Disclosure Doc

7/29/2019 Disclosure Doc

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J.P. Morgan Healthcare

Conference 2013

January 7, 2013

Robert Meyer, President & CEO

Craig McKnight, Executive VP & CFO


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Cautionary Statement Regarding Forward-Looking Statements

We may have made forward-looking statements in this presentation that arenot historical facts but rather reflect current expectations concerning futureresults and events. These forward-looking statements are subject to risks,uncertainties and other factors, some of which are beyond our control thatcould cause actual results and events to differ materially from thoseforecasted or anticipated in the forward-looking statements. You arecautioned not to place undue reliance on forward-looking statements,

which reflect management's view only as of the date of this presentation oras of such earlier date as indicated. All forward-looking statementsincluded in this presentation and all subsequent forward-lookingstatements attributable to Phoenix Childrens Hospital, Inc. or personsacting on our behalf are expressly qualified in their entirety by thesecautionary statements. We do not intend to update or revise thesestatements to reflect events or circumstances existing after the date of this

presentation or to reflect the occurrence of unanticipated events, except asrequired by law.

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Speakers

Phoenix Childrens Hospital

Robert Meyer President and Chief Executive Officer

Craig McKnight Executive Vice President and Chief Financial Officer

Associate Faculty, Mel and Enid Zuckerman College of PublicHealth, University of Arizona

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Phoenix Childrens Hospital at a glance

One of newest pediatric hospitals in the US; operational

since 1983, stand-alone since 2002 National pediatric player with newly completed 11-story

tower Six Centers of Excellence

Top ten childrens hospitals in US based on volume Nearest quaternary pediatric providers are Denver and San

Diego

PCH has been at the center of the consolidation of thepediatric specialty market in Phoenix, driven by the

Dignity Health relationship and the new tower

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Phoenix Childrens Hospital is the leading pediatricservice provider in the Southwest

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In 2005, PCH developed a plan that recognized thetremendous growth in the pediatric population of Arizona Need for capacity (new physical plant)

Physician group growth and management (focus on sub-specialists)

Geographic expansion (ambulatory network)

Academic affiliations and research collaborations

Consolidation of the market (affiliation with Dignity Health)


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PCH overcame significant challenges in achieving itsobjectives

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By the mid 2000s PCHs patient base was growing in

Maricopa County and throughout Arizona To meet the demand, PCH Board and management initiated a campus

redevelopment plan that called for the construction of a new tower ofwhich the financing was completed in 2007

Beginning in 2008, the financial crisis had a significant impact

in Arizona driving down the economy and putting pressureon the State budget

PCH responded immediately and aggressively to thiseconomic reality

Scaled back the project by $100 million Developed a Safety Net Care Pool and intergovernmental transferarrangement

Aggressive ongoing financial discipline


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Strategic plan positions PCH for future success

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Pediatric-specific clinically-integrated organization Improves quality of care and access to care

Improves reimbursement opportunity

Focus on high-acuity / quaternary programs

Strong focus on management of population health

Strong partnerships Pediatric specialists (employed)

Primary care pediatricians (non-employed)

Dignity Health

Mayo Clinic

University of Arizona Phoenix

State of Arizona & AHCCCS


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Other Factors that Position PCH for Future Success

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Energized and engaged Board

Strong philanthropic support

Large and growing pediatric population

Rebounding Arizona economic environment


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Expansion Tower Completed 2011

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PCH has Consolidated the Pediatric Specialty Market in Phoenix

The affiliation with Dignity Health united the two leadingspecialty pediatric providers in the state of Arizona into one

comprehensive pediatric health care delivery system

Effective June 1, 2011, Dignity transferred substantially all ofits pediatric service lines within Maricopa County to PCH

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Dignity

Health

Childrens

Healthcare of

Arizona, Inc.

Phoenix Childrens

Hospital, Inc.

20% 80%

Members of Obligated Group indicated in Red

PCH Foundation, Inc.Cambridge Arizona

Insurance Company, Inc.


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Centers of Excellence National Top 10 Positioning

The PCH-Dignity Health Pediatric Combination resulted

in 3 of our 6 Centers of Excellence achieving volumesthat immediately place them in the top 10

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#23

Phoenix ChildrensHospital

#6

Phoenix ChildrensHospital + Dignity Health

#13 #7

#26 #11

Neurosurgery

Cardiology

Orthopedics

Specialty

Source: U.S. News & World Report


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Banner Lease

Banner Health has decided to exercise their right toterminate the PCH lease of a 76 private bed NICU at theirdowntown Phoenix hospital following a binding legal rulingrelated to the strategic alignment with Dignity Health.

