Speaker: Michael Hubble

1. ©2013TheAdvisoryBoardCompany•27103A
NACCDO 2014
State of the Industry 2013 - 2014
Current Challenges to the Case for Support of
Hospitals and Health Systems
Michael Hubble hubblem@advisory.com
Philanthropy
Leadership Council
1

2. ©2013TheAdvisoryBoardCompany•27103A
Taking the Donor Perspective
2
Three Lenses for Evaluating the Philanthropic Environment in Health Care
Source: Philanthropy Leadership Council interviews and analysis.
Donor-Centric Lenses
The Economy and
Perception of Personal
Economic Security
Personal Motives and
Perception of Value
and Impact
Hospital Performance and
Perception of Need in
Health Care
Am I in the financial
position to donate?
Is the organization a
worthy cause?
Will my gift make a
difference?
“MY CHECKBOOK” “THEIR STORY” “OUR IMPACT”

3. ©2013TheAdvisoryBoardCompany•27103A
Charities Feeling Bullish About 2013
3
Source: Flandez R, ―70% of Charities Forecast Rise in Donations in 2013,‖
Chronicle of Philanthropy, April 8, 2013, available at: www.philanthropy.com,
accessed June 6, 2013; Philanthropy Leadership Council interviews and analysis.
Lens #1: ―My Checkbook‖
Anticipated Direction of
Change in Charitable Receipts
2013 compared with 2012
Rising Consumer Confidence
―Overall consumer confidence in the
economy rose last year and that
created a more positive environment
for charities to go out in and build
relationships [with donors].‖
Andrew Watt, President
Association of Fundraising Professionals
”
2%
7%
20%
12%
59% Increase by
1% to 15%
Increase by
more than 15%
Stay the same
Decrease by
1% to 15%
Decrease by
more than 15%
n=1,167

4. ©2013TheAdvisoryBoardCompany•27103A
Giving Tends to Follow the Economy
4
Source: Giving USA Foundation™, ―GIVING USA 2013,‖ Lilly Family School of Philanthropy,
Indiana University, 2013; Philanthropy Leadership Council interviews and analysis.
2011–2012 Giving Trends
1) Health organizations include: Health care institutions and services; mental health and
crisis intervention; diseases, disorders, and medical disciplines; and medical research.
Total Charitable Giving and S&P 500 Index
1972-2012 (in billions of inflation-adjusted dollars)
8.9%
Giving to health care
organizations as a
percent of total
1.5% Total increase in
charitable giving
Increase in giving to
health organizations12.8%

5. ©2013TheAdvisoryBoardCompany•27103A
Taking the Donor Perspective
5
Three Lenses for Evaluating the Philanthropic Environment in Health Care
Source: Philanthropy Leadership Council interviews and analysis.
The Economy and
Perception of Personal
Economic Security
Personal Motives and
Perception of Value
and Impact
Hospital Performance and
Perception of Need in
Health Care
Am I in the financial
position to donate?
Is the organization a
worthy cause?
Will my gift make a
difference?
“MY CHECKBOOK” “THEIR STORY” “OUR IMPACT”
Donor-Centric Lenses

6. ©2013TheAdvisoryBoardCompany•27103A
Other Headwinds Challenging Our Case for Support
6
Health Care Issues at the Forefront
Source: Philanthropy Leadership Council interviews and analysis.
Lens #2: ―Their Story‖
Increasing Transparency into Hospital Finances1
2
3
Politics of the Affordable Care Act
The Health System ―Identity Crisis‖
Top Three Case Vulnerabilities

7. ©2013TheAdvisoryBoardCompany•27103A
That’s One Way to Sell Magazines
7
―Exposé‖ Shines Spotlight on Hospital Pricing
Issue #1: Increasing Transparency into Hospital Finances
―When you look behind the bills that
Sean Recchi and other patients receive,
you see nothing rational—no rhyme or
reason—about the costs they faced in a
marketplace they enter through no
choice of their own. The only constant is
the sticker shock for the patients who
are asked to pay.‖
Steven Brill
Time Magazine
March 2013
”
Cited Examples of Hospital Pricing
BITTER PILL
WHY MEDICAL BILLS
ARE KILLING US
BY STEVEN BRILL
$77
Box of sterile
gauze pads
$1.50
Single pill of
acetaminophen
$18
One diabetes
test strip
Source: Brill S, ―Bitter Pill: Why Medical Bills Are Killing Us,‖ Time, March 4, 2013; Advisory
Board interviews and analysis. The TIME logo is the registered trademark of Time, Inc.

