2012 Healthcare M&A Conference by ACG Chicago

May 9, 2012

2012 Healthcare M& A Conference S Sponsors

Where Partnership Meets

Media Sponsor

Reason says: bigger is better.

Instinct says: nimble is better for driving growth.

At Grant Thornton we understand the many challenges that dynamic organizations like yours are up against. We bring a real, competitive advantage of senior staff time, short decision-making chains and sound processes that our clients truly value. To help unlock your potential for growth, visit GrantThornton.com/Growth.

速

Grant Thornton refers to Grant Thornton LLP, the U.S. member firm of Grant Thornton International Ltd.

Table of Contents Healthcare M&A Conference

Keynote Information.................................................................................................... 5 Providers Panelist Information ....................................................................................11 Information Technology Panelist Information ............................................................ 14 Payer/Payer Services Panelist Information ............................................................... 17 Medical Products & Devices Panelist Information .................................................... 20 Innovation Track Panelist Information ....................................................................... 23 Presentation Materials - The State of Healthcare M&A - The Marwood Group......... 27 White Paper - BDCs: The Best Prescription for Healthcare Lending ........................ 33 White Paper - HealthCareRx ..................................................................................... 36

速

www.ACGChicago.com

The F&M Bank & Trust Company Healthcare Finance Size

Structures

Senior Debt up to $25 Million

Types Mergers and Acquisitions Recapitalizations Growth Capital Refinancings Participations

Cash Flow Term Loans Revolving Lines of Credit Real Estate

Sectors Healthcare Service Companies Healthcare IT Medical Devices Select Pharmaceutical Companies

The F&M Bank & Trust Company is a 64-year old full service institution servicing numerous industries. For more information, please contact Sharmila or Kevin.

Sharmila Solanki Managing Director (214) 780-2084 (972) 365-3651 ssolanki@fmbanktexas.com

Kevin Howell Director (214) 780-2091 (214) 577-5766 khowell@fmbanktexas.com

3811 Turtle Creek Blvd., Suite 1725 Dallas, Texas 75219

Keynote

John Kelliher Senior Managing Director Theâ&#x20AC;&#x2C6;Marwood Group

The State of Healthcare M&A Supreme Court and the Affordable Care Act: Legal Issues and Policy Implications

John J. Kelliher is the Managing Director for the Marwood Group. Since joining the Marwood Group in 2007, Mr. Kelliher has been responsible for managing the day-to-day work product of the Marwood Research Group.

Prior to joining Marwood, Mr. Kelliher was a Vice President at Timmons and Company, a Washington-based lobbying firm. Previous to that position, Mr. Kelliher served from 2001 to 2003 as Chief Counsel for the Committee on Ways and Means in the U.S. House of Representatives. As Chief Counsel, he was responsible for managing the legislative process for the Committee. Mr. Kelliher acted as a primary advisor to Chairman Bill Thomas on policy issues, political strategy and procedural tactics. During his tenure at the Committee on Ways & Means, significant legislation was enacted including the Medicare Modernization Act of 2003. Mr. Kelliher has also worked as Counsel and Chief Counsel at the Committee on House Administration. Mr. Kelliher received his undergraduate degree from Princeton University and then served three years of active duty in the U.S. Army. He graduated from the Boston University School of Law and holds the FINRA series 7, 24, 65, 86 and 87 securities licenses

ÂŽ

www.ACGChicago.com

CCommercial ommercial Banking GGroup roup

HEALTHCARE EALLTHCARE HEAL LENDING 7 Skilled Nursing Facilities in California

$58,500,000 Term T erm Loan

$5,000,000

32 Skilled Nursing Facilities in 6 States*

$30,000,000 Revolving Line of Credit *AL, FL, GA, KY KY,, MD, P PA, A, TN T

Revolving Line of Credit

FI FINANCING NANCING O OPTIONS PTIONS • Real estate term loans for acquisitions or refinancing of stabilized or repositioned facilities • Enterprise term loans to support expansion and other initiatives • Revolving lines of credit to meet ongoing working capital requirements • Senior financing to support sponsor -led buyouts and recapitalizations sponsor-led

F FOR OR MOR MORE E INFORMATION INFORMA ATION PLEASE PLEASE CONTACT: CONT TACT: Steve Anderson at (312) 953-6812

Keynote

Congressman Bart Stupak Partner Venable LLC

The Insiders View

Former U.S. Congressman Bart Stupak is a partner in Venable’s Legislative and Government Affairs group. As Congressman to Michigan’s First Congressional District for 18 years, Mr. Stupak developed a deep understanding of issues that directly affected

his constituents, including matters related to energy, healthcare, telecommunications and international trade. As an attorney at Venable, he is in a unique position to provide clients with well-informed, extensive counsel that is based on a thorough knowledge of these industries and related legislation.

While in Congress, Mr. Stupak served on the Energy and Commerce Committee for 16 years. During his tenure on the Energy and Commerce Committee, he served on a number of subcommittees, including Health, Energy and the Environment, Communications, Technology and the Internet, Consumer Protection, Commerce and Trade, and Oversight and Investigations. As Chairman of the Oversight and Investigations Subcommittee, Mr. Stupak helped lead investigations into key issues, such as physical and cyber security breaches at U.S. nuclear labs, food and drug safety, and insurance company rescissions of insurance policies. He also played an important role in the passage of H.R. 3590, the Patient Protection and Affordable Care Act of 2010. Additionally, Mr. Stupak served on the Armed Services, Government Reform and Merchant Marine and Fisheries Committees. Prior to joining the U.S. House of Representatives, Mr. Stupak worked in private practice in Michigan. Mr. Stupak began his career in public service as a police officer in Escanaba, Michigan. He continued his career in law enforcement as a Michigan State Police Trooper until he was medically retired due to an injury sustained in the line of duty. He also served in the Michigan House of Representatives. In spring 2011, Mr. Stupak was a Fellow at the Institute of Politics, Harvard University, John F. Kennedy School of Government.

www.ACGChicago.com

Power comes from being understood. When you trust the advice youâ&#x20AC;&#x2122;re getting, you know your next move is the right move. And when health care organizations are looking to control costs and improve operations, they turn to us to understand their needs. Our experienced M&A professionals thoroughly analyze and validate financial, operational and strategic assumptions to reveal opportunities and bring potential dangers to light. We can help structure the deal to ensure the successful integration of business operations, cultures and strategies, and maximize the value of your investment. To learn how McGladrey can help your organization, please contact John Schmidt or Pat Kitchen at 312.634.3400.

Go to www.mcgladrey.com

Keynote

Reality Check-up: Diagnosing the Future

Edward F.X. Hughes, MD, M.P.H., is Professor of Health Enterprise Management and Management and Strategy in the Kellogg School of Management and Professor of Preventive Medicine in The Medical School, Northwestern University. He first came to Northwestern in 1977 as the founding Director of the University's Center for Health Services and Policy Research, now the Institute for Health Services Research and Policy Studies, and served as its Director for 18 years. A native of Boston, Dr. Hughes is a graduate of The Boston Latin School, Amherst College, Harvard Medical School and Columbia University School of Public Health. He trained originally in general surgery at the Columbia-Presbyterian Medical Center in the City of New York. Prior to coming to Northwestern, he was for seven and one half years associated with the National Bureau of Economic Research and the Mt. Sinai School of Medicine also in the City of New York. Edward Hughes Professor of management &â&#x20AC;&#x2C6;Strategy Kellogg School of Management

Under Dr. Hughes' leadership, the Center for Health Services and Policy Research, a University wide entity with five programs of active interdisciplinary research, grew from its founding in 1977 to be one of the most highly regarded, University based health services research Centers in the United States. Its five programs included: Health Care Policy and Financing, Long Term Care, Organization Behavior in Health, the Multi Purpose Arthritis Center at Northwestern, and the Department of Veterans Affairs HSR&D Field Station in collaboration with the Edward A. Hines, Jr. VA Hospital.

Dr. Hughes is particularly interested in the elaboration of national health policy, in the efficient utilization of resources in the delivery of health care, and in the future directions of our health system. Within the Center, he was co director of the Program in Health Care Policy and Financing and was for five and one half years Principal Investigator of the HCFA "Policy Center" at Northwestern. He was also Special Advisor to the V.A. Field Station and for many years served as the Director of the Non-Biomedical Component of the Multipurpose Arthritis Center. Simultaneous with being Center Director, Dr. Hughes served for three years as the Director of the Program in Health Services Management in the Kellogg School. The Program was recently chosen by U.S. News and World Report as one of the two highest-ranking health management programs in the United States. Dr. Hughes is also the originator of Northwestern's Joint MD/MBA Program, one of the first programs of its kind in the United States. In addition, to the best of our knowledge, Dr. Hughes is the first physician to be a tenured professor in a School of Management in the U. S.