The Banner Health leased unit operated at an average dailycensus of approximately 36 patients during 2012 andrepresented approximately 4% of PCH operating revenues.

PCH will concentrate its NICU services at its 33 bed LevelIIIC NICU located on the PCH campus as well as providingcomprehensive physician specialty services at DignityHealths 65 bed Level III NICU and 2 Level II NICUs (40beds) in Maricopa County.

A transition plan is being jointly developed. The impact on operations is not expected to be material.

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Physician Strategy

720-member Medical

Staff at October 2012 Employed Multi-Specialty

Physician Group Fundamental strategy

220 physicians, 65physician extenders

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Focused on sub-specialists

Common economics, infrastructure, IT platforms

Non-employed Primary Care Physicians Collaborative model

Focused growth in specialty physician staff

Employed Multi-Specialty Physicians

Note: Includes physician extenders


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Physician Strategy Includes Six Centers of Excellence to FocusFuture Growth and Investment

Childrens Heart Center *

Barrow Neurological Institute at Phoenix Childrens Hospital* Center for Pediatric Orthopaedics

Center for Cancer and Blood Disorders

Level 1 Pediatric Trauma Center

Neonatal Intensive Care Unit

* Enhanced by Dignity affiliation

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Phoenix Childrens Centers of Excellence Rank DataCardiac Pediatric Patient Days (All Payors) Neonatal Pediatric Patient Days (All Payors)

Hospital Patient Days % of Total Hospital Patient Days % of Total

Phoenix Children's Hosp. 6,894 63% St Joseph's Hospital Medical Ctr 20,723 13%

University Medical Center 2,058 19% Banner Desert Medical Center 18,726 12%

Banner Desert Medical Center 631 6% Phoenix Children's Hosp. 17,348 11%

Los Ninos Hospital 441 4% Tucson Medical Center 14,492 9%

Tucson Medical Center 232 2% Banner Thunderbird Med Ctr 10,577 7%

Other (21 Hospitals) 760 7% University Medical Center 10,300 6%

Total 11,016 100% Scottsdale Healthcare - Shea 8,894 5%

Maricopa Medical Center 7,098 4%

Chandler Regional Medical Center 5,881 4%

Orthopaedic Pediatric Patient Days (All Payors) Arrowhead Hospital 5,718 4%

Hospital Patient Days % of Total Carondelet St Joseph's Hospital 5,019 3%

Phoenix Children's Hosp. 3,635 48% Yuma Regional Medical Ctr 4,827 3%

Banner Desert Medical Center 1,005 13% Banner Estrella Med Ctr 4,229 3%

Tucson Medical Center 611 8% Banner Good Samaritan Med Ctr 3,543 2%

University Medical Center 584 8% Flagstaff Medical Center 3,508 2%

Maricopa Medical Center 371 5% Banner Gateway Medical Center 3,475 2%

Other (29 Hospitals) 1,417 19% Northwest Medical Center 2,698 2%

Total 7,623 100% Phoenix Baptist Hospital 2,139 1%

Banner Del E Webb Medical Center 2,039 1%

Mercy Gilbert Medical Center 1,261 1%

Neuro Pediatric Patient Days (All Payors) Other (26 Hospitals) 10,056 6%

Hospital Patient Days % of Total Total 162,551 100%

Phoenix Children's Hosp. 7,401 53%

Banner Desert Medical Center 2,046 15%

University Medical Center 1,219 9% Hem-Onc Pediatric Patient Days (All Payors)

Tucson Medical Center 787 6% Hospital Patient Days % of Total

Maricopa Medical Center 626 4% Phoenix Children's Hosp. 7,411 64%

St Joseph's Hospital Medical Ctr 518 4% University Medical Center 2,141 18%

Los Ninos Hospital 504 4% Banner Desert Medical Center 1,600 14%

Other (24 Hospitals) 889 6% Other (23 Hospitals) 510 4%

Total 13,990 100% Total 11,662 100% 14Arizona statewide pediatric hospital activity 12 months ended June 30, 2012

Ph i i St t P t i ith U fA C ll f


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Physician Strategy Partnering with UofA College ofMedicine - Phoenix

Academic Affiliation with University of Arizona Phoenix

completed 2010

Positioning for

growth in research

Academic Programs

Faculty Recruitment

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Th A i h b t b d ft d i


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The Arizona economy has begun to rebound after droppingsharply from 2008 to 2010

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2,000,000

2,100,000

2,200,000

2,300,000

2,400,000

2,500,000

2,600,000

2,700,000

2,800,000

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

TotalNonfarm

Employees

Source: Bureau of Labor Statistics; Total Nonfarm Arizona Employees; Seasonally Adjusted. Series ID: SMS04000000000000001.

