Corus™ Suite: Next-Generation Cost Management Technology

1. Next-Generation Cost Management Technologies CORUS™ Suite June 2017

2. © 2016 Health Catalyst Proprietary and Confidential Agenda Topic Topic Details Introduction • Agenda review The Need for Activity-Based Costing • Surviving in both fee-for-service (FFS) and value-based worlds • Cost accounting basics • Healthcare cost-accounting pain points • Why costing matters: Peds example How CORUS works • CORUS Suite overview • Costing the Health Catalyst way • Is my organization prepared? Conclusion • Feedback • Actions and next steps $ $ $

3. © 2017 Health Catalyst Proprietary and Confidential “The only way to be successful in the new world of value-based healthcare and population health is to understand your true costs and manage them. To get there, we need access to massive amounts of data from across the care continuum to identify all of the resources used in delivering patient care.” Robert A. DeMichiei, EVP and CFO, UPMC

4. © 2017 Health Catalyst Proprietary and Confidential Why Would Health Catalyst Do This? 4 Predicted Utilization of Population Contracted Utilization Cash Received Cost to Deliver Care Actual Utilization Margin Millionsof$ 1 Source: Moody's Investors Service, "U.S. Not-for-Profit Hospital 2014 Medians" report, September 2015. Median is 2.6%1

5. © 2017 Health Catalyst Proprietary and Confidential Poll Question Does your organization consider cost accounting a critical component to succeeding in value-based care? - Strongly Agree - Agree - Disagree - Strongly Disagree - I don’t know / Not applicable 5

6. © 2017 Health Catalyst Proprietary and Confidential Cost Accounting Basics 6 GENERAL LEDGER (COST) SERVICES Linking expenses from the GL to services delivered is the key to accurate and useful cost data EVERYONE’s cost is accurate at a high level – the GL don’t lie! LINKING

7. © 2017 Health Catalyst Proprietary and Confidential Healthcare Cost-Accounting Pain Points 7 Current cost accounting systems are outdated • Process is time and resource intensive to maintain and update • Current cost accounting systems struggle to handle the amount and type of data needed • Validation of data and reconciliation of cost is tedious Historically under-invested in • Just a person or two checking boxes, which are mostly used for internal financial reporting • Lack of transparency into calculations limits buy-in from key stakeholders

8. © 2017 Health Catalyst Proprietary and Confidential 8 Problems with Existing Solutions/Methods Cost data that comes from: Cost data from actual utilization: Existing Solutions Our Approach Procedures Charges Averages & Guesses EMR Activity Supplies Dept. IT Systems Procedures Dept. IT Systems Staff & Payroll

9. © 2017 Health Catalyst Proprietary and Confidential 9 Why Costing Matters Costing of two patients in a clinic under the different costing methodologies Total quarterly cost for the “HC Peds Clinic” department from the General Ledger was $225,000 - Patient A: Toddler with an ear infection  Scheduled for “possible ear infection”; physician removed earwax in the patient’s ear, identified infection and called in antibiotics  Total visit time was 10 minutes and physician billed a 99214 visit and 69210 for ear wax removal - Patient B: Teenager with ongoing “headaches”  Scheduled for “headaches”; physician performed an extensive evaluation and spoke with parents for 20 minutes  Total visit time was 30 minutes and physician billed a 99215 visit

10. © 2017 Health Catalyst Proprietary and Confidential RCC Example Charges RCC Patient Cost Ear Infection $220 45.0% $99 Teen with Headaches $200 45.0% $90 Patient Average $95 10 Costing Example – RCC Method Costing of two patients in a clinic under the different costing methodologies - Total cost for the “HC Peds Clinic” department from the General Ledger was $225,000 - Patient A came in for “possible ear infection” and Patient B came in for “headaches” Total Charges Total Cost RCC $500,000 $225,000 45.0% The total cost for the department is divided by the total charges for the clinic to come up with a ratio ($225k/$500k) = 45% The ratio of cost to charges is then applied to each patients charges in the clinic to come up with a cost for their encounter

11. © 2017 Health Catalyst Proprietary and Confidential RVU Example RVU's Cost per RVU Patient Cost Ear Infection 4.42 $22.50 $99 Teen with Headaches 4.07 $22.50 $92 Patient Average $96 11 Costing Example – RVU Method Costing of two patients in a clinic under the different costing methodologies - Total cost for the “HC Peds Clinic” department from the General Ledger was $225,000 - Patient A came in for “possible ear infection” and Patient B came in for “headaches” Then total cost for the department is divided by the total RVUs to come up with a cost per RVU ($225k / 10k) = $22.50 per RVU RVUs are assigned to each charge code based on fee schedule and/or department manager input; total RVU’s are then calculated for the dept. The cost per RVU is then applied to each patients RVUs in the clinic based on their procedures/charges to come up with a cost for their encounter. Total RVU's Total Cost Cost per RVU 10,000 $225,000 $22.50