ÂŽ

www.ACGChicago.com

Venture Capital, Mezzanine Capital and Private Equity SERVICES & ADDED VALUE đƫƫ !*01.!ƫĒƫ .+30$ƫ Equity Financings

đƫƫ +%*#ƫ .%2 0!ƫ Transactions

đƫƫ !66 *%*!ƫĒƫ !*%+.ƫ Financings

đƫƫ ! (0$ .!ƫ %(%#!* !ƫ Ēƫ %/'ƫ * (5/%/

đƫƫ !2!. #! ƫ 15+10/ Ēƫ ! ,%0 (%6 0%+*/

đƫƫ ! (0$ .!ƫ *2!/0%# 0%+*/ Ēƫ !#1( 0+.5ƫ +1*/!(

Your Partner in Healthcare Transactions

bassberry.com

Providers Panel

Lonnie Busby CEO Medsurant Holdings

Lonnie L. Busby, Chief Executive Officer, Medsurant Holdings, LLC: Since 2009, Mr. Busby has been the CEO of Medsurant Holdings, LLC, one of the leading providers of intraoperative neuromonitoring services in the U.S. Mr. Busby has over 30 years of domestic and international experience in senior level management positions in the healthcare industry. He has been a CEO, COO, Board Member, management consultant, and entrepreneur. He has served as a consultant to a variety of healthcare clients domestically, as well as in Europe, the Middle East, and Asia. His management experience in healthcare ranges from multi-hospital systems and solo-hospitals to surgery centers, technology companies, imaging centers, rehab facilities, physician organizations and group practices. Mr. Busby was President of the Midwestern Division for HCA Healthcare Corporation. He had P&L responsibility for all operations within a three-state region encompassing Colorado, Arizona and Nebraska, and total revenue exceeding $1.5 billion. He expanded HCA’s presence in the Denver market from two hospitals to nine hospitals, growing the company’s market share from 9% to 36% in two years. Mr. Busby received his Master of Healthcare Administration degree from Baylor University and a Bachelor of Science in Biology from Arkansas State University.

Kent E. Capps is the Director of Strategy for Surgical Care Affiliates (SCA) an operator of 145 ambulatory surgery centers, surgical hospitals, and hospital surgery departments, with approximately 3,700 full-time teammates, 2,000 physician partners, and 21 health system partners in more than 30 states. SCA provides patient care and clinical outcomes to more than 2,000 surgical patients each day, and generates more than $1 billion in annual system-wide revenue. In his role at SCA, Kent is involved in developing the overall strategic direction of the organization, including developing inorganic and organic strategies around new lines of business.

Kent Capps Director of Strategy Surgical Care Affiliates

Prior to joining SCA, Kent was a member of the Dell Corporate Development team and has over 10 years of Mergers and Acquisitions, Investment Banking, Venture Capital and Corporate Finance experience. Prior to the Dell, Inc. acquisition of Perot Systems, Kent was a member of the Perot Systems Corporate Development Group. Prior to joining Perot Systems, Kent worked for Challenger Capital Group a middle market merchant banking firm in Dallas focused on principal investing. Previously, Kent worked in the transaction services advisory group for KPMG where he led M&A due diligence and financial analysis for both strategic and financial buyers.

Earlier in his career, Kent worked in the investment banking division of Salomon Smith Barney/ Citigroup in New York. While at Salomon Smith Barney/ Citigroup, Kent provided financial and advisory services to the health care industry, focusing primarily on mergers and acquisitions, as well as, equity and financing transactions. Additionally, Kent has worked with Motorola Ventures, the venture capital arm of Motorola and in the corporate finance group of a small market cap health care services company. ®

www.ACGChicago.com

Providers Panel

Jeffrey E. Huffman joined Ide Management Group, LLC. as Vice President of Development in 2011 as a minority partner. He was recruited to Ide Management after working for several years for CarDon and Associates, a long term care provider in Indiana as a business development specialist. Jeff works in Government affairs, Business Development in relationship to strategic partnerships with hospitals, Trade Associations, Vendors and other providers. He also leads our Mergers and Acquisitions team for our growth strategy in skilled and assisted living properties.

Jeffery Huffman Vice President of Development Ide Management Group

Jeff started his career in his family business owning and operating three restaurants. He then spent about 9 years as the number one salesperson for Electronic Liquid Fillers, Inc. a 2 time INC 500 Award winning company. Having a son born with Down syndrome gave Jeff the opportunity to leave the for profit world for a tour of duty in the nonprofit sector. First as a staff member at IHCA the largest health care association in Indiana and than as the CEO of a nonprofit disability provider. Jeff turned this company from a sleepy provider that had been forgotten about into an industry leader while doubling the revenue and market share. In 2008, Jeff returned to long term care with CarDon and Associates where he helped them grow their business in total properties and strategic partnerships. Jeff received his Bachelorâ&#x20AC;&#x2122;s degree in Business Administration from Findlay College where he was a 4 year member of the Champion Findlay Oiler football team and President of Tau Kappa Epsilon Fraternity. He utilizes his expertise in marketing and sales, business development, strategic planning and acquisition management to assist Ide Management in growing their healthcare management company.

Eric D. Hargan is a Shareholder in Greenberg Traurig, LLP, based in its Chicago office. He focuses his practice on transactions, health care regulations and government relations. For health industry companies and investors, his experience as a senior official at the U.S. Department of Health and Human Services, combined with nearly twenty years of experience as a transactional attorney, allow him to provide unique and advantageous insights to his clients.

Eric Hargan Shareholder Greenberg Traurig

Previously, Eric served in the position of Deputy Secretary of the U.S. Department of Health and Human Services. He also served as Regulatory Policy Officer of HHS, overseeing the development and approval of all HHS, CMS and FDA regulations and significant guidances. He also previously served as Deputy General Counsel of the Department.

Eric has spoken widely and been published both in the United States and overseas on health-related topics, including Medicare and Medicaid reform, health law, medical device regulation, food safety, vaccines, quarantine, public health preparedness and pandemic influenza. He has also served as a U.S. representative to the World Health Organization. He is a graduate of Harvard University and Columbia University Law School.

ÂŽ

www.ACGChicago.com

MIDDLE MARKET LENDING

A familiar leather chair. The comfort of a repeat financing partner. Over $5 billion of capital under management Leading provider of senior, GOLD (one-loan), mezzanine, and equity co-investments Underwrite & syndicate debt facilities: $15 million to $250 million+ Buy & hold positions: $10 million to $150 million+

Contact: Andy Steuerman, Head of Middle Market Lending 212.660.7280 or asteuerman@golubcapital.com

Information Technology Panel

Thomas S. Law is President and CEO of Zotec Partners. He helped form Zotec in May 1998. Prior to operating under the Zotec name, the company was Allmed Financial, Inc., a wholly owned subsidiary of Anthem. Allmed grew by acquisitions to be the third largest medical billing company in the nation. Law was the CFO/CIO responsible for migrating all of the 17 acquired practice management systems into one internally developed solution. He spent three years working with Andersen Consulting to develop the Electronic Billing Center (EBC) software suite. In 1998, when Anthem wanted out of the billing business, Law was able to divest Anthem of Allmed and purchase the EBC software. Thus, Zotec Solutions was formed in 1998.

Thomas Law President & CEO Zotec Partners

Fred Naeymi-Rad CEO Intelligent Medical Objects

In 2007, Zotec Solutions merged with Healthcare Management Partners to create Zotec Partners. Zotec Partners merged with Susan J. Taylor, Inc. in July 2007 and with EmPhysis Medical Management in September 2007. Four years later, Zotec Partners merged with Medical Business Service, Inc., one of Florida's largest and most respected medical billing companies.

As a proud graduate of Butler University, Law enjoys giving back to his alma mater and helping to pave the way for future business leaders. He is the Butler College of Business (COB) Zotec Entrepreneur Executive in Residence, and a Board of Visitor’s member. In 2012, the COB introduced the Zotec Business Competition for the Real Business Experience practicum. This competition provides a monetary incentive and mentorship from Zotec executives to help COB students create and manage a real business successfully. Dr. Frank Naeymi-Rad is Chief Executive Officer, Chairman of the Board and co-founder of Intelligent Medical Objects, Inc. He was also co-founder of Intelligent Medical Systems, Inc., which was bought by Glaxo in 1994, in addition to his expertise in electronic medical record systems and other entrepreneurial ventures. He has been nominated for special recognition by the Oracle Corporation Smithsonian Award in the category of Medicine. Dr. Naeymi-Rad is a member of numerous professional organizations, as well as author and co-author of numerous peer-reviewed publications and patents in the field of Medical Informatics. His degrees are from Southern Illinois University and the Illinois Institute of Technology, the latter a Ph.D. in Computer Science. His thesis work focused on the role of medical vocabulary to support data base translation, information retrieval, intelligent medical records, and expert systems.

www.ACGChicago.com

Information Technology Panel

Drew Turitz is Managing Director, Emerging Business of Aetna Inc. Drew leads M&A for Aetna’s Emerging Business (EB). EB is a group within Aetna responsible for building a portfolio of new businesses outside of Aetna’s core insurance products. EB leverages assets such as Medicity, ActiveHealth, iTriage and other recent acquisitions. EB also launches new businesses, such as Accountable Care Solutions, to address new market opportunities.

