understanding its regulatory environment, economics, and focus on patient care over profits.

1. Understanding Healthcare Technology: The Opportunities and Obstacles Mark Reiboldt, Vice President Coker Capital Advisors LLC May 18, 2010

2. Introduction The healthcare industry is perhaps the most attractive new frontier for advisors of all kinds, including consulting and technology firms ,throughout the US. Considered to be the largest single area of investment right now for healthcare industry stakeholders, healthcare IT has opened up a new world of opportunity for all types of service providers, including our consulting community. But consultants entering this new frontier need to be more than technology experts to gain opportunity within healthcare IT; the healthcare industry has many unique variables and pitfalls that make it drastically different than other tech sectors. To find success, consultants must be prepared to address the specific knowledge and expertise that healthcare executives demand. This discussion will specifically look to: Examine the impact of the recently passed healthcare reform legislation on healthcare IT and what it will mean for the prospects of increased technology adoption by healthcare providers. Address some of the key elements making up the healthcare IT market and how the market’s demand is expected to evolve over the next decade. Identify where the opportunities lie in this space for outside advisors and other service providers. Identify obstacles service providers will face in the healthcare IT market and ways to overcome them. The healthcare industry opportunity …

3. Stats & Metrics The US spends four times as much on healthcare as we do on defense spending Projected healthcare spending over the next ten years should increase by $1.5 trillion as a result of the recent healthcare reform package signed by President Obama The healthcare industry loses over $50 billion a year in value that falls through the cracks as a result of inefficiencies and broken models Healthcare providers are struggling on multiple fronts: Access to capital Reimbursement cuts Diminishing margins Increased regulatory burden Pressure of uncompensated care Lack of economies of scale Inefficient operations What does the current healthcare industry landscape look like?

4. Technology & Healthcare While many of the nation’s healthcare provider organizations have invested in technology, these entities continue to lag behind other businesses in terms of overall technology adoption and optimization throughout their operations Technology has been promoted for a number of years as a critical factor to transforming the system; however, overall adoption of EHR remains below 25% The verdict is still out as to whether or not current technology solutions will actually save healthcare providers money The current healthcare reimbursement system does not incentivize technology adoption, making the ROI for providers investing in expensive, cutting edge technology unclear Policymakers and government agencies have attempted to change this with recent healthcare reform proposals and the Stimulus Bill (ARRA); however, this has yet to prove of any economic value to medical providers Many provider organizations are learning that simply purchasing a piece of technology does not automatically resolve the problems they are intending to address It’s not just EHR … providers are beginning to place a premium and focus technology adoption on solutions that will directly enhance operational efficiencies and value opportunities Learning experiences over the last five to ten years …

5. Healthcare Reform & Technology Impact of healthcare reform will increase access to healthcare services to the 45 million uninsured Americans will dramatically change the financial and operational flow of patients, capital and technology Volume of patients to support will dramatically increase, which will decrease the burden of uncompensated care for hospitals; however, this will increase the community need for medical providers The payment system has yet to adjust for these changes, so even though more people will be covered, providers are still not being adequately paid for their services Technology is already hailed as the cornerstone to making the newly emerging healthcare delivery system work the way it is planned The government is instituting programs that focus on incentivizing adoption and optimization; however, policymakers are already talking about penalties for non-compliance How will healthcare change and where will more opportunities emerge as a result? The versus/then the

6. The Opportunity Enhanced revenue cycle management to take advantage of lost revenue Cutting costs by replacing expensive infrastructure with technology alternatives Expanding services through economies of scale, market growth and non-traditional ventures Commercialization opportunities of monetized assets and entrepreneurial initiatives Retention of value kept in an organization as a result of enhanced operational efficiencies New income opportunities emerging as a result of better quality of care (pay for performance) Provider organizations are beginning to pursue previously missed opportunities …

7. Emerging Trends Tele-health Electronic data management / exchange Health information management Enhanced communications Scaled IT platform solutions Advanced provider-patient interaction Analytics and research tools Revenue management solutions Administrative efficiencies and management solutions The “Medical Home” Scalable, integrated delivery, data and information systems (SIDDIS) How technology is saving providers from business declines …

8. Results & Outcomes Whatever helps providers institute care more efficiently will also have positive benefits on patients Health information management Long-term / Chronic illness Streamlined coordination of care Wellness management Less value and (more importantly) less patient needs falling through the cracks Overall technology industry has greatly benefitted as a result of more innovation in the healthcare delivery process Greater economic efficiency as a result of patients taking on the roll of active consumer Healthcare organizations will ultimately have to be accountable to the manner in which their customers (i.e., patients) benefit from their services Technology is changing the nature by which the healthcare industry has traditionally measured and approached standards of care More importantly, technology will be critical to saving lives … “Let's face it, in America today we don't have a health care system, we have a sick care system.” – Senator Tom Harkin (D-IA)

9. Gaps & Opportunities Technology adoption Solution procurement / deployment Managed IT / Help Desk services Consolidation / Integration Clinical Integration Revenue cycle and value chain enhancement Original R&D (new solutions, start-ups, etc) Ongoing Development (applications, modules, etc) Business process enhancement Program / Project Management Lean / Six Sigma Strategy (Business, finance, marketing, clinical and technology) Who, what, when and where for outside advisors to the healthcare industry? The healthcare industry is embracing the concept of the “Universal Advisor” (one-stop solution for needs involving corporate finance, management, technology …)

10. Healthcare’s Uniqueness Understand the regulatory landscape involving healthcare providers Have a clear grasp on the economics of the reimbursement system Comprehend healthcare providers’ value chain and how that conflicts with others Delineate true value opportunities versus red herrings Incorporate clinical, business and technology components into you work/advice Work within the confines of healthcare’s uniqueness (i.e., confidentiality, revenue cycle, etc) Remain flexible in dealing with the systems inefficiencies and lack of innovation Be realistic with expectations, goals and recommendations Adjust for various audiences and agendas (all of which have different expectations, even within the same organizations) Understand at the end of the day that while these entities are businesses, their single most critical objective is to provide needed care for patients Healthcare entities have different needs and requirements than other businesses; in order to work with these organizations, an advisor must be able to …

11. Questions & Contacts Questions? Mark Reiboldt Vice President O: 678-832-2004 M: 678-637-2040 F: 678-832-2016 markreiboldt@cokercapital.com www.CokerCapital.com