SWMC BUSINESS PLANFINANCIAL PROFORMAS-INCOME STATEMENT

Revenue and Expenses from operation for first 5 years.Projections were built using data from PDH, OSHPD, audited financial statements, information from

small rural hospitals, other private and public sources, outsource vendors and commitments from physicians.

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SWMC BUSINESS PLANFINANCIAL PROFORMAS

RETURNING BUSINESS CALCULATION

Returning business net revenue equals FY 2013 actual less the Physical Therapy department.

Net Revenue generated by Dr. Pappas has been replaced by: efficiencies achieved by Drs. Bollinger and Bragonier;

an expanded general surgery program not included in new business;and, improved charge capture via the new EMR software.

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SWMC BUSINESS PLANFINANCIAL PROFORMAS

HOW SWMC WILL GENERATE YEAR 1 PROJECTED REVENUE

1. No significant change in attending (referring) physicians. Of all referrals, 91% will arrive to the medical center by the following:

50% from primary care physicians-Top referrers include Drs. Powers, Rosa, Fichman, Davidson, Canova and

Whisman. In addition, WCHC is a consistent referral source.37% from the ER and attended to by the hospitalists.7% directly from the orthopedic group4% directly from independent general surgeons2% directly from local cardiologist

2. EMS is prepared to bring patients to SWMC.

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SWMC BUSINESS PLANFINANCIAL PROFORMAS

HOW SWMC WILL GENERATE YEAR 1 PROJECTED REVENUE

2. Add more specialty physicians to increase patient services

GENERAL SURGEONSRichard Bland Allan Hill Michael Bozuk Peter Leoni Mitch Bailey VASCULAR SURGEONLoie Sauer INSTITUTE LEADERS1. SWMC Medical Director-James K Gude MD 9. Endocrinology-Roger Minkoff MD2. General Surgery-Roger Delgado MD 10. Pain-Michael Tran MD3. Orthopedics-Drs. Bollinger MD & Bragonier 11. Wound-Barry Silberg MD4. Neurology & Stroke-Alan Bernstein MD 12. Geriatrics- Ida Jahed MD5. Emergency-Rodney Look MD 13. Neurosurgery-Brian Pereira MD6. Psychiatry-Jonathan Hulkower MD 14. Radiology-Ingo Rencken MD7. Integrative Medicine-David Murphy PhD 15. Urology-Peter Bretan MD8. Rheumatology-Richard Zweig MD 16. Family Medicine-Rick Flinders MD 17. Electric Medical Record/HarmoniMD- Misty Zelk MD

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SWMC BUSINESS PLANFINANCIAL PROFORMAS

HOW SWMC WILL GENERATE YEAR 1 PROJECTED REVENUE

3. No significant change in physicians performing procedures. For all procedures performed;

41% performed by general surgeons27% performed by orthopedic surgeonsremainder performed by other specialists such as ENT, oncology, podiatry, pain management and plastic surgery.

4. Many of the specialist have unique skills that will direct patients to SWMC. For example Dr. Bollinger performs anterior hip replacements.

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SWMC BUSINESS PLANFINANCIAL PROFORMAS

HOW SWMC WILL GENERATE YEAR 1 PROJECTED REVENUE

5. Collect 100% of charges with EMR software. Historically many charges were not captured during patient procedures.

6. Through improved revenue cycle management increase collection rate from 28% to 34% (Healdsburg Hospital collection rate). Better collections improves net revenue by $1.7m.

7. All revenue cycle vendors who submitted proposals to SWMC, confirmed that their systems would likely generate 5-10% in additional net revenue in year one from improvements to various steps in the revenue cycle such as financial

clearance, clinical clearance, point of service collections, claims submission and denials management.

8. Expand patient base beyond hospital district; for example, West Santa Rosa and Rohnert Park & Cotati.

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SWMC BUSINESS PLANFINANCIAL PROFORMAS

NEW BUSINESS ANALYSIS

New business contributes 20% to Net Revenue

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SWMC BUSINESS PLANFINANCIAL PROFORMAS

UTILIZATION STATISTICS FOR NEW SERVICES

New patients are created from the No-Wait ER, the addition of new insurance products and an expanded surgery program.

Of the 728 new patients, 246 (33%) will become in-patients.

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SWMC BUSINESS PLANFINANCIAL PROFORMAS

GENERAL, ORTHOPEDIC AND OTHER SURGEONS

Annual net revenue generated at hospitals by various specialties range from $700k to $2.7m.

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SWMC BUSINESS PLANFINANCIAL PROFORMAS

INPATIENT UTILIZATION STATISTICS

Total Return Business discharges were estimated based on The Operating Indicators Report from PDH financial package.

The plan uses 2.5 days as the average length of stay (ALOS). The ALOS for PDH was 3.4 days. The reduction in ALOS days is due to the increase in surgeries and their

generally lower ALOS requirements.

The average daily census (ADC), including new business is planned at 10 patients.General and orthopedic surgery patients total 30% of ADC.

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SWMC BUSINESS PLANFINANCIAL PROFORMAS

By April 2014, PDH management had reduced salaries and benefits significantly.

Historically, PDH FTEs averaged 155. By April 1, 2014 PDH FTEs had been reduced to 120. SWMC budgeted FTEs total 117.

Wage rates for SWMC plan match PDH FY 2013 wage rates.

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Primary drivers of expense reductions1. Wages and benefits

SWMC BUSINESS PLANFINANCIAL PROFORMAS

Cost of supplies decreases from PDH at 23% for FY 2013 to 16%.Primary drivers of decrease include standardization of surgery supplies

and drugs and best practices assistance from our GPO partner, Amerinet.

For example, Amerinet provides SWMC with a supply ordering and inventory software product to assist in controlling costs.

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Primary drivers of expense reductions

2. Medical Supplies