Drew Turitz Managing Director, M&A, Emerging Business Aetna, Inc.

Raymond Falci Managing Director Cain Brothers & Co.

Prior to joining Aetna, Drew was a Managing Director at Sandbox Industries in Chicago. Drew managed the corporate venture fund Blue for Cross Blue Shield, nearly $300 million from 22 BCBS Plans focused on healthcare technology and innovation. Drew led investments in Bloom Health, ZeOmega, Change:Healthcare, Nexidia and InVivolink. Prior to joining Sandbox, Drew was a Vice President at Bank of America in New York. He worked in the Healthcare Mergers and Acquisitions group, and executed numerous healthcare services, life sciences, and medical device transactions. Drew was also a Strategy Consultant for USWeb / CKS and Manager of Strategy and Business Development for Fluid, a web development firm, both in San Francisco. Drew has a BA from Stanford University and a MBA from the Kellogg School of Management at Northwestern University.

Raymond G. Falci is the Managing Director of Cain Brothers & Company LLC in New York. Ray joined Cain Brothers in early 2006 as an investment banker to lead the firm’s franchise in Healthcare Information Technology (HCIT) and Pharmaceutical Services. As a former sell-side equity research analyst, Ray has followed HCIT since 1994. During his career as an analyst, Ray worked primarily at Bear Stearns, where he was named to Institutional Investor’s Top-rated list in 5 of his last 6 years, including two number 1 rankings. In addition to HCIT, Ray’s research coverage included pharmaceutical outsourcing, pharmaceutical distribution and publicly-traded hospital companies. Prior to working on Wall Street, Ray worked for 5 years at a start-up company focused on energy efficient lighting products, where he held various positions ranging from Engineering Manager to National Sales Manager.

Ray grew up in Queens, NY and currently resides with his family in Westchester County. He received a BE from the Cooper Union in New York, NY; an MS in Engineering from Columbia University, and an MBA from The Wharton School of the University of Pennsylvania.

www.ACGChicago.com

Where Partnership Meets

Working Together to Grow Healthcare Companies Healthcare Leveraged Finance & More Investment Criteria → → → →

One-stop Financing Senior Secured Debt Junior Secured Debt Mezzanine Debt

Hold Size Up to $75 Million* Sunny Khorana Partner skhorana@fifthstreetfinance.com 312.348.7777

Greg Browne Managing Director Healthcare Leveraged Finance gbrowne@fifthstreetfinance.com 312.348.7776

Juan E. Alva Partner juan@fifthstreetfinance.com 818.876.9665

Casey Zmijeski Partner casey@fifthstreetfinance.com 914.286.6830

*Ability to underwrite larger transactions up to $100 million

Select Investments $19,000,000

$13,000,000

$20,000,000

$25,100,000

Senior Secured Debt Facility to support the acquisition

Senior Secured Debt to support the growth of

Senior Secured Debt Facility to support the acquisition of

by The Riverside Company

a portfolio company of KRG Capital

by Riverside Partners

Technology-Enabled Home Delivery Pharmacy

Contract Design and Manufacturer of Medical Devices

Medical and Dental Care

Manufacturer of Medical Devices

$10,000,000

$57,300,000

$11,500,000

$16,500,000

Senior Secured Debt to support an add-on acquisition by

Senior Secured Debt Facility to refinance and support the growth of

Senior Secured Debt to support expansion of credit to

Senior Secured Debt Facility to support the acquisition of

a portfolio company of GTCR Acquirer / Operator of Specialty Pharmaceutical Companies

a portfolio company of Riverside Partners

by Clearlight Partners

by Flexpoint Ford Highlander Partners

Contract Manufacturer of Medical Device OEMs

Healthcare Revenue Cycle Management Services

$10,000,000

Senior Secured Debt to support the acquisition of

Chicago Growth Partners Single-specialty Pain Management Group

$25,000,000

Hospitalist Company

$35,500,000

$19,500,000

Last-Out Term B Loan to support an add-on acquisition for

Senior Secured Debt Facility to support a recapitalization and add-on acquisition for

Senior Secured Debt Facility to support an add-on acquisition for

by Beecken Petty O’Keefe & Co. Provider of Homecare Medical Products and Services

a portfolio company of Riverside Partners

by Beecken Petty O’Keefe & Co. Specialty Pharmacy Operator

CHICAGO

● GREENWICH ●

A NASDAQ Listed Company (Ticker: FSC)

Manufacturer of Flat-panel Liquid Crystal Display Screens

LOS ANGELES ● NEW YORK

www.fifthstreetfinance.com

Payer/Payer Services Panel

Craig Ikens is Senior Director of Corporate Transactions and Business Analysis at Health Care Service Corporation (HCSC), the fourth largest health insurer in the United States operating the Blue Cross Blue Shield health plans in Illinois, Texas, Oklahoma, and New Mexico. In this role, Craig is responsible for overseeing HCSC's mergers, acquisitions and joint ventures including business evaluation, valuation analyses, due-diligence, negotiations, and deal structuring and execution. Prior to joining HCSC, Craig worked for eight years in management consulting with Accenture and Deloitte Consulting, assisting health industry clients including HCSC, CareFirst BCBS, Bristol-Myers Squibb, and Kaiser Permanente.

Craig Ikens Senior Director - Corporate Transactions & Business Analysis Health Care Service Corp. (BCBS)

Gary Velasquez Managing Director Tricium Health Partners

Craig holds a B.A. in Political Science from Hope College and a Masters in Public Affairs from Indiana University's School of Public and Environmental Affairs.

Gary S. Velasquez is a recognized health care executive with more than 30 years of experience in the life sciences, managed care and specialty healthcare sectors. Mr. Velasquez’ areas of broad expertise includes organizational leadership, operations and strategic innovation. Mr. Velasquez is a managing partner with Tricium Health Partners, a leading Knowledge Process Outsourcer which specializes in providing clinical management solutions. Previously, Mr. Velasquez served as Chief Executive Officer for one of the country’s largest health care data management companies. He also held the role of Chief Executive Officer for Synarc, a global provider of specialized scientific services for the life sciences industry. Concurrent with his tenure at Synarc, Mr. Velasquez served as an Operating Partner with SV Life Sciences, a leading international life sciences venture capital firm. In addition, Mr. Velasquez has over 20 years of handson operating experience in leading and operating national health plan and indemnity insurance organizations.

Mr. Velasquez has authored numerous publications covering clinical trials for metabolic diseases, as well as operating clinical research centers in eastern Europe. He is a member of the Health Care Financial Management Association and has been a guest lecturer at several health care industry conferences.

Mr. Velasquez holds a BS in Economics with High Honors from the University of San Francisco.

www.ACGChicago.com

Payer/Payer Services Panel

Thomas P. Wiffler is the President and Chief Executive Officer of UnitedHealthcare of Illinois, an operating division of UnitedHealth Group and the largest single health carrier in the United States. (NYSE: UNH). UnitedHealthcare of Illinois serves over 1.2 million people in Illinois and contracts directly with over 22,500 physicians and 150 hospitals.

Thomas Wiffler President and CEO UnitedHealthcare of Illinois

Deborah Gordon Partner and Co-Chair of The Healthcare Practice Group Seyfarth Shaw

As a recognized leader in the health and well-being industry, we strive to: • Help individuals access quality care at an affordable cost; • Simplify health administration and delivery; • Strengthen the physician/patient relationship; • Promote evidence-based care; and • Empower physicians, health care professionals, consumers, employers, and other participants in the health system with actionable data to make better, more informed decisions.

Tom has been with UnitedHealthcare since 1999 and served in a variety of finance and operating roles prior to his appointment as the President and CEO of UnitedHealthcare of Illinois in April 2007. Prior to UnitedHealthcare, Tom was a finance manager with Aetna and Prudential Health Care. He also worked at Bankers Trust in New York as a securities settlement analyst. His professional career began as an officer in the United States Marine Corps and served as a logistics officer and company commander.