Total nonfarm Arizona employment: Jan-02 through Sep-12


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Philanthropy Consistent Record of Growth

Total Raised includes new cash and new pledges for years 1986-2003. Beginning in 2004, includesin-kind gifts.

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Year

Total Raised

($000)

1986 $110

1987 607

1988 784

1989 911

1990 1,630

1991 1,154

1992 1,759

1993 1,568

1994 2,835

1995 2,656

1996 3,535

1997 2,860

1998 5,544

1999 3,874

2000 11,376

2001 11,655

2002 15,313

2003 10,956

2004 13,928

2005 23,889

2006 31,869

2007 20,357

2008 22,910

2009 23,280

2010 27,191

2011 28,656

$271,207

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

DollarsRaised


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Demonstrated Financial Leadership

Key management initiatives to mitigate the impact ofAHCCCS payment reductions include:

Expense management

Revenue cycle improvements

Intergovernmental transfers Arizona Safety Net Coalition

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Strong Cost Controls

PCH is below the national CHA average on two keyindicators

PCHs overall operating cost per adjusted patient day is 16.5%below CHA average in 2011 ($3,601 v. $4,312)

PCHs FTEs per adjusted occupied bed is 15% below CHA average

in 2011

Continued better than CHA stats for FTEs and operating

costs despite build up for new tower and marketconsolidation with Dignity Health in 2011

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Revenue Cycle Overhaul

Revenue Cycle was evaluated in 2010 and improvement

program started immediately, with over $20 million inimprovements recorded in 2011 alone

Improvements have come from:

ED and urgent care coding - $10 million E-insurance (financial counseling) - $3 million

Clinical documentation - $4 million

Short pay review program - $3 million

Patient access redesign - $1 million

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Partnership with the State of Arizona

As the Arizona economy declined, PCH leadership

reached out to Arizona executive and legislativeleadership to effectively create a partnership between

PCH and the state

As a result, legislation passed in 2010 HB 2116 and in

2011 SB1357 that enabled other public entities to beconsidered as sourcing entities for public match as partof an intergovernmental transfer agreement

Continued focus by PCH led to creation of the SafetyNet Care Pool in 2012

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C CCCS


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PCH Responded to AHCCCS Reductions

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0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2008 2009 2010 2011 2012YTD

EBIDA as % Operating Revenue

AHCCCS Annual Reductions as % Operating

Revenue

7,000

5,000

15,000

4,000

35,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2008 2009 2010 2011 2012EST

Th

ousa

nd

s

AHCCCS Annual Reductions EBIDA & AHCCCS Annual as % of Operating Revenue

PCH K C t t P d O ll P Mi


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Commercial

0.9%

Contract

39.7%

Patients &

Other

4.0%Gov't Prog

3.2%

AHCCCS

52.2%

Commercial

0.7%

Contract

40.3%

Patients &

Other

3.4%Gov't Prog

3.1%

AHCCCS

52.5%

PCHs Key Contract Payors and Overall Payor Mix

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2011

2012

Payor Payor %

Payment

Method Payor %

Payment

Method

AETNA 6.7 Per Diem 6.7 Per Diem

BC OUT OF STATE 6.2 DRG 6.2 DRG

BLUE CROSS 9.8 DRG 9.8 DRG

CIGNA 4.9 Per Diem 4.9 DRG

UNITED HEALTH 8.1 Per Diem 8.1 Per Diem

CONTRACT All Others 4.3 Per Diem 4.1 Per Diem

40.0 39.8

2011 2012 YTD


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Bond Transaction Overview

In August, 2012, Phoenix Childrens Hospital conducted the sale of $285million of tax-exempt fixed rate bonds at an all-in interest cost of 4.57%

(excluding swap termination cost)

Following the issuance of the Series 2012A bonds, PCH has a total of$509.6 million of bonds outstanding of which $284.6 million are fixed ratebonds (56%) and $225 million are variable rate bonds swapped to a fixedrate (44%)

The 2007 series $225 million in variable rate bonds are callable at parbeginning February, 2013 with a put provision in February, 2015.

The Hospital is continuing its plans to complete the 2007 series

refinancing during the call period.

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PCH Delivered on its Strategic Plan and is Positioned for


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PCH Delivered on its Strategic Plan and is Positioned forContinued Success

Key elements of Strategic Plan Consolidated the pediatric market

Grew our employed pediatric subspecialty group

Completed the new patient care tower

Expanded the network of satellite facilities

Developed strategic academic affiliations

Added key research collaborations

Future objectives Further development of a pediatric-specific, clinically-integrated

organization

Continued focus on high-acuity / quaternary programs

Creating an organization dedicated to managing pediatric populationhealth

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