8. ©2013TheAdvisoryBoardCompany•27103A
The PR Bombardment Continues
8
Health Care Costs Making National Headlines
Source: Clune S and Kane J, ―Why Does Health Care Cost So Much in the United States?‖ PBS Newshour, November 25, 2011; Doyle J, ―Hospital CEOs See
Double-Digit Pay Hikes,‖ St. Louis Post-Dispatch, June 2, 2013; Evans M, ―Use of CEO Compensation Comparisons Draws Heightened Scrutiny,‖ Modern
Healthcare, May 11, 2013; Kavilanz P, ―6 Reasons Health Care Costs Keep Going Up,‖ CNN Money, July 12, 2012; Kliff S, ―Here‘s Why Hospitals Set High Prices,‖
Washington Post, May 19, 2013; ―Why Health Care Costs Are So High,‖ New York Times, June 3, 2013; Philanthropy Leadership Council interviews and analysis.
―Here‘s Why Hospitals
Set High Prices‖
Washington Post, 05/19/13
―Use of CEO Compensation
Comparisons Draws
Heightened Scrutiny‖
Modern Healthcare, 05/11/13
―Why Health Care
Costs Are So High‖
New York Times, 06/03/13
―Why Does Health Care Cost
So Much in the United States?‖
PBS Newshour, 11/25/11
―6 Reasons Health Care
Costs Keep Going Up‖
CNN Money, 07/12/12
―Hospital CEOs See
Double-Digit Pay Hikes‖
St. Louis Post-Dispatch, 06/02/13

9. ©2013TheAdvisoryBoardCompany•27103A
COPD Simple
Pneumonia
Major Joint
Replacement
Minimum Maximum
1
2
CMS Fans the Flames on Hospital Pricing
9
New Database Profiles Charges for Most Frequent Discharges
Source: CMS, Medicare Provider Charge Data, May 2013, available at: www.cms.gov; Young J and
Kirkham C, ―Hospital Prices No Longer Secret As New Data Reveals Bewildering
System, Staggering Cost Differences,‖ Huffington Post, May 8, 2013; Advisory Board interviews and
analysis.
1) Chronic obstructive pulmonary disease.
2) Simple Pneumonia and Pleurisy with complications and comorbidities.
―Our purpose for posting this information is to shine a much stronger light on these practices.
What drives some hospitals to have significantly higher charges than their geographic peers?
I don't think anyone here has come up with a good economic argument.‖
Jonathan Blum
Deputy Administrator, CMS
”
Key Database Features
100 Most frequent
discharges
163K Individual
charges
3,337 Hospitals
Hospital Charge Variation
Chicago Hospital Referral Region
n=27
$5.8K
$28.3K
$12.7K
$39.4K $36.1K
$74.4K

10. ©2013TheAdvisoryBoardCompany•27103A
Charges a Far Cry from Paid Prices
10
Most Pay Less than Fifty Cents on the Dollar
Source: 2012 Almanac of Hospital Financial and Operating Indicators, Optuminsight Inc, 2011; CDC, ―National
Hospital Discharge Survey,‖ 2010, available at: www.cdc.gov/nchs; Melnick GA and Fonkych K, ―Hospital Pricing
and the Uninsured: Do the Uninsured Pay Higher Prices?‖ Health Affairs, 2008, 27: w116-22; AHA, ―Uncompensated
Care Cost Fact Sheet,‖ January 2013, available at: http://www.aha.org; Advisory Board interviews and analysis.
The Rest of the Story
Hospital Revenue Received
as Percentage of Charges
All Payers, 2010
Discounts for Uninsured Patients
35.2%
43.6%
51.8%
25th
Percentile
50th
Percentile
75th
Percentile
5% Self-pay percent of
U.S. discharges, 2010
(28%)
Median difference
in collected price between
uninsured, commercially-
insured patients
$39.3B Uncompensated care provided
by U.S. hospitals, 2010