Deborah Gordon is an attorney and partner at Seyfarth Shaw, LLP in Chicago office. She is the co-chair of the firm’s Health Care Practice Group and vice-chair of the firm’s Corporate Department. Ms. Gordon concentrates her practice in general corporate law with a specialization in the financial and health care industries. She advises clients in the areas of general business transactions, finance and private equity, mergers and acquisitions, health care regulatory matters, compliance, and corporate governance. Ms. Gordon represents general corporate and health care clients, including health care providers, PPOs, long term care facilities, hospitals, surgical centers, physician associations, physician groups, pharmaceutical companies, medical device companies, and biotech companies. She also handles commercial and real estate finance transactions, syndications, loan acquisitions, and participations, particularly in the health care and pharmaceutical industry.

www.ACGChicago.com

SNR Denton is proud to sponsor the

ACG Chicago Healthcare M&A Conference In a fast-changing healthcare market, SNR Denton brings exceptional business focus and vast experience in handling the most complex and high-profile healthcare mergers, acquisitions and other transactions.

SNR Denton is an international legal practice serving clients from more than 60 locations worldwide, through offices, associate firms and special alliances in the US, the UK, Europe, the Middle East, Russia and the CIS, Asia Pacific and Africa. We offer our clients premier service in eight key industry sectors. For more information visit snrdenton.com.

snrdenton.com ÂŠ 2012 SNR Denton. SNR Denton is the collective trade name for an international legal practice. Attorney Advertising. Please see snrdenton.com for Legal Notices.

Medical Products & Devices

Jane Kiernan is the President and Chief Executive Officer of Salter Labs. She has over 28 years of healthcare experience, serving in numerous executive positions in finance, strategy and marketing, and operations in corporate and line roles, as well as general management roles. Prior to joining Salter Labs, Ms. Kiernan spent a cumulative total of 22 years with Baxter Healthcare Corporation. Most recently, she was the General Manager for Baxter IV Therapy, a $1.5 billion global business unit.

Jane Kiernan CEO Salter Labs

After an initial 12 years with Baxter, primarily in the areas of finance and operations, in 1995 Ms. Kiernan joined Allegiance Healthcare Corporation as VP of Finance, Distribution, and Services. She returned to Baxter in 2000, in 2001 was appointed VP/GM, Specialty Therapies, and became GM, Baxter Nutrition in 2003. Ms. Kiernan serves on the board of directors of the American Red Cross of Greater Chicago, and is a past-president of the Healthcare Businesswomen’s Association, Chicago Chapter. Until its recent sale, she also served on the board of directors of American Medical Systems (NASDAQ: AMMD), a Minneapolis-based medical device company.

Grant Riedinger is the Vice President, Solutions for Baxter Healthcare. Mr. Riedinger is a seasoned healthcare industry executive with over 20 years of professional experience in pharmaceuticals and medical devices. Grant has held a variety of global commercial and operational roles having worked at industry leading companies including GE Medical, Johnson and Johnson, Abbott Laboratories and most recently Baxter Healthcare.

Grant Riedinger Vice President - Solutions Baxter Healthcare Corporation

At Baxter Healthcare, Grant has led global marketing for Infusion Systems, managed Baxter’s Consent Decree and been the General Manager the Global Pharmaceutical Injectable business. Most recently, Grant has taken on increased responsibility for Pharmaceutical Injectables, IV Solutions and Pharmacy devices which constitute a portfolio well over $2B in global sales. Grant has a Bachelor of Science from Pennsylvania State University and an MBA from the University of Chicago.

In his spare time, Grant is a Soccer coach and serves on the Illinois Board of FIRST Robotics.

www.ACGChicago.com

Medical Products & Devices

Julie Sawyer Montgomery is Vice President, Global Marketing for Hospira’s Medication Management Systems business, a $600M global business including infusion pumps and sets, safety software, and services. She also serves as Vice President, Business Insights for all of Hospira’s businesses, across devices, pharmaceuticals, and biosimilars.

Prior to joining Hospira in 2010, Ms. Sawyer Montgomery served as Director, Marketing Strategy for Boston Scientific’s Cardiovascular division. Prior to her six years at Boston Scientific, Ms. Sawyer Montgomery served pharmaceutical and biotech clients as a project leader with Boston Consulting Group’s healthcare practice. Julie Sawyer Montgomery Vice President - Global Infusion Systems and Global Business Insights Hospira, Inc.

Ms. Sawyer Montgomery holds a B.A. magna cum laude in Economics from Columbia University and a MBA from Harvard Business School.

Anthony Davis has been involved in principal investing and consulting since 1992. Prior to founding Linden LLC, he was a Partner with One Equity Partners (formerly FCEC). Mr. Davis was previously a strategy and operations management consultant with Cresap, McCormick and Paget in Chicago and Hong Kong. Mr. Davis currently serves on the boards of directors of Behavioral Centers of America and Drayer Physical Therapy Institute and was a board member of Focused Health Solutions and Ranir. Mr. Davis is a member of the Economic Club of Chicago and the Chicago Council on Global Affairs.

Anthony Davis Managing Partner Linden Capital Partners

Mr. Davis holds a Bachelor of Arts with honors in Economics from Northwestern University and an MBA with honors from the University of Chicago Graduate School of Business, where he was a Rosett Scholar and serves as a guest lecturer on private equity.

www.ACGChicago.com

Innovation Track Panel

John Kennedy is the Co-Founder and President of Vasc-Alert. John graduated from Georgetown University in physics and has an MM from the Kellogg School of Business at Northwestern University. After working in consulting and at Brunswick Corp. for their M&A department, he started a software business called Marketing Information Systems in 1981 developing systems to create and support a marketing database, a application now termed customer relationship management systems (CRM). The company focused on business-to-business applications and had over 500 clients including MCI, DHL, and IBM worldwide. The business was sold in 1998.

John Kennedy Co-Founder and President Vasc-Alert

John then started Open Channel Software in 2000 to commercialize scientific and technical software developed in universities and research labs, with the core purpose to actively commercialize the very best of these applications. Today, the OCS web site features for licensing and download over 300 applications, many created by NASA and DOE labs and the active commercialization efforts are focused on a software application out of Henry Ford Health Systems in the hemodialysis market. Vasc-Alert extraqcts data collected in the patient’s medical record and uses a patented algorithm to predict which patients are at risk for thrombosis. The service is offered under a ‘software as a service’ business model and is currently servicing over 10,000 patients nationwide.

Al B. Reid is currently Vice President of Corporate Development for Abbott Laboratories. Al joined Abbott in June 2000. Al provides the executive management team strategic advisory and operational support for Abbott’s pharmaceutical, medical device, diagnostic and nutrition businesses with combined revenue over $40 billion.

Al Reid Vice President of Corporate Development Abbott Laboratories

Mr. Reid has spent over 20 years leading a variety of healthcare initiatives for Abbott and Baxter including cross border transactions, strategic development and emerging market acceleration programs. During his career, Mr. Reid has worked in over 50 countries and has extensive experience executing multiple M&A transactions. Al’s previous professional experiences include Baxter Healthcare, Dun & Bradstreet, Paramount Communications and the Federal Reserve Bank where he held positions of increasing responsibilities in finance, business development and management consulting.

Mr. Reid is a member of the Executive Leadership Council, the Association of Corporate Growth, and the Chicago Foreign Council. Al serves on the board of several organizations, including the HistoryMakers, Chicago Youth Centers and Advocates USA. Mr. Reid is a frequent guest panelist discussing topics ranging from sustaining business growth to business expansion through emerging market activities.

www.ACGChicago.com

Innovation Track Panel

John Smolen is a Project Director at Northwestern Memorial HealthCare (NMHC), where he is responsible for technology strategy and planning. John started his career in healthcare technology with a B.S. in Electrical and Computer Engineering from University of Illinois at Urbana-Champaign, then worked as a software engineer at Motorola.

John Smolen Project Director Northwestern Memorial Health Care

After receiving his MBA with a concentration in Health Sector Management from Duke University, John worked as a management consultant at McKinsey & Company advising medical device and health plan clients on business strategy. In his role at NMHC, John defines and leads initiatives to support and enable NMHC’s overall business strategy with innovative technology solutions. John lives in Chicago with his wife and three children.

Geeta Vemuri joined Baxter in January, 2012 as Senior Managing Director - Baxter Ventures, the corporation’s $200 million venture fund. Prior to joining Baxter, she was a General Partner at Quaker Partners, where she spent the last 8.5 years leading investments in Biopharmaceutical and Healthcare companies and being integral part of the team in raising capital for the funds. Dr. Vemuri's role in building and mentoring portfolio companies has helped lead their exit through either acquisition or through Initial Public Offering. Some of her representative Quaker portfolio board member or observer responsibilities include Protez, Cempra, Corridor, Regado and Tranzyme Pharma.