12. © 2017 Health Catalyst Proprietary and Confidential Value Cost per Activity Total Activity Cost Total Cost Ear Infection # of Visits 1 $36.00 $36.00 Scheduled Minutes 10 $2.70 $27.00 $63 Teen with Headaches # of Visits 1 $36.00 $36.00 Scheduled Minutes 30 $2.70 $81.00 $117 Patient Average $90 12 Costing Example – ABC Method Costing of two patients in a clinic under the different costing methodologies - Total cost for the “HC Peds Clinic” department from the General Ledger was $225,000 - Patient A came in for “possible ear infection” and Patient B came in for “headaches” Activities Value Allocation % Total Cost Allocated Costs Cost per Activity # of Visits 2,500 40% $225,000 $90,000 $36.00 Scheduled Minutes 50,000 60% $135,000 $2.70 100% $225,000 Clinic costs are allocated to each driver (e.g. front desk staff salaries are driven by the # of visits and nurses/MA’s are best captured by minutes with patients) Allocated costs are divided by actual utilization for each activity ($90,000 / 2,500 visits) = $36 per visit & ($135,000 / 50,000 minutes) = $2.70 per minute The cost per activity is then applied to each patients actual activity calculate a cost per activity and a cost per encounter. The best available activities that drive costs are selected

13. © 2017 Health Catalyst Proprietary and Confidential Comparison RCC RVU ABC Average Cost $95 $96 $90 Ear Infection $99 $99 $63.00 Teen with Headaches $90 $92 $117.00 Variance $9 $8 ($54) % Variance 10% 9% -46% 13 Why Costing Matters Average cost for these patients is similar for all methodologies However, ABC accurately highlights the variation between the resources used by each patient Potential impact on 1 million visits each year = $54 million variance. You cannot make the right strategic decisions to improve care while lowering costs without this kind of data.

14. © 2017 Health Catalyst Proprietary and Confidential 14 Step 1: Assign true costs to each patient based on their actual utilization  Drug, supply and labor costs (when available) What methodologies does CORUS support? Step 2: Remove all true patient costs from GL Step 3: Allocate remaining expenses to patients using the best available driver(s)  Minutes in OR, number of images, scheduled minutes, etc. (currently have 20+) $ $ $ Patient’s Activity for Allocations  Minutes in OR  Number of imaging procedures  Scheduled minutes in clinic  Number of registrations

15. © 2017 Health Catalyst Proprietary and Confidential Poll Question What costing methodology does your organization use? (check all that apply) - Ratio of Cost-to-Charges (RCC) - Relative Value Units (RVU) - Activity Based Costing (ABC) - Other - I don’t know 15

16. © 2016 Health Catalyst Proprietary and Confidential Agenda Topic Topic Details Introduction • Agenda review The Need for Activity Based Costing • Surviving in both fee-for-service (FFS) and value-based worlds • Cost accounting basics • Healthcare cost-accounting pain points • Why costing matters: Peds example How CORUS works • CORUS Suite overview • Costing the Health Catalyst Way • Is my organization prepared? Conclusion • Feedback • Actions and next Steps $ $ $

17. © 2017 Health Catalyst Proprietary and Confidential 17  EMR  Patient Accounting  General Ledger  HR/Payroll HealthCatalystData OperatingSystem Activity-Based Costing  System set-up and administration  Build and assign cost models  Enter activity-based costing allocations  Create cost driver queries  Link costs to patients/activities  Supply Chain  Pharmacy  Affiliate Data  RTLS CORUS CostEngine Cost Insights and Analytics  Leverage detailed and actionable cost data across your analytics environment  Cost Insights, Qlik/Tableau apps, Excel, SQL, etc. WebApplicationCORUS Suite Overview

18. Activity-Based Costing: Dashboard

19. Activity-Based Costing: Allocations

20. Cost Insights: Provider Comparison

21. © 2017 Health Catalyst Proprietary and Confidential Costing the Health Catalyst Way Recognized in 2017 as “Best in KLAS for healthcare business intelligence and analytics.” • Embedded costing knowledge from world-renowned academic medical institutions, accelerating cost management transformation. • Integration of EMR and financial data, including patient-level clinical and operational data, delivering the first truly comprehensive view of the cost of patient care. • Manufacturing-style activity-based costing that is scalable and maintainable, freeing analysts to focus on identifying variation and cost saving opportunities. • Dramatically more timely and actionable cost data based on healthcare’s most advanced analytics platform, which supports over 160 source systems.

