Approximately 50 percent of CMS payments are now tied to a value component. The CMS Innovation Center has allocated nearly $5.4 billion to implement 37 value-based payment models, with 55 percent of those funds marked for development and implementation of additional value-based models. The shift towards value and consumerism is pushing providers to adopt a novel financial mindset and strategy. The key component? Accurate financial data. In this webinar Steve Vance, senior vice president and executive advisor at Health Catalyst, explores why accurate financial data, coupled with specific tools and strategies, is critical for successful transformation. View this webinar for key insights into thriving in a value-based environment: - Why it’s time to embrace new payment methodologies. - What role financial and clinical data play in value- and risk-based contracts. - Various organizational and operational strategies for successful financial transformation. - How Health Catalyst solutions support an innovative data-driven financial process.

1. © 2019
Health
Catalyst
Why Accurate Financial Data
is Critical for Successful
Value Transformation
Steve Vance, MBA, FHFMA
Senior Vice President & Executive Advisor, Health Catalyst
October 30, 2019

2. © 2019
Health
Catalyst
• Share why now is the time to embrace new payment
methodologies.
• Explore the critical role of accurate financial data.
• Financial data coupled with complete data for transformation.
• Review tested data strategies for successful transformation.
• Review Health Catalyst tools and approaches that support an
innovative data-driven financial process.
Learning Objectives
2

3. Embracing New
Payment
Methodologies

4. © 2019
Health
Catalyst
What is the Current State?
• Prepare for sustainable cost control.
• Develop innovative approach to
expense control.
• Explore diversified revenue streams.
• Boost outpatient market share.
• Meet rising consumer demands.
CEO Survey: Top Concerns
4 Advisory Board Annual Health Care CEO Survey 7/11/18

5. © 2019
Health
Catalyst
Key Forces:
What is the Current State?
5 Advisory Board Annual Health Care CEO Survey 7/11/18
Consumerism
Health Reform
Competition
Collaboration
Technology
Volume to Value Payment
Reduce Total Cost of Care

6. © 2019
Health
Catalyst
ü Many providers are still
focused on the
incentives of a Fee-
For-Service system.
ü Continued shift
towards value.
ü Need to be prepared
for the “tipping point”
from volume to value.
Volume to Value
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7. © 2019
Health
Catalyst
What percentage of your payments are tied to value
or risk?
1. 0-10% – 24%
2. 11-20% – 10%
3. 21% or more – 14%
4. N/A or don’t know – 52%
Poll Question #1
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8. © 2019
Health
Catalyst
Dollars at Risk - Hospital
8
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
2013 2014 2015 2016 2017 2018
Medicare $ At Risk
HAC
Readmit
VBP
MU/Q
CMS Website

9. © 2019
Health
Catalyst
Fee-For-Service (FFS)
• Favorable situation when beds are full.
Value-Based Care/At Risk
• Favorable situation when members are healthy, and utilization is
appropriately low.
Shift in Incentive
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Health
Catalyst
Challenge:
Payment incentives of traditional FFS are at odds
with payment models based on value which creates
conflicting challenges of living in both worlds.
Unaligned Payment Incentives
10

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Health
Catalyst
11
$3 Trillion $1 Trillion

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Health
Catalyst
Financial Incentive Alignment
Under different payment mechanisms to remove waste
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FFS
Per
case
Provider
at risk
WASTE REMOVAL
LEVEL
PAYMENT METHOD
% of all
waste
45%
40%
15%
Case-rate Utilization
(# cases per population)
Within-case Variation
(# and type of units per case)
Efficiency
(cost per unit of care)
James Brent C and Poulsen Gregory P. The case for capitation: It’s the only way to cut waste while improving quality. Harv Bus Rev 2016; 94(7-8):102-11, 134 (Jul-Aug).

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Health
Catalyst
Consumer at Risk
AHRQ Cost Trends
Health Affairs, Aug 2017
$1,658
$3,069
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2008 2016
Average Family Deductible
19%
44%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2008 2016
High Deductible Penetration
+ 132%
13
+ 85%

14. © 2019
Health
Catalyst
ü Receive estimate for treatment and services ahead of time.
ü Receive estimate for follow-up care ahead of time.
ü Have discussions about choices and costs.
ü Be able to comparison shop online.
ü Be able to manage and pay bills online.
ü Talk to financial counselor to help manage costs.
What Do Consumers Want?
>31% of consumers are
dissatisfied with hospital
transparency.
PwC Health Research Institute Consumer Survey
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Health
Catalyst
Shift in Mindset
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Health
Catalyst
Don’t be the Blockbuster or Kodak that failed to
adapt to a changing environment.
Kodak & Blockbuster
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17. Critical Need for
Accurate Financial
Data