11. ©2013TheAdvisoryBoardCompany•27103A
Cross-Subsidy Economics on the Brink of Failure
11
Source: Advisory Board interviews and analysis.
1) Projected results for health care industry if hospitals do nothing to alter current course, based on the Health Care Advisory Board‘s
Margin Improvement Intensive that projects margin performance based on key financial and operational metrics from 158 hospitals.
Margin Improvement Analysis Results1
Five-Year Margin Projections Ten-Year Margin Projections
Greater than
10% Decline
5-10% Decline
Improvement
0%
3%
13%
84%
Improvement
0-5% Decline
5-10% Decline
Greater than
10% Decline
15%
36% 36%
13%
Four Forces Eroding Future Margins
0-5% Decline
• Shifting payer mix: most demand growth over the next decade comes from publicly insured patients
• Continuing cost pressure: projected annualized commercial price growth half of historical norms
• Decelerating growth in reimbursement rates: commercial cost shifting stretched to the limit
• Deteriorating case mix: medical demand from aging population threatens to crowd out profitable procedures
!

12. ©2013TheAdvisoryBoardCompany•27103A
Responding to “Sticker Shock”
12
Source: Philanthropy Leadership Council interviews and insights.
Talking Points for Donor Conversations
Emphasize that philanthropy has essential role to play in ensuring that hospitals
can continue to serve their communities, especially as pressure increases on
operating margins; know your institution‘s operating margin
Be equipped to discuss the ―community benefit‖ the institution provides, whether
that is charity care for low-income patients, free wellness services and diagnostic
screenings, or something else; know how much charity care and community
benefit your institution provides each year
Explain that hospitals and health systems are facing more financial pressures
than they ever have; be prepared to talk about cuts to Medicare, Medicaid
payments and that the population is becoming more expensive to care for
If your operating margin is particularly healthy, reinforce the concept that, as
not-for-profit institutions, hospitals reinvest profits into providing services rather
than pay them out to shareholders; position philanthropic opportunities as sound
financial investments

13. ©2013TheAdvisoryBoardCompany•27103A
Other Headwinds Challenging Our Case for Support
13
Health Care Issues at the Forefront
Source: Philanthropy Leadership Council interviews and analysis.
Lens #2: ―Their Story‖
Increasing Transparency into Hospital Finances1
2
3
Politics of the Affordable Care Act
The Health System ―Identity Crisis‖
Top Three Case Vulnerabilities

14. ©2013TheAdvisoryBoardCompany•27497A
Not the Smoothest of Starts
Federal Exchange Slow to Answer the Bell

15. ©2013TheAdvisoryBoardCompany•27497A
Some State Exchanges Faring Better
15
Enrollment Slow, But Most Websites Working
Source: Kaiser Family Foundation, ―State Decisions for Creating Health Insurance Exchanges, as of May 28, 2013,‖ available at: www.kff.org; CNBC, ―One Washington
gets Obamacare Right,‖ available at: http://www.cnbc.com/id/101096445, Kentucky Governor‘s Office, ―2.6 Million Page Views on Kynect for Affordable Health
Insurance,‖ available at: http://migration.kentucky.gov/newsroom/governor/20131005kynect.htm; Health Care Advisory Board interviews and analysis.
State Decisions on Exchange Participation
16 States, District of Columbia Running
Own Exchanges
27
17
7
State-Based
ExchangeFederal
Exchange
Partnership
Exchange
State Exchange Enrollment Within
First Week of Launch
>40,000 Completed applications in
New York
16,311 Completed applications in
California
326 Completed applications in
Maryland
12,955 Completed applications in
Kentucky