22. © 2017 Health Catalyst Proprietary and Confidential Poll Question How ready is your organization to implement more accurate costing methodologies? - Very ready - Moderately ready - Somewhat ready - Not at all ready - N/A – our costing is good enough 22

25. © 2017 Health Catalyst Proprietary and Confidential Start With the End in Mind Project planning Timeframe Data needs Risk planning Pre Work Analyze data in EMR Determine starting point Stakeholder Analysis Who can help our project? Who can hinder us? KeepSatisfied Meet Their Needs Key Player Manage Closely Monitor Minimum Effort KeepInformed Show Consideration Low High High Interest of Stakeholders Power/Influence ofStakeholders

26. © 2017 Health Catalyst Proprietary and Confidential Data Governance What existing structures exist in your organization?  CFO group  Service line leaders  Specific working group Triple Aim of Data Governance *  Ensure data quality  Build data literacy  Maximize data exploitation * Dale Sanders, Executive VP, Product Development, Health Catalyst

28. © 2017 Health Catalyst Proprietary and Confidential Data Searching Event # of Cases % of Cases Patient Arrived 920 1.49% Patient Arrived in Dept 2301 3.73% Patient Departs PeriOp 55320 89.70% Patient in Pre-OP 56129 91.01% Patient in Room 60420 97.97% Patient Out of Room 58272 94.48% Patient Out PreOp 51104 82.86% Staff Type CountOfCases % of time LOS calculated Circulator 42328 68.63% First Assist TCV 1417 2.30% Monitoring Nurse 3808 6.17% Orientee - Circ 64 0.10% Special Procedure Tech 2103 3.41% 5 0.01% Vendor Representative 763 1.24% Physicians Assistant 49 0.08% Relief Scrub 6510 10.56% Finding drivers Studying the data available

31. © 2017 Health Catalyst Proprietary and Confidential Two Final Important Pieces Communication  Go back to stakeholder analysis  Advertise your product Education  Get reports needed by clinical experts  Constantly champion your product

32. © 2017 Health Catalyst Proprietary and Confidential Investment  Focus on differentiating capabilities  Align cost structure  Reorganize for growth  Enable change and cultural evolution Authors: Vinay Couto, John Plansky, Deniz Caglar

33. © 2017 Health Catalyst Proprietary and Confidential “The only way to be successful in this new world is to understand costs and manage them — if you can't manage your costs you won't survive.” Robert A. DeMichiei, EVP and CFO, UPMC

34. © 2017 Health Catalyst Proprietary and Confidential Thank You Interested in chatting about CORUS or cost management in general? Dan Unger dan.unger@healthcatalyst.com Bobbi Brown bobbi.brown@healthcatalyst.com

35. © 2017 Health Catalyst Proprietary and Confidential Healthcare Analytics Summit 17 ERIC J. TOPOL Author, The Patient Will See You Now and The Creative Destruction of Medicine. Director, Scripps Translational Science Institute DAVID B. NASH, MD. MBA Dean, Jefferson School of Population Health JOHN MOORE Founder and Managing Partner, Chilmark Research ROBERT A. DEMICHIEI Executive Vice President and Chief Financial Officer, University of Pittsburgh Medical Center THOMAS D. BURTON Co-Founder, Chief Improvement Officer, and Chief Fun Officer, Health Catalyst DALE SANDERS Executive Vice President, Product Development, Health Catalyst THOMAS DAVENPORT Author , Consultant Competing on Analytics*, , Analyitcs at Work, Big Data at Work, Only Humans Need Apply:Winners and Losers in the Age of Smart Machines. *Recognized by Harvard Business Review editors as one the most important management ideas of the past decade, one of HBR’s ten must-read articles in that magazine’s 90-year history. Summit highlights Industry Leading Keynote Speakers We’ll hear from well-known healthcare visionaries. We’ll also hear from two C-level executives leading large healthcare organizations. CME Accreditation For Clinicians HAS 17 will again qualify as a continuing medical education (CME) activity. 30 Educational, Case Study, and Technical Sessions We have the most comprehensive set of breakout sessions of any analytics summit. Our primary breakout session focus is giving you detailed, practical “how to” learning examples combined with question and opportunities. The Analytics Walkabout Back by popular demand, the Analytics Walkabout will feature 24 new projects highlighting a variety of additional clinical, financial, operational, and workflow analytics and outcomes improvement successes. Analytics-driven, Hands-on Engagement for Teams and Individuals Analytics will continue to flow through the three-day summit touching every aspect of the agenda. Networking and Fun We’ll provide some new innovative analytics-driven opportunities to network while keeping our popular fun run and walk opportunities and dinner on the down. Sept. 12-14, 2017 Grand America Hotel Salt Lake City, UT