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Health
Catalyst
The Problem
18
Shifting
payer mix
Increasing
costs
New
competition
Declining
volumes
Changing
consumer
demands
Shrinking
payments
1.6% margin

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Health
Catalyst
Need to understand profitability at all levels of the organization:
ü System
ü Facility
ü Department
ü Service line
ü Clinical program
ü Case/Procedure
Knowing Profitability is Key
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Health
Catalyst
Financial data must be:
ü Trusted by users
ü Easily understood and
explainable
Accurate Financial Data
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Health
Catalyst
How comfortable are you with the accuracy of your
financial data?
1. Very comfortable – 15%
2. Somewhat comfortable – 25%
3. Somewhat uncomfortable – 22%
4. Very uncomfortable – 7%
5. N/A or no opinion – 30%
Poll Question #2
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22. © 2019
Health
Catalyst
Operational Performance Levers
22
Cost or Expense
Charges or
Gross Revenue
Reimbursement
(Payment or
Net Revenue)
Volume
Rate
Mix
Salaries
Supplies
Volume
Rate
Mix
Volume
Negotiations
Policies
Quality Metrics
Regulations
What is easiest lever to pull, hardest?

23. © 2019
Health
Catalyst
Net
Operating
Margin
(and return on investment)
Revenue growth:
5 to 9% contribution
for each case added
Waste elimination:
50 to >100% contribution
for each case avoided
Much Higher Financial Leverage from Waste
Elimination Than Revenue Growth
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24. © 2019
Health
Catalyst
Who should get
care and when?
What care should
be included?
Is each care
component
delivered
efficiently?
Needs
care
Received
care
Current State Ideal StateWaste
Category
Question
Case-rate utilization
(# cases per population)
Within-case variation
(# and type of units per case)
Efficiency
(cost per unit of care)
Symbol Key Improvement
• Fewer inappropriate
cases
• Early intervention
to prevent disease
or injury
• Only the right care is
included: avoid
duplicate testing and
eliminate
complications and
less effective
interventions
• Do what we
know works
• Lower-cost
drugs and supplies
are used
• Technical and
administrative
processes are
streamlined to
reduce indirect costs
Behavioral consults
Procedures
Labs
Drugs
Patient education
Diagnostic test
Time
(both patient and
clinician time)
Resources
(both direct and
indirect costs)
==
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25. © 2019
Health
Catalyst
Financial Incentive Alignment
Under different payment mechanisms to remove waste
25
FFS
Per
case
Provider
at risk
WASTE REMOVAL
LEVEL
PAYMENT METHOD
% of all
waste
45%
40%
15%
Case-rate Utilization
(# cases per population)
Within-case Variation
(# and type of units per case)
Efficiency
(cost per unit of care)
James Brent C and Poulsen Gregory P. The case for capitation: It’s the only way to cut waste while improving quality. Harv Bus Rev 2016; 94(7-8):102-11, 134 (Jul-Aug).

26. © 2019
Health
Catalyst
Dr. J.
15 Cases
$60,000 Avg. Cost Per Case
Mean Cost per Case = $20,000
$40,000 x 15 cases =
$600,000 opportunity Total Opportunity = $600,000
Total Opportunity = $1,475,000
Total Opportunity = $2,360,000
Total Opportunity = $3,960,000
Cost Per Case, Vascular Procedures
26
Variation Example

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Health
Catalyst
Variation Principles
Adjust for severity of illness (apples to apples
comparisons).
Recognize the two primary causes of variation:
• Clinical variation: Differences in the way care
is delivered.
• Data system variation: differences in the way data
are captured, care is documented and reported, etc.
Objective: Focus improvement initiatives on areas with
the greatest clinical variation, but commit to reducing both
causes of variation.
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Health
Catalyst
• The complete data concept
• Clinical, quality and financial data
Financial Data Coupled With Other Data
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29. Organizational
& Operational
Strategies for
Transformation