16. ©2013TheAdvisoryBoardCompany•27497A
Post-Subsidy Premiums Within Reach for Many
16
But Penalties Still Smaller than Cost of Coverage
Observation #1: Affordable Premiums
Year Annual Penalty
2014 $95 or 1% of income
2015 $325 or 2% of income
2016 $695 or 2.5% of income
Penalties for Non-compliance
Annual Penalty
Income: $30,000
$300
$600
$750
2014 2015 2016
Source: Kaiser Family Foundation, ―Kaiser Health Tracking Poll,‖ March 2013, available
at: kff.org; PwC, ―Health Insurance Exchanges: Long on Options, Short on Time,‖ October
2012, available at: www.pwc.com; Health Care Advisory Board interviews and analysis.
Weighted Average Monthly Premiums for
Adult Individual Aged 27
For Second Cheapest Silver Plan, by State, 2014, Pre
and Post subsidy1 for Income of $30,000
$154
$255
$286
$344
$154
$214 $214 $214
Tennessee Florida Mississippi Alaska
Before Subsidy After Subsidy

17. ©2013TheAdvisoryBoardCompany•27497A
Trading Price for Volume on the Public Exchanges
17
Reimbursement Information Still Anecdotal , but Rates Not Generous
Source: Mathews AW and Kamp J, ―Another Big Step in Reshaping HealthCare,‖ Wall Street
Journal, February 28, 2013, available at: www.online.wsj.com;; Health Care Advisory Board interviews and
analysis.
Observation #2: Low Reimbursement
1) Pseudonym.
Anticipated Provider Reimbursement Rates for Exchange Plans
Catholic Health Initiatives
Modest discounts from
commercial rates
Tenet Healthcare
Up to 10% below
commercial rates
Meriwether Hospital1
5% below commercial
rates
WellPoint Inc.
Between Medicare
and Medicaid rates
Meyers Health1
10% above
Medicare rates
Millern Medical Center1
20% below commercial
rates

18. ©2013TheAdvisoryBoardCompany•27497A
Lower Prices through Narrower Networks
18
Source: Covered California, ―Health Plans & Rates for 2014: Making the Individual Market in California Affordable, May 23, 2013, available at: www.coveredca.com;
Kliff S, ―California Obamacare premiums: No ‗rate shock‘ here,‖ Washington Post, May 23, 2013, available at: www.washingtonpost.com; Terhune C, ―Insurers limit
doctors, hospitals in state-run exchange plans,‖ LA Times, May 24, 2013, available at: www.articles.latimes.com; Health Care Advisory Board interviews and analysis.
Observation #3: Narrow Networks
1) Silver plan premiums for 40-year old
individual, before subsidy; actual rates
represent HMO plans in Northern Los Angeles.
Monthly Health Insurance Premiums
Cedars-Sinai Medical Center
not participating in any
exchange plan networks
UCLA Health System
participating in only one
exchange plan network
Prominent Health Systems
Largely on the Sidelines
36% 80%13
Blue Shield of
California network
physicians in payer‘s
exchange plans
California
physicians, hospitals
participating
in at least one
exchange plan
Insurers offering
plans on Covered
California exchange
5M
Individuals expected
to be eligible for
Covered California
exchange, 2014
$450
$222
$254
$294
Milliman ProjectionHealth Net AnthemKaiser Permanente
Actual Premiums
Select California Exchange Plans, 20141

19. ©2013TheAdvisoryBoardCompany•27497A
Employer-Sponsored Coverage at a Crossroads
19
Employers Choosing Between Abdication, Activation
“Activation”“Abdication”
Self-Funded
Benefits
No Health
Benefits
Pros:
• Full control over
networks
• Exemption from
minimum benefits
requirements
Cons:
• Greater exposure to
unexpected
expenditures
• Complex network
negotiations
Defined Contribution/
Private Exchange
Pros:
• Health benefits still part
of compensation
package
• Predictable, controllable
cost growth
Cons:
• Fundamental disruption
in benefit design
• Employees may under-
insure
Pros:
• Total escape from
cycle of rising
premium costs
Cons:
• Fine for violating
employer mandate
• Loss of important
labor market
differentiator
Spectrum of Options for Controlling Health Benefits Expense
Source: Health Care Advisory Board interviews and analysis.