Geeta Vemuri Senior Managing Director Baxter Ventures, Baxter Healthcare Corporation

Prior to Quaker, she was an Associate at Toucan Capital, where she was responsible for investments in seed-stage and start-up biotech opportunities. She participated in raising capital and helped start several portfolio companies by identifying technologies from universities. Prior to that, she was an Associate Equity Analyst at SalomonSmithBarney and First Union Securities covering specialty pharmaceuticals and healthcare sectors. Geeta was also a research scientist at The Wistar Institute and completed her postdoctoral fellow program at Thomas Jefferson University.

Dr. Vemuri received her M.S. from Central University in India, her Ph.D. in biochemistry from the Indian Institute of Sciences, and her M.B.A. from the Wharton School of the University of Pennsylvania. Until recently she served on the Board of Directors and Executive Committee of Southeast BIO, and the Advisory Committees of BioAdvance Greenhouse and the Sid Martin Biotechnology Incubator.

www.ACGChicago.com

Innovation Track Panel

Michael Rosenthal has practiced in SNR Denton's Corporate practice since 1990 and has significant experience in private equity and venture capital transactions, corporate mergers and acquisitions, joint venture formation, securities matters, corporate finance, and workouts and restructurings, as well as general corporate counseling. Michael is a member of SNR Denton's Venture Technology practice and its Private Equity practice.

Michael Rosenthal Partner SNR Denton

Recognized by Chambers USA as one of the leading venture capital lawyers in the nation and one of the leading private equity lawyers in Illinois, Michael represents venture capital and private equity investors; angel investors and strategic investors in start-up, later-stage and mezzanine financing; and workout transactions and matters relating to portfolio management. His extensive fund formation experience includes representing private equity, venture capital and hedge fund sponsors, as well as limited partners in funds. His practice also includes representing clients in mergers and acquisitions of both public and private companies, the formation of joint ventures, and counseling both public and private clients regarding corporate governance matters. In all these areas he brings a creative yet practical approach to advising clients and structuring and negotiating transactions.

Michael has significant experience representing technology and other companies in their capital-raising efforts and in general corporate matters. He is a member of the Illinois Venture Capital Association, where he serves on its Legislative Committee, and he speaks frequently on issues relating to venture capital and early-stage companies.

速

www.ACGChicago.com

SELECT HEALTHCARE SERVICES SELEC SE S TRANSACTIONS D December ecember 2011

December December 2011

November November 2011

December December 2011

O Outsourced utsourced H Hospital ospital SServices ervices P Provider rovider

Outsourced Outsourced Hospital Hospital Services Services Provider Provider

$15,000,000

$8,500,000

$4,000,000

$1,000,000

$15,000,000

Term T erm Loan & R evolving L ine of C Cr redit Revolving Line Credit

Term T erm Loan & Revolving Line Line of Credit Cr Credit Revolving

Revolving R evolving Line Line of Credit C Crredit

Revolving Revolving Line Line of Credit C Crredit

Revolving Revolving Line Line of Credit Cr Credit e

D Denver, enverr, CO

Chester Chesterfield, field, MO

Plano, P lano, TX TX

Denton, D enton, TX TX

October October 2011

SSeptember eptember 2011

A August ugust 2011

July July 2011

$11,600,000

$5,000,000

$20,000,000

$16,240,000

$15,000,000

Term T erm Loan & Revolving Line Line of Credit C Crredit Revolving

Revolving Revolving Line Line of Credit Cr Credit

Term T erm Loan & Revolving Revolving Line Line of Credit Cr Credit

Term T erm Loan

R Revolving evolving L Line ine of C Cr Credit redit

O Omaha, maha, NE

Dallas, D allas, TX TX

Torrance, T orrance, CA

Culver Culver City City, y,, CA

Timonium, T imonium, i MD

April Ap pril 2011

M March arch 2011

F February ebruary 2011

February February 2011

January January 2011

$1,500,000

$5,000,000

$6,680,000

$1,500,000

$5,000,000

R Revolving evolving L Line ine of C Cr Credit redit

Term T erm Loan & Revolving Credit Revolving Line Line of C Cr redit

Term T erm Loan

Revolving Revolving Line Line of Credit Cr Credit

Revolving Revolving Line Line of Credit C Crredit

Woonsocket, W oonsocket, RI

Skokie, Skokie, IL

Louisville, KY

Westlake W estlake V Village, illage, CA

Nutley, N utleyy, NJ

D December ecember 2010

October October 2010

July July 2010

June June 2010

$5,000,000

$68,500,000

$16,000,000

$5,000,000

Term T erm Loan & R evolving L ine of Cr C redit Revolving Line Credit

Term T erm Loan & ine of Cr C redit Revolving Line Credit R evolving L

Term T erm Loan & Revolving Revolving Line Line off Credit Crredit C

R Revolving evolving L Line ine of Cr C Credit redit

Brentwood, Brentwood, TN

ackson, MI JJackson,

West W est H Hollywood, ollywood, CA

Huntington Huntington Park, Park, CA

Presentation Materials

New New Y York ork • Washington, Washington, D D.C. .C. Tel. Tel. 212 212 • 532 532 • 3651 3651 www.marwoodgroup.com www.marwoodgroup.com

© Ma Marwood rwood Group Group Advisory, Advisory, LLC LLC 2012 2012 Unauthorized Unauthoriized reproduction reproduction o orr d distribution isttriibution o off tthis his co copyrighted pyriighted w work ork iis sp prohibited rohibited

!!! Founded in 2000, Marwood Group is a nationally recognized healthcare advisory firm ! providing strategic consulting services and independent research to healthcare companies and investors ! !!! Professional staff of over 100 employees with offices in New York and Washingt gton, D.C. –!! C – Corporate orporate clients clients include include over over 60 60 healthcare healthcare providers, providers, pa payors yors a and nd o other ther healthcare healthcare focused focused ccorporations orporations –! Investor equity over 135 135 private private e quity firms, firms, lenders lenders and and venture venture capital capital firms firms –! In vestor clients clients include include over

!!! Marwood provides advisory services across seven different practice areas: ! Integrated Analysis Provides Holistic Market Perspective

Federal Analysis

State Analysis

Private Payor Research

Ⴠ! LLegislative Ⴠ! egislative

Ⴠ! LLegislative egislative Ⴠ!

Ⴠ! R Ⴠ! Regulatory egulatory

Ⴠ! R egulatory Ⴠ! Regulatory

Ⴠ! Medicare Ⴠ! Medicare rreimbursement eimbursement

Ⴠ! Me dicaid Ⴠ! Medicaid rreimbursement eimbursement

Ⴠ Medicare Ⴠ!! Medicare coverage coverage

Ⴠ edicaid ccoverage overage Ⴠ!! M Medicaid

Ⴠ Ⴠ!! M Medical edical p policy olicy review review

Ⴠ rkers Ⴠ!! Wo Workers compensation compensation

Ⴠ! C linical Ⴠ! Clinical differentiation differentiation

Ⴠ! FDA FDA regulation regulation Ⴠ!

Ⴠ Ⴠ!! R Reimbursement eimbursement o outlook utlook Ⴠ Ⴠ!! C Coverage overage o outlook utlook

Provider Research Ⴠ!! De Ⴠ Decision cision ma making king process p rocess mapping mapping Ⴠ!! P Ⴠ Purchasing urchasing d dynamics ynamics Ⴠ roduct sselection election Ⴠ!! P Product cri teria criteria Ⴠ! P roduct clinical clinical Ⴠ! Product differentiation differentiation

Market Analysis

Clinical & Compliance Diligence

Ⴠ!! C Ⴠ Competitive ompetitive la landscape ndscape a analysis nalysis

Ⴠ!! Id Ⴠ Identify entify areas areas of of rrisk isk ffor or ffraud raud and and abuse

Ⴠ!! Process Ⴠ Process b enchmarking benchmarking

Ⴠ! Ⴠ! A Assess ssess provider provider performance p er formance of tthrough hrough review review of rregulatory egulatory surveys surveys

Ⴠ! M Ⴠ! Market arket sizing sizing

Financial Analysis Ⴠ! Valuation Ⴠ! V aluation Ⴠ! Financial Ⴠ! F inancial modeling mo deling and and projections p rojections Ⴠ!! P Pro Ⴠ ro fforma orma analysis analysis

U Unauthorized nauthorized rreproduction eproduction or or distribution distribution of of this this copyrighted copyrighted work work is is p prohibited rohibited

www.ACGChicago.com

Presentation Materials Federal F ederal Revenues Revenues a and nd O Outlays utlays (% o off GDP) GDP)