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Health
Catalyst
ü Variation identification/reduction
ü Link quality to costs
ü Look outside of hospital walls
ü Leading indicators
ü Report and review regularly and
consistently
Data Strategies
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Health
Catalyst
ü Financial partnership with clinicians
ü Strategic direction
ü Goal an incentive alignment
ü C-Suite alignment
ü Governance structure
ü Proactive vs reactive
Organizational Strategies
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32. © 2019
Health
Catalyst
Has your organization engaged in any at-risk models
with commercial payers?
1. Yes – 29%
2. No – 21%
3. N/A or not sure – 50%
Poll Question #3
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33. © 2019
Health
Catalyst
ü Need an adequate “toolbelt”
ü Profitability at all levels
ü CFO strategy
ü Profitability tied to value and
quality
ü Accurate costing data
Financial Strategies
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34. © 2019
Health
Catalyst
1 2 3 4 5 6 7
Analyze the
Opportunity and
Define the
Problem
Scope the
Opportunity and
Set Goals
Explore Root
Causes and
Set Process Aims
Design
Interventions and
Plan Initial
Implementation
Implement
Interventions
and Measure
Results
Monitor, Adjust,
and Continually
Learn
Diffuse and
Sustain
Is it an adoption
problem?
Are data valid?
Do we need to
adjust
our interventions?Do we need
to reevaluate
root cause?
Start with a directive from executive leadership based on high-level opportunity analysis and readiness assessment
Seven Essential Questions of Improvement
34

35. Health Catalyst
Tools That
Differentiate &
Support
Transformation

36. © 2019
Health
Catalyst
Health Catalyst Overview
A data-driven journey to
massive improvement.
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37. © 2019
Health
Catalyst
Transforming Healthcare
We measure our success in
patient lives saved or improved and
millions of dollars saved
by our partner organizations.
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Health
Catalyst
The Core Capabilities to scale Improvement
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Health
Catalyst
My organization has the necessary tools to improve
quality and efficiency.
1. Strongly agree – 15%
2. Somewhat agree – 38%
3. Somewhat disagree – 19%
4. Strongly disagree – 17%
5. N/A or no opinion – 13%
Poll Question #4
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40. © 2019
Health
Catalyst
Finance & The Data Operating System
We are data lovers. (You have a lot of data.)
We can drive ROI discussions.
We can help prioritize initiatives.
We can work with clinicians to
explain financial data.
To ensure the right care, in the right care setting, at the right cost, Allina Health embarked on a
multiyear journey to decrease ICU days, employing ICU avoidance strategies for select
groups of CV patients. Result:
• $600,000 cumulative cost savings
• 636 additional ICU bed days available
• One-day reduction in TAVR patients
Finance as data user and key to supporting initiatives
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41. © 2019
Health
Catalyst
Applications
Financial Operational Population Health
• Revenue Cycle Explorer
• Financial Management
Explorer clinical service line and
opportunity analytics
• CORUS- Activity Based Cost
Accounting
• Labor Productivity
• Patient flow
• Supply chain
• Departmental specific: Surgical
suite, Emergency department
• PMPM: Cost and utilization for a
specific population
• Population builder:
Stratification of population
• Referrals and leakage
Measures (Leading Wisely)
Clinical
• Targeted clinical areas: Sepsis,
Joint, CV, Ambulatory
• Patient safety: CAUTI, CLABSI
• Predictive models: Readmissions
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42. © 2019
Health
Catalyst
CORUS Costing
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Health
Catalyst
CORUS Costing: Activities
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Health
Catalyst
Combining Financial and Clinical Ad Hoc Report
- Average Cost per Case
44
LAPAROSCOPIC VAGINAL ROBOTIC OPEN
TOTAL
HYSTERECTOMIES
Cases 870 250 330 280 1,730
PerCase
Revenue $ 6,207 $ 10,480 $ 5,152 $ 7,036 $ 6,757
Variable & Supporting
Expense
$ 5,397 $ 4,400 $ 6,803 $ 7,893 $ 5,925
Contribution Margin $ 810 $ 6,080 $ (1,651) $ (857) $ 832
2.7%
10.1%
0.3%
4.0%
18.8%
43.3%
1.4%
7.2%
6.2%
12.5%
0.0%
4.9%
8.1%
2.3%
0.0%
4.8%
6.1%
20.2%
0.4%
4.7%
Complications Transfusions (IP
Only)
Surgical Site
Infections
30 Day Returns
Hysterectomy Quality Outcomes
Laparoscopic Open Robotic Vaginal Total
1.38
3.51
1.63
1.18
2.10
IP ALOS
IP Average LOS
Laparoscopic Open Robotic Vaginal Total
Sample data for illustrative purposes.