20. ©2013TheAdvisoryBoardCompany•27497A
Employers Already Scaling Back Coverage
20
Erosion of Employer-Sponsored Coverage Well Underway
Sources: Sonier J, et al., ―State-Level Trends in Employer-Sponsored Health Insurance,‖ Robert Wood Johnson Foundation, April 2013, available
at: www.rwjf.org; Collins R, et al., ―Insuring the Future,‖ The Commonwealth Fund, April 2013, available at: www.commonwealthfund.org; Towers
Watson, ―Reshaping Health Care,‖ 2013, available at: www.towerswatson.com; Health Care Advisory Board interviews and analysis.
Individuals Covered by ESI1
23%
Employers planning
to offer CDHP2 as only
plan option, 2014
25%
Insured non-elderly adults
with deductibles $1,000
or higher, 2012
Non-elderly Population
69.7%
59.5%
2000 2011
11.5M fewer
individuals
Contribution to Insurance Premiums
1) Employer-sponsored insurance.
2) Consumer-directed health plan.
Coverage for Family of Four
$5,866
$2,137
$11,429
$4,316
2002 2012
Employer
2002 2012
Worker
95%
growth
102%
growth

21. ©2013TheAdvisoryBoardCompany•27497A
Some Employers Dodging Their Mandate
21
Despite Delay, Employers Finding Ways to Avoid Insurance Requirement
Source: Reynolds J and Merin J, ―Business Leaders Give 2013 Outlook Mixed Reviews,‖ International Franchise Association, January
2013, available at: www.franchise.org; Mercer, ―Health Reform Poses Biggest Challenges to Companies with the Most Part-Time and Low-Paid
Employees,‖ August 8, 2012, available at: www.mercer.com; ―Regal Entertainment Group Cuts Employee Hours, Explicitly Blames Obamacare in
Memo: Report,‖ The Huffington Post, April 17, 2013, available at: www.huffingtonpost.com; Health Care Advisory Board interviews and analysis.
1) Full-time equivalents.
2) n=72 franchisees, all industries.
3) n=1,203 employers.
Case in Brief: Regal Entertainment
Group
• In March 2013, reduced number
of work shifts for non-salaried
employees to ensure part-time status
• First public company to institute policy
31%
Franchisees that plan
to cut jobs to stay under
50-employee threshold2
32%
Retail and hospitality
companies that plan
to ―change workforce
strategy‖ to avoid penalties3
Strategies to Avoid ACA Penalties
Cut jobs to
remain under
50 FTEs1
Convert full-time
employees to
part-time status
Hire all new
employees at
part-time status
Split into smaller
companies with
fewer than 50 FTEs
Memo to Managers
To comply with the Affordable Care
Act, Regal had to increase our health care
budget to cover those newly deemed
eligible based on the law's definition of a
full time employee. To manage this
budget, all other employees will be
scheduled in accord with business needs
and in a manner that will not negatively
impact our health care budget…

22. ©2013TheAdvisoryBoardCompany•27497A
New Path for Employer Cost Shifting
22
Private Health Insurance Exchanges Open for Business
Source: Towers Watson, ―18th Annual Towers Watson Employer Survey on Purchasing Value in Health Care,‖
2013, available at: www.towerswatson.com; Wall JK, ―Mercer Courts Employers with Private Exchange,‖ Indianapolis
Business Journal, April 22, 2013, available at: www.ibj.com; Health Care Advisory Board interviews and analysis.
Responding to Market Demands
―The high-caliber carrier participation in Mercer‘s private
benefits exchange matches the increasing interest
displayed by our clients and prospects.‖
Julio A. Portalatin
President and CEO, Mercer
”
15%
Employers considering
private exchange
model for 2014
Private Health Insurance Exchanges
• Over 100,000 employees
enrolled in Aon Hewitt‘s
private health insurance
exchange in fall 2012
• Benefits offered by nine
national, regional carriers
• Launching private health
insurance exchange in
nine states
• Expect to serve employers
covering approximately
30,000 individuals
• Offering suite of exchange
offerings to employers
• Will include coverage
from 10 major insurers