Source: CBO, January 2011

Congressional Budget Office (CBO) proj ojects that if current laws and policies remained unchanged, federal budget deficits will persist in future years but at a lower ratio to GDP !!! CBO’s ! CBO’s a assumptions ssumptions include include expiration expiration of of Bush-era Bush-era tax tax cuts cuts which which generate generate $3.7T $3.7T in in revenue revenue –!! –

H However, owever, tthere here is is Congressional Congressional disagreement disagreement on on whether whether all, all, some some or or none none of of the the cuts cuts should should be be extended extended or or made made p permanent ermanent

!!! CBO ! CBO p projects rojects ffederal ederal healthcare healthcare spending spending to to grow grow –!! –

Und Under er tthe he extended-baseline extended-baseline scenario scenario (current (current law) law) healthcare healthcare spending spending will will grow grow from from 5.6% 5.6% to to 9% 9% of of GDP in in 2035 2035 ••!! 6% 6% o off GDP w would ould be be spent spent o on nM Medicare; edicare; Medicaid/CHIP Medicaid/CHIP and and exchange exchange subsidies subsidies would would consist consist of of 3% 3% of of GDP

U Unauthorized nauthorized rreproduction eproduction or or distribution distribution of of this this copyrighted copyrig ghted work work is is p prohibited rohibited

42 states and DC closed or are working to close $103 billion in budgetary shortfalls for FY2012 !!! 3 ! 30 0 sstates tates are are projecting projjectingg deficits deficits of of a cumulative cumulative $49 $49 billion billion for for FY2013, FY2013, although although as as more more states states prepare prepare likely to to grow grow e estimates, stimates, tthis his ttotal otal is is likely WA MT T

ND D MN

OR R

VT NH

NY Y

CT IA

NV V

NE UT T

OK K

KY Y

NC C

TN AR

SC C MS

AL L

States States with shortfall shortfall

TX LA

FL L

Source: Source: Center Center o on n Bu Budget dget a and nd Po Policy licy Pri Priorities orities

U Unauthorized nauthorized rreproduction eproduction or or distribution distribution of of this this copyrighted copyrighted work work is is p prohibited rohibited

www.ACGChicago.com

WV KS

CO O

CA A

MA RI

States States without shortfall shortfall

Presentation Materials

Senate Race (60 seats fo for super maj ajority ty) y) Current Seats

Open Seats

RCP General Election Poll Av Average: Obama vs. Romney

Democratic Seats

51+2 independent

21+2 independent

9 ffr from rom states states B Bush u sh won MT, wo on in in 2004: 2004: M T, NM, ND, NE, MO, OH, N M, N D, N E, M O, O H, FL, VA, FL L, V VA A, WV

Republican Seats

2 ffr from rom states states B Bush u sh did win in in 2004: 2004: d id not not win ME, M E, MA MA

Total

100

O Obama bama

R Romney omney

50% 48% 46% 44 44% %

42% 40% 38%

House Race (218 seats for maj ajority ty) y)

36%

112th Congress

Retirements

242

Republican Seats Democratic Seats

193

Total

435

U Unauthorized nauthorized rreproduction eproduction or or distribution distribution of of this this copyrighted copyrighted work work is is p prohibited rohibited

ACA will drive a significant number of people into Medicaid and newly formed Exchanges, while requiring approximately $1 trillion in "pay-for" over the next 10 years from the healthcare provider community !!! The ! The rreduction eduction in in uninsured uninsured will will increase increase overall overall healthcare healthcare utilization, utilization, potentially potentially reduce reduce the the amount amount of of ultimately simplify simplifyy the the eligibility bad b ad d debt ebt expense expense and and ultimately eligibility and and payment payment collection collection processes processes ! rder tto o reduce reduce the legislation’s costs costs the the healthcare healthcare provider provider community community agreed agreed to to accept accept multiple multiple !!! In o order the legislation’s ““pay-for” pay-for” iin n tthe he fform orm of of iindustry ndustry contributions contributions ($480 ($480 billion) billion) and and new new taxes taxes and and fees fees ($526 ($526 billion) billion) –!! Imp – Impacted acted he healthcare althcare Industries Industries include include but but are are not not limited limited to, to, Hospitals, Hospitals, SNFs, SNFs, Home Home health, health, Pharmaceuticals Pharmaceuticals and and he health alth plans plans Number of People In U.S. With Heath Insurance (Millions)

Provisions of ACA

Change

Low-Income Program Expansion 37

Individual Mandate

Exchanges

Medicaid and CHIP +17

Employer Mandate Individual Subsidies Small Employer Subsidies Health Insurance Exchange

15 2 152

151 151

2011 2011

2021 202 1

Medicare and Non-Group

Employer Coverage

+24

+16

-1

S Source: ource: C CBO’s BO’s An Analysis alysis o off tthe he M Major ajor H Healthcare ealthcare L Legislation egislation a and nd M Medicare edicare S Supplemental upplemental D Data, ata, M March arch 3 30, 0, 2 2011 011

U Unauthorized nauthorized rreproduction eproduction or or distribution distribution of of this this copyrighted copyrighted work work is is p prohibited rohibited

www.ACGChicago.com

Presentation Materials

Supreme Court likely to rule on ACA by the end of June 2012 !!! The ! The S Supreme upreme Court Court he heard ard oral oral arguments arguments on on the the ACA ACA on on March March 26, 26, 27 27 and and 28, 28, 2012, 2 012, w with ith a p potential otential d decision ecision lilikely kely a ass e early arly as as June June 2012 2012 Key Issues

Possible Cour t Rulings

Individual Mandate Uphold The Entire Law Anti-Injunction Act

Eliminate The Entire Law Sever Individual Mandate

Medicaid Expansion

Delay Ruling Until 2014

Individual Mandate Severability

© Marwood Marwo ood Group Group Advisory, Advisor y, LLC LLC 2012 2012 U Unauthorized nauthorized rreproduction eproduction or or distribution distribution of of this this copyrighted copyrig ghted work work is is p prohibited rohibited

Election Outcome

Supreme Cour t Ruling

Obama & Republican Congress

Uphold Entire Law

Over turn Mandate

Over turn Entire Law

Full Coverage Expansion

Par tial Coverage Expansion

No Coverage Expansion

Romney & Republican Congress

Repeal & Replace

www.ACGChicago.com

Presentation Materials

Selected Situational Analysis Based On Results Of The 2012 Election Issue

Divided Government

Sequestration

!!! LLikely ! ikely tto o be be rreplaced eplaced with with specific specific deficit deficit rreduction eduction !! !! M More ore defense defense ccuts uts and and fewer fewer domestic domestic ccuts uts ((healthcare) healthcare)

! !!! LLikely ikely tto ob be e rreplaced eplaced with with specific specific deficit deficit rreduction eduction ! !!! LLess ess d defense efense ccuts uts and and more more domestic domestic cuts cuts ((healthcare) healthcare)

Deficit Reduction Legislation

!!! 1 tto off sspending ! o 2 ttrillion rillion o and pending rreductions eductions and 1 tto o 2 ttrillion rillion of of tax tax iincreases ncreases in in 2013-14 2013-14 !!! H Half ! ax cuts cuts expire expire alff of of Bush Bush ttax

!!! O Over ver 5 ttrillion rillion of of spending spendingg cuts cuts ! !!! B ! Bush ush ttax ax ccuts uts extended extended

Doc Fix Debt Ceiling

Republican President And A Republican Congress

!!! Te Temporary emporary ffixes are byy rreductions providers; $25b/year $25b/year eductions to to other other providers; ! ixes a re lilikely, kely, offset offset b !!! C Crisis risis a atmosphere tmosphere ! !!! Ult Ultimately ! imately raised raised iin n ccombination ombination with with deficit d eficit rreduction eduction

!!! C Crisis atmosphere tmosphere ! risis a !!! Ult Ultimately ! imately rraised aised iin n ccombination ombination with with spending spending ccuts uts

U Unauthorized nauthorized rreproduction eproduction or or distribution distribution of of this this copyrighted copyrighted work work is is p prohibited rohibited

Marwood Assessment

Obama Re-elected

Romney President & Republican Congress

Most Favorable

M Medicaid edicaid MCOs MCOs

HSAs HS As

Favorable

Health H ealth IT Ge neric P harma Generic Pharma

Ge Generic neric P Pharma harma

Stable

M Medicare edicare Advantage Advantage Commercial Commercial Insurance Insurance PBMs HSAs HSAs

Hospice H ospice ASCs AS Cs Psych P sych Devices De vices

H ealth IT Health dvantage Medicare Advantage M edicare A

Dialysis Di alysis Hospice Hospice PBMs

Pressure

SNFss SNF B randed P harma Branded Pharma Bio tech Biotech Di alysis Dialysis IR Fs IRFs LT CPs LTCPs