45. © 2019
Health
Catalyst
Financial Management Explorer
45
Combines
costing and
billing data for
analysis

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Health
Catalyst
General Revenue Cycle Engagement Approach
46
Identifying the right opportunities to pursue first is critical to the success
of any project, especially with the many competing priorities that exist
Making sense of the findings from the assessment helps to accurately formulate the true and impactful
opportunities that exist. Opportunities identified are quantified for financial, organizational, process
improvement and then prioritized based on strategic direction.
A comprehensive assessment provides an understanding of your
organization’s current state and provides insight into your unique
strengths and challenges
Assessment includes collecting relevant data, performing interviews with key stakeholders, process
observations, and performing selective analyses to get a full picture of current performance.
Implementing the improvement can be daunting and resource intensive
when your organization is already firing on all cylinders
Our experienced advisory services team is positioned to support implementation of improvement initiatives
at all levels including process and organizational design/re-design, designing and installing performance
metric tools, providing training, and full or partial project management leadership and support.
Assessment
Opportunity
Identification
Implementation

47. © 2019
Health
Catalyst
Revenue Cycle Explorer
47
• Trusted visibility into data
needed to be successful.
• Enable faster and better
decisions to improve
outcomes performance.
• Rapidly identify and
understand important
trends and variances.
• Single-source of truth to
take timely and
appropriate actions.
• Drill-down capabilities to
the payer, provider,
location and CPT levels
allow for true root cause
analysis.

48. © 2019
Health
Catalyst
HC Professional Services provides strategic advisory services and access to
nationally recognized domain experts to work with CHNw and establish improvement
and data governance. Domain experts work with CHNw teams for FOCUSED
IMPROVEMENT efforts using 7-guiding question methodology.
The DOS™ platform integrates 25 sources of data
CHNw. The Analytics Accelerators are built on the
DOS™ platform, and includes AI/ML.
Data-Driven Insights
Opportunities identified:
Systemwide clinical variation analysis. High priority
focus areas: Sepsis, Delirium Reduction, Drug Costs,
Maternal Child Service Line, and CV Service Line.
Tangible Outcomes
Clinical &
Financial
$23.2M in improvements. Example
include:
• $6.2M in drug cost savings.
• $8.2M in sepsis cost savings.
• $1M in savings for Geriatric Evaluation
Management (GEM) patients.
• 407 lives impacted. Patients receiving
care from the GEM have a mortality rate
that is 1.45% less than that of non-GEM
patients.
• $986K CV service line savings.
• $660K maternal child service line
savings.
Operational • Increased number of TAVR cases.
• Increased use of Watchman device.
• Eliminated over-utilization of CKMB
testing.
• Six-day reduction in NICU LOS.
Analytics Accelerators
Multitude of applications, including the examples noted below:
• Population Explorer delivers insights into cohorts and
improvement opportunities. Supports leaders’ ability to identify,
prioritize, and report on quality improvement efforts.
• Sepsis Prevention enables early recognition and intervention for
sepsis, reducing mortality, morbidity, and cost.
• Combined clinical and financial data, including risk adjustment,
highlights the best opportunities for improvement and cost
reduction.
CHNw Uses DOS™& Analytics Accelerators to Drive 80 Financial
& Clinical Improvements
Analytic &
Clinical
Workflow
Applications
2
Data
Integration1
Professional
Services3
Data
Warehouse
Cloud-basedSource
Connectors
Reusable Data
Content
Terminology
Services
NLPMachine
Learning
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49. © 2019
Health
Catalyst
• Develop, implement predictive
model (46 data elements).
• Segment collection strategies using
output from predictive model.
• Enabled improved account
prioritization in collection workflows.
Patient Balance: Leveraging Data to Prioritize/Focus
49
“In order for propensity to pay programs to
work, you need to know your data and
processes.”
Barbara Ball
President of Accounts Receivable Services
Allina Health
$2M Increase in overall patient
collections in the first year.
Bonus Opportunity: Power your Patient Access leadership with analytic
insights on patient deposit collection performance versus policy.

50. © 2019
Health
Catalyst
• Accurate financial data
• Critical regardless of payment methodology
• Helps enable strategic decisions
• Significant variation and waste creates significant opportunities
• The right tools and resources are necessary to enable this
transformation
Summary
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51. © 2016 Health Catalyst
Proprietary and Confidential
Q & A

52. © 2016 Health Catalyst
Proprietary and Confidential
Thank You!