23. ©2013TheAdvisoryBoardCompany•27497A
Igniting a Race to the Bottom
23
Exchange Shoppers Trading Premiums for Deductibles
Source: Mathews AW, ―To Save, Workers Take On Health-Cost
Risk,‖ Wall Street Journal, March 17th, 2013, available at:
www.wsj.com; Health Care Advisory Board interviews and analysis.
1) Preferred provider organization.
2) Health maintenance organization.
Case in Brief: Sears, Darden Restaurants
• For 2013 open enrollment, self-insured large employers redesigned
benefits to reduce health spend through defined contribution model
• Employers offered employees lump sum credit to choose coverage
in Aon Hewitt‘s online marketplace
47%
70%
14%
18%
39%
12%
2013
2012
PPO HMO High-Deductible Plan1 2
42%
Employees on Aon Hewitt health
insurance exchanges selecting plans
less rich than the previous year
Results of Open Enrollment Process

24. ©2013TheAdvisoryBoardCompany•27497A
The Future of Employer-Sponsored Insurance?
24
Private Exchanges Poised For Rapid Growth
1M
9M
19M
30M
40M
2014 2015 2016 2017 2018
Projected Private Exchange Enrollment
27%
Percentage of consumers receiving
employer-sponsored coverage today
projected to receive benefits through
private exchanges in 2018
Factors Influencing Move to
Private Exchange Models
Logistical difficulty of
benefit renegotiations
Internal politics of
benefit changes
Attractiveness of
other options
Source: Accenture, ―One-in-Four Consumers Will Receive Employer Health Benefits Through Insurance Exchanges in Five Years, Accenture
Research Shows,‖ available at: http://newsroom.accenture.com/news/one-in-four-consumers-will-receive-employer-health-benefits-through-
insurance-exchanges-in-five-years-accenture-research-shows.htm, Health Care Advisory Board interviews and analysis.

25. ©2013TheAdvisoryBoardCompany•27497A
Reexamining the ACA “Grand Bargain”
25
Source: CBO, ―Letter to the Honorable John Boehner Providing an Estimate for H.R.6079, The Repeal of Obamacare
Act,‖ July 24, 2012, available at: www.cbo.gov; CBO, ―Effects of the Affordable Care Act on Health Insurance Coverage—
February 2013 Baseline,‖ February 5, 2013, available at: www.cbo.gov; Advisory Board interviews and analysis.
1) Non-elderly population.
2) Disproportionate Share Hospital.
ACA Hospital Payment Cuts
2013-2023
2M
14M
20M
26M
27M 27M
2013 2014 2015 2016 2017 2018
Projected Cumulative Increase in
Newly Insured Population1
Provider “Get”: Higher Revenue
• Medicaid expansion
• Insurance exchanges
• Employer mandate
Provider “Give”: Lower Payment
• Medicare rate cuts
• DSH cuts
$260B
$316B$56B
Hospital Payment
Rate Cuts
DSH Payment
Cuts
Total Hospital
Cuts
2
DSH2 Payment
Cuts

26. ©2013TheAdvisoryBoardCompany•27497A
Divided Public Opinion of Health Care Reform
26
Opponents Taking Stronger Stance
Source: Ramlet M and Dropp K, ―Memo on the Poll Findings – Public Opinion on the
Affordable Care Act,‖ June 12, 2013, available at:
www.themorningconsult.com, accessed June 14, 2013; Philanthropy Leadership
Council interviews and insights.
Do You Approve or Disapprove of the
Affordable Care Act?
8%
20%
23%
41%
Strongly
approve
Somewhat
approve
Somewhat
disapprove
Strongly
disapprove
5%
15%
23%
11%
33%
A lot better A little
better
Have no
effect
A little
worse
A lot worse
How Do You Think the Affordable Care Act
Will Affect You and Your Family?
June 2013
n=1,000
June 2013
n=1,000

27. ©2013TheAdvisoryBoardCompany•27497A
Common Sentiments from
Million-Dollar Health Care Donors
Many Donors Interested, but Uncertain
27
Source: Philanthropy Leadership Council interviews and insights.1) Pseudonym.
―Health care has become too political, and I‘ll
be on the sidelines until things are sorted out.‖
―I defy anyone to make sense of the current
medical care situation.‖
―It‘s hard to plan when you don‘t know what
the future is.‖
―We don‘t know what‘s going to happen.
The hospital president went to a meeting
[about health care reform], and he came out
more confused than before. Nobody has
their finger on the pulse.‖
50
220
Typical Session Health Care
Reform Session
Attendance at Biannual Donor Educational
Sessions at Odair Health System1
”