Labs Hospitals H ospitals LTCHs LTCHs Doctors Do ctors DME DME Medicaid Medicaid Providers Providers

Commercial Insurance C ommercial Insurance Biotech B iotech randed P harma Branded Pharma B LT CPs LTCPs LT CHs LTCHs IR Fs IRFs

P Psych sych A ASCs SCs DM DME E De Devices vices

Imaging Imaging

Home Health H ome H ealth Hospitals H ospitals Medicaid Providers roviders Medicaid P Medicaid MCOs M edicaid M COs

Doctors Do ctors Labs SNFs SNFs Ima ging Imaging

Most Pressure

Home Health Home Health

U Unauthorized nauthorized rreproduction eproduction or or distribution distribution of of this this copyrighted copyrighted work work is is p prohibited rohibited

www.ACGChicago.com

BDCs: The Best Prescription for Healthcare Lending

raditional banks have been lukewarm when it comes to deploying capital in the healthcare industry—a sector known for its regulatory complexities and reimbursement risk even during the best of times. It should come then as no surprise that the period during the recent U.S. financial crisis was particularly difficult. Credit tightened significantly, leaving small and mid-sized healthcare providers and vendors scrambling to finance their growth strategies. The healthcare reforms GREG BROWNE that followed only served to heighten uncertainty, exacerbating the issue. Challenging conditions aside, lending did not dry up completely. In fact, compared to other sectors at the time, total healthcare mergers and acquisitions activity fared relatively well. What the overall numbers obscure, however, is the amount of extra effort that was required to secure muchneeded financing. With fewer lenders specializing in the industry, healthcare vendors and providers were forced to approach multiple lenders to successfully complete their deals. A Variety of Financing Remedies As credit conditions may be poised to tighten again, the BDC (Business Development Company) business model appears to offer an important advantage over traditional lenders: a wider range of financing solutions. Leading BDCs enjoy diverse sources of liquidity, ranging from secured/term debt and SBIC financing to securitization financing and long-term credit facilities. Since each pocket carries its own cost and covenants, well-established BDCs are able to offer a superior product suite that runs from low

multiple, senior secured debt all the way to straight unitranche or mezzanine finance. Traditional banks, on the other hand, are prohibited from offering one-stop financing or unsecured lending. For companies looking for a streamlined and efficient way to access a comprehensive array of financing alternatives, working with a BDC can remove some of the headache—and execution risk—that stems from dealing with multiple lending partners.

With a deeply honed, industry-specific underwriting expertise, BDCs may be better equipped to differentiate between good credits and riskier ones—a far cry from the conservative, one-size-fits-all approach that many traditional lenders take. BDCs May Be the Cure Structural dynamics and demographic trends tend to drive a continuous need for financing in the healthcare industry, whether to underwrite mergers and acquisitions or fund capital expenditures. Yet, unique risks—from strict regulation and a heavy emphasis on government payment sources to the idiosyncrasies of healthcare receivables—create a steep learning curve. That is why healthcare companies require stable lenders with a strong, ongoing commitment to the sector. They need financing partners who possess the insight and wherewithal to lend—even during difficult market environments. With its sole mission to facilitate private financing to small and midsized businesses, the BDC is better positioned to meet this mark.

www.fifthstreetfinance.com

Established by Congress to foster small business growth, BDCs are obligated to offer to provide managerial assistance. Because of this, their industry knowledge tends to run more than surface-deep—a stance that underscores their position as a more suitable lending partner. In fact, it is not uncommon for top-tier BDC professionals with a healthcare specialization to speak at industry conferences, attend Congressional testimony and keep highly-regarded industry consultancies on permanent retainer. Consider a Specialist BDCs’ distinctive model confers certain benefits, such as an authentic underwriting specialization in industry verticals like healthcare. With a deeply honed, industry-specific underwriting expertise, BDCs may be better equipped to differentiate between good credits and riskier ones—a far cry from the conservative, one-size-fits-all approach that many traditional lenders take. For instance, it is not uncommon for a bank to broadly categorize healthcare lending as ‘real estate lending’ as opposed to business lending. From this standpoint, it is not hard to see why the sector suffered during the last downturn. It appears that BDCs’ strong focus on underwriting discipline has borne fruit. For example, over the past five years, ✧ the average

cumulative loss rate for BDCs was only 111 basis points (bps) per year—a figure that stands considerably below the 155 bps per year that banks have averaged. Looking ahead, if the U.S. economy enters another soft patch and credit conditions deteriorate, a select group of BDCs seem better positioned to continue to support this sector. In addition to their flexible financing solutions, many BDCs have used the intervening years since 2008-2009 to shore up their balance sheets. These niche players can also draw upon hard-earned underwriting expertise to analyze underlying company fundamentals—increasing the likelihood of successful deal completion. Get a Referral When considering a BDC specialist, it should be emphasized that they are not all the same. Some BDCs experienced difficulties during the recent economic downturn when reliance on short-term revolving bank facilities left them stranded. When looking at a prospective BDC, companies would be wise to choose one with modest balance sheet leverage, diverse sources of funding, a meaningful hold size and significant ongoing capital availability. Greg Browne is Managing Director at Fifth Street Finance.

Published in Healthcare Finance News in the Jan/Feb 2012 Issue Fifth Street: A Paragon of Reliability Fifth Street has diverse sources of funding, a high quality portfolio and ample capacity. As credit conditions appear poised to tighten again, we believe we are particularly well-positioned. We have proactively recast our balance sheet to support long-term value, while adopting policies that align our interests with those of our shareholders. We have actively invested in healthcare companies since our inception and understand the complexities and challenges facing the industry. Offering in-depth industry experience combined with certainty of execution, we provide comprehensive financing solutions to middlemarket healthcare companies in conjunction with private equity sponsors.

Visit us at www.fifthstreetfinance.com or call us at (312) 348-7205. 914.286.6800

A NASDAQ Listed Company (Ticker: New York • Greenwich • Chicago • LosFSC) Angeles

EXCLUSIVE COVERAGE, PRICELESS ANALYSIS, INSIDE SCOOPS

Subscribe Subscribe now now to to the t MU MUST UST ST READ R sourc source e for Chicago’s Chicago’s business leaders Here’s H ere’s a lo look ok inside Crain’s Cra Chicago Business: t Essential Essential local cal business new news and information yyou ou w won’t on’t find anywhere anywhere else els t Focused Focused reports reports including tthe Crain’s Cr rain’s 40 Under Un 40 40,, W Who’s ho’s W Who, FFast ast 50 and mor more e t Plus Plus get exclusive exclusive mar market ket fa facts and vvaluable aluable lists including the Annual A Book Book of Lists ($44.95 vvalue) alue)

DON’’ T MISS AN ISS ISSUE! Subsc Subscribe bscrribe to ttoday oday a at: w www.chicagobusiness.com/offer ww.chicagobusiness.c a and nd ent enter ter er promo ccode ode W2ACG

Annual Book of Lists INCLUDED! ($44.95 value)

Health CareRx A business intelligence prescription for health care executives Winter 2012

Governance in a dynamic health care environment: A Q&A with Anne McGeorge and Dr. Lawrence Prybil Health care as a business is changing dramatically. Between health care reform, shrinking reimbursements, accountable care, electronic health records, new technologies, growing scrutiny from regulators and other transformative aspects of health care, hospitals and health care systems are under more pressure than ever to adapt for the future. Effective governance is more important than ever, but what are the best governance features at leading health care systems?

Governance in USA’s Largest Nonprofit Health Systems examines the systems’ governance structures, practices, and culture in relation to contemporary benchmarks of good governance. The findings, which will be released in spring 2012, are based on 71 on-site interviews with CEOs and senior board leaders in 14 of the country’s 15 largest nonprofit health care organizations.

We recently sat down with Dr. Lawrence Prybil, principal investigator of Governance in USA’s Largest Nonprofit Health Systems and an earlier study, Governance in High-Performing Community Health Systems; and Anne McGeorge, national managing partner of Grant Thornton LLP’s Health Care practice, to learn more about the current state of governance practices at some of the leading health systems in the United States.

What are the key factors that drive performance in health care systems?

Prybil: There are several factors that have emerged across the country. From the perspective of boards of large systems, there is clear recognition that, because the environment is increasingly difficult and the challenges are becoming greater, establishing and maintaining a strong, values-based leadership team is absolutely imperative. This has always been vital, but it is more critical than ever in today’s environment. Boards realize now that management and clinical leadership together are the driveshaft of maintaining and strengthening performance. continued>

Governance in a changing health care environment: A Q&A with Anne McGeorge and Dr. Lawrence Prybil (continued)

McGeorge: We see executive and clinical leadership working as a team like never before. A strong bond between the CEO and clinical leadership is essential — especially now as integrated delivery networks are emerging as the model for the provision of high quality, costefficient patient care. If there aren’t synergies between the management team and clinical leadership, the board ends up having to take action. How is the role of physicians changing?