28. ©2013TheAdvisoryBoardCompany•27497A
Coverage Expansion Reducing Perception of Need
28
Less Charity Care Provided, Less Charity Required
Source: CBO, ―Effects of the Affordable Care Act on Health Insurance Coverage—February 2013 Baseline,‖
February 5, 2013, available at: www.cbo.gov; Philanthropy Leadership Council interviews and analysis.1) Non-elderly population.
A Threat to Giving?
―If everybody would truly be able to
receive treatment under
ObamaCare, it probably would at that
point impact what we may be giving.
People will already be covered, and
we‘re probably going to be taxed a lot
more to get to that point anyway.‖
Million-dollar health care donor
”Projected Cumulative Increase in
Newly Insured Individuals1
2M
14M
20M
26M
27M 27M
2013 2014 2015 2016 2017 2018

29. ©2013TheAdvisoryBoardCompany•27103A
Key to Emphasize Local Impact
29
Most Large Gifts to Health Care Organizations Stay Local
Source: ―The Million Dollar Gift Next Door,‖ Indiana University Lilly Family School of
Philanthropy, April 17, 2013; Philanthropy Leadership Council interviews and analysis.1) Geographic regions include Northeast, Midwest, South, and West.
60%
7%
33%
Within the donor’s state
or geographic region1
Outside the donor’s
geographic region1
Unidentified
Geographic Distribution of $1M+ Gifts
2000–2011
n=20,941 gifts

30. ©2013TheAdvisoryBoardCompany•27103A
Other Headwinds Challenging Our Case for Support
30
Health Care Issues at the Forefront
Source: Philanthropy Leadership Council interviews and analysis.
Lens #2: ―Their Story‖
Increasing Transparency into Hospital Finances1
2
3
Politics of the Affordable Care Act
The Health System ―Identity Crisis‖
Top Three Case Vulnerabilities

31. ©2013TheAdvisoryBoardCompany•27103A
What Business Are We In?
31
Businesses Displaced by Focusing on the Means Rather than the Ends
Study in Brief: What Business Are We in?
• Explores how Eastman Kodak Company‘s camera and film business was displaced by
alternate mediums that fulfilled customers‘ desires for images
• Draws parallels to the challenges that provider organizations face in shifting activities from
delivering health services to a broader spectrum of tactics for health
Providing Health, Not Health Care
―…It's always better to define a business by
what consumers want than by what a
company can produce…whereas doctors
and hospitals focus on producing health
care, what people really want is health.
Health care is just a means to that end—
and an increasingly expensive one.‖
Source: Asch D., "What Business Are We In? The Emergence of Health as the Business
of Health Care,‖ NEJM, 367,2012: 888-889; Advisory Board interviews and analysis.
”
1976
90% market share
of commercial film
business
1990s
Digital cameras
enter mainstream
market
2012
Kodak files for
bankruptcy
Timeline for Eastman Kodak Business
Researchers featured in
New England Journal of Medicine

32. ©2013TheAdvisoryBoardCompany•27103A
Health System Strategy, c. 2003
“Extractive Growth”
Health System Strategy, 2013-2023
“Value-Based Growth”
Grow by being bigger: Leverage market
dominance to secure prime pricing, network status
Grow by being better: Leverage cost, quality,
service advantage to attract key decision makers
• Expand market share
• Strengthen service lines
• Exert pricing leverage
• Solidify referrals
• Secure physicians
• Increase utilization
• Expand covered lives
• Compete on outcomes
• Minimize total cost
• Assemble network
• Offer convenience
• Expand access
• Discharges
• Service line share
• Fee-for-service revenue
• Pricing growth
• Occupancy rate
• Process quality
• Share of lives
• Geographic reach
• Risk-based revenue
• Share of wallet
• Outcomes quality
• Total cost of care
• Inpatient capacity
• Outpatient imaging
centers
• Clinical technology
• Ambulatory surgery
centers
• Primary care capacity
• Care management staff
and systems
• IT analytics
• Post-acute care
network
Toward an Economics of Value
32
Adapting to New Rules of Competition
Source: Advisory Board interviews and analysis.
Description
Key Success
Factors
Performance
Metrics
Critical
Infrastructure

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Carving a New Growth Path
33
Competing Under Distinct, but Not Mutually Exclusive, Identities
Source: Advisory Board interviews and analysis.
Best-in-Class Acute
Care Destination
Consumer-Oriented
Ambulatory Network
Full Service Population
Health Manager
Integrated Finance and
Delivery System
• Assumes full risk by offering
health plan to subscribers
• Unifies care financing and
delivery into single
coordinated care enterprise
• Maintains extensive network
of outpatient care sites
• Offers convenient primary
care, diagnostic, procedural
services at competitive prices
• Assumes delegated risk from
payers and/or employers
• Prioritizes care
management, coordination to
limit avoidable demand
• Consistently delivers
efficient, effective acute care
episodes
• Ensures reliable
coordination, communication,
data sharing across the care
continuum
Four Emerging Provider Identities

34. ©2013TheAdvisoryBoardCompany•27103A
Fundraising’s Role in Carving a New Growth Path
34
What Can You Make the Case For?
Source: Philanthropy Leadership Council interviews and analysis.
• Outpatient clinics
• Primary care offices
• Post-acute care
facilities
• Outpatient
lab, imaging centers
• EMR, meaningful use
• Employee utilization liaisons
• Inpatient care coordinators
Investment Priorities
• Outpatient clinics
• Outpatient care
managers
• Clinical patient guides
• Disease management
• Palliative care
• Non-urgent care
navigators
• Transition partners
• EMR, meaningful use
• Telemonitoring services
• Home health initiatives
• Primary care offices
• Outpatient lab,
imaging centers
• Wellness centers
• EMR, meaningful use
Best-in-Class Acute
Care Destination
Consumer-Oriented
Ambulatory Network
Full Service Population
Health Manager
Integrated Finance and
Delivery System
• IT systems
• Cash/unrestricted funds

35. ©2013TheAdvisoryBoardCompany•27103A
Taking the Donor Perspective
35
Three Lenses for Evaluating the Philanthropic Environment in Health Care
Source: Philanthropy Leadership Council interviews and analysis.
The Economy and
Perception of Personal
Economic Security
Personal Motives and
Perception of Value
and Impact
Hospital Performance and
Perception of Need in
Health Care
Am I in the financial
position to donate?
Is the organization a
worthy cause?
Will my gift make a
difference?
“MY CHECKBOOK” “THEIR STORY” “OUR IMPACT”
Donor-Centric Lenses

36. ©2013TheAdvisoryBoardCompany•27103A
Focusing on What We Can Control
36
Source: Philanthropy Leadership Council interviews and analysis.
Lens #3: ―Our Impact‖
―You feel like it‘s just not fundraising
as it is solving a problem.‖
Underlying Values Desire for Impact
―I do believe that we need to give; those
of us that have, we need to help.‖
―Charitable giving for us is really from
following what the Lord has taught us…
where much is given, much is expected.‖
―Blaming the government and taxes
is just an excuse for not acting.‖
―We can afford it, and I‘m a great
believer in giving while I‘m living.‖
―We want to give all our money
away while we‘re still young enough
to appreciate the impact … it‘s such
a joy to see how lives are changed.‖

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Revisiting the Conversation About Impact
37
Source: Philanthropy Leadership Council interviews and analysis.
Donor
Comprehension Barriers
Reframed
Donor Perspective
A Bridge
Too Far
Priorities focused
outside hospital sphere
Institutional
Priority
Non-traditional but
current priorities of
broader health system
Intangible
Concept lacks
physical manifestation
Concrete
Initiative
Easily articulated
explanation
Far
Removed
Impact several steps
away from meaningful
donor experience
Direct
Impact
Affecting lives of
people throughout
community

38. ©2013TheAdvisoryBoardCompany•27103A
Elevating Philanthropy’s Strategic Value
38
Translate Our Relevance and Impact to Key Stakeholders
Source: Philanthropy Leadership Council interviews and analysis.
Providing 360° Value
Clinicians
Donors
Executives
Foundation