McGeorge: We have learned from talking to physicians, especially physicians new to the profession, that most don’t want to be in a stand-alone private practice. They see integration as their future. This is a distinct shift from what we witnessed 10 to 15 years ago. Now, it seems like there is a much more positive attitude about teaming with hospitals. There also are more administrative leadership opportunities for physicians within health care systems than in the past. A growing number of physicians are rising to executive ranks within hospitals. For example, many health systems have physician CEOs. Also, we see more physician organizations where physicians have their own board and make their own decisions as a physician organization, but are still affiliated with the hospital organization. This has worked well as it gives the physicians independence, while still maintaining their alignment with the health system’s mission and strategy.

2 Health CareRx – Winter 2012

As hospitals pursue growing integration and coordination with physicians, what are the biggest challenges they face?

Prybil: Regardless of the exact organizational model for integration and coordination, what is paramount is that the organization establishes common metrics, shared information systems, and a clear organizational vision and direction. There must be one vision of how to get from here to there, and transparent financial and information systems that allow everyone to be looking at the same scoreboard and measures. Without these, how will the organization know if its performance is proving to be successful?

McGeorge: A shared vision and consolidation of systems and metrics are definitely the goals, but these can be a challenge for large health systems with many disparate systems. Trying to consolidate and streamline processes and information systems is a huge undertaking. For example, I was with a client yesterday, whose organization has 120 different financial systems alone. As they evaluate how to streamline their technology solutions, they are trying to create a common dashboard that will bring together all of their data into consistent metrics for decision-making. The challenge is streamlining information systems in a cost-efficient manner. continued>

There must be one vision of how to get from here to there, and financial and information systems that allow everyone to be looking at the same scoreboard and measures. Without these, how will the organization know if its performance is proving to be successful?

Governance in a changing health care environment: A Q&A with Anne McGeorge and Dr. Lawrence Prybil (continued)

One of your preliminary study findings is that boards are spending more time on strategy than in the past. How are boards becoming more strategic in their thinking?

Prybil: One of the striking findings from our current study of governance in these large health systems, Governance in USA’s Largest Nonprofit Health Systems, is the growth in attention and focus at the board level on strategy and strategic thinking. The boards of all these large systems recognize that they need to refocus how they spend their time, which is their most precious asset. Boards are making deliberate efforts to carve out more time for strategy and strategic thinking, and decrease the percentage of time they allocate to shorter-term, operational issues. Among these health systems, nearly 30 percent of board meeting time currently is being devoted to strategy and strategic thinking. Boards recognize that the world and the health care environment have changed dramatically, and that their systems too must change. We cannot just focus on providing acute inpatient care to those that come to our doorsteps. Instead, we need to be asking questions about how to accommodate the needs of a changing population and new financial realities. We need to be able to live within Medicare rates. If we believe this is the likely scenario, how can we change from what we’ve been to what we need to be? Moreover, how can we do this while still preserving our system’s values and soul in the process?

McGeorge: The health care delivery model is gradually changing from a fee-for-service model to a model of preventative wellness and payments for quality outcomes, more like an HMO or capitated environment. Ultimately, systems need to evolve. This doesn’t happen overnight. These are entirely new challenges – ones that many boards didn’t have 10 to15 years ago. If they don’t do something to change, hospitals will not survive for the long haul.

McGeorge: We think that boards need some training in how to think strategically. Some organizations — and we applaud them — are holding strategy retreats, where they have outside speakers and strategy consultants who help them challenge the status quo. Another area that can be helpful for boards is training on how to identify big-picture, enterprise wide risks that will affect the organization, such as competitors coming into marketplace, not integrating physicians quickly enough, not reacting to changes quickly enough, etc. continued>

How do high-performing boards differ from ordinary boards? In addition to sponsoring Governance in USA’s Largest Nonprofit Health Systems, which will be released in spring 2012, Grant Thornton also sponsored a 2009 study authored by Dr. Prybil, Governance in HighPerforming Community Health Systems: A report of trustee and CEO Views, focused on the governance practices of leading community health systems. The study concluded that high-performing boards are more likely than other boards to: s s s s s s s s

3 Health CareRx – Winter 2012

What kinds of training do boards need as they sharpen their focus on strategy?

ENGAGE IN FORMAL ASSESSMENTS OF HOW WELL THEY ARE CARRYING OUT THEIR lDUCIARY DUTIES SPELL OUT ROLES AND RESPONSIBILITIES OF STANDING BOARD COMMITTEES IN WRITTEN BOARD APPROVED CHARTERS HAVE A PROCESS THAT THEIR #%/ BELIEVES IS EFFECTIVE FOR EVALUATING BOARD PERFORMANCE REGULARLY ENGAGE IN FORMAL DISCUSSIONS ABOUT THEIR ORGANIZATIONS COMMUNITY BENElT RESPONSIBILITIES AND programs, COLLABORATE REGULARLY WITH OTHER LOCAL ORGANIZATIONS IN COMMUNITY NEEDS ASSESSMENT HAVE FORMAL SYSTEM LEVEL POLICIES AND PLANS WITH MEASURABLE OBJECTIVES FOR COMMUNITY BENElT programs, RECEIVE REGULAR REPORTS ON THEIR ORGANIZATIONS PROGRESS TOWARD ESTABLISHED COMMUNITY BENElT OBJECTIVES AND ENGAGE IN ACTIVE DISCOURSE AND DECISION MAKING PROCESSES IN WHICH BOARD MEMBERS ARE WILLING TO express their views and constructively challenge each other and the management team.

Governance in a changing health care environment: A Q&A with Anne McGeorge and Dr. Lawrence Prybil (continued)

Prybil: Boards and the management and clinical leadership are still grappling with what they should be looking at in terms of quality and safety. There is an explosion of measures and methods in this area. Medicaid just came out with a new study on quality measures. The National Quality Forum and other organizations have released more measures. One of the daunting challenges for boards is to understand: What do we need to look at

versus what the quality committee needs to look at versus what local leadership needs look at? What are the right targets to set? If our objective is to reduce hospital-acquired infections, what are the right measures and targets? When you give a board dozens of quality and safety measures to review, their eyes glaze over. There are so many gauges and dials and flashing numbers – but what does the board really need to be looking at? s

Lawrence Prybil, PhD, FACHE Dr. Lawrence Prybil is professor of health services management and associate dean in the University of Kentucky College of Public Health, and professor emeritus at the University of Iowa College of Public Health. Dr. Prybil is a fellow in the American College of Healthcare Executives and received his master’s and doctoral degrees from the University of Iowa College of Medicine. He has served on the governing boards of hospitals, multi-unit health systems, state hospital associations, the American Hospital Association (AHA) and other nonprofit and investor-owned organizations. He currently serves on the National Board of Advisors of the AHA’s Center for Healthcare Governance and the board of managers of the Catholic Healthcare Audit Network. He has authored or co-authored over 80 publications. He is recognized for his expertise in organizational governance and leadership, and currently is directing the third in a series of studies regarding governance structures, practices, and cultures in nonprofit hospitals and systems.

About the newsletter Health CareRx is published by Grant Thornton LLP. The people in the independent firms of Grant Thornton International Ltd provide personalized attention and the highest-quality service to public and private clients in more than 100 countries. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity. Contact information Anne McGeorge National Managing Partner Health Care anne.mcgeorge@us.gt.com

Anne McGeorge Anne McGeorge is the national managing partner of Grant Thornton LLP’s Health Care practice, and has represented health care clients for almost 25 years. She has worked extensively with large health systems, academic medical centers, managed care organizations, coalitions and purchasing organizations, health care private equity firms, and physician practices. She has assisted clients in all aspects of financial consulting. McGeorge also focuses on helping clients with establishing community health needs assessments and board governance benchmarking. She has assisted with the publications, The Tax Economics of Charitable Giving, A Guide to Navigating Intermediate Sanctions, The Essentials of Physician Practice Management, and Governance in High-Performing Community Health Systems. McGeorge was selected as a “Woman Extraordinaire” by Business Leader magazine in 2011 and named one of Charlotte’s “Most Influential Women” in 2010 by the Mecklenburg Times.

4 Health CareRx – Winter 2012

healthcare@us.gt.com Content in this publication is not intended to answer specific questions or suggest suitability of action in a particular case. For additional information on the issues discussed, consult a Grant Thornton client service partner. © Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd www.GrantThornton.com

May 9, 2012

2012 Healthcare M& A Conference Sponsors S

Where Partnership Meets

Media Sponsor