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DECEMBER 3, 2012
Physician Advisory Services
Driving Growth Through Measured Results
Driving Growth Through Measured Results 2
Certain statements contained in this presentation may be considered forward-looking as defined by the Private Securities Litigation Reform Act of 1995. In particular, any statements made about Accretive Health’s expectations for future financial and operational performance, expected growth, new services, profitability or business outlook are forward-looking statements. Investors are cautioned not to place undue reliance on such forward-looking statements. There is no assurance that the matters contained in such statements will occur since these statements involve various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. These risks and uncertainties include those listed under the heading Risk Factors in the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, which is available on the SEC’s website as well as in the investor relations portion of Accretive Health’s website at www.accretivehealth.com. The forward-looking statements made in this presentation are based on the company’s beliefs and expectations as of December 3, 2012 only and should not be relied upon as representing the company’s views as of any subsequent date. While the company may elect to update these forward-looking statements at some point in the future, Accretive Health specifically disclaims any obligation to do so, even if its views change.
Safe Harbor
Driving Growth Through Measured Results 3
Use of Non-GAAP Financial Measures
*Reconciliations of non-GAAP measures to their most directly comparable GAAP measures are presented, where possible in the Appendix, as well as in the Company’s financial press releases and related Form 8-K filings with the Securities and Exchange Commission. This information can be accessed for free in the Investor Relations section of the Company’s website at www.accretivehealth.com
We believe adjusted EBITDA is useful to stockholders in evaluating our operating performance for the following reasons:
• these and similar non-GAAP measures are widely used by investors to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, capital structures and the methods by which assets were acquired;
• securities analysts often use adjusted EBITDA and similar non-GAAP measures as supplemental measures to evaluate the overall operating performance of companies; and
• by comparing our adjusted EBITDA in different historical periods, our stockholders can evaluate our operating results without the additional variations of interest income (expense), income tax expense (benefit), depreciation and amortization expense and share-based compensation expense.
We understand that, although measures similar to adjusted EBITDA are frequently used by investors and securities analysts in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider it in isolation or as a substitute for analysis of our results of operations as reported under GAAP. To properly and prudently evaluate our business, we encourage you to review the GAAP financial statements included elsewhere in our regulatory filings, including the Preliminary Prospectus, Form 8-K, and Form 10-K, and not to rely on any single financial measure to evaluate our business.
In order to provide stockholders with greater insight and to allow for better understanding of how our management and board of directors analyze our financial performance and make operational decisions, we supplement our condensed consolidated financial statements presented on a GAAP basis with the adjusted EBITDA and adjusted net income measures *.
Adjusted EBITDA measure has limitations, as noted below, and should not be considered in isolation or in substitute for analysis of our results as reported under GAAP.
Our management uses adjusted EBITDA:
• as a measure of operating performance, because it does not include the impact of items that we do not consider indicative of our core operating performance;
• for planning purposes, including the preparation of our annual operating budget;
• to allocate resources to enhance the financial performance of our business;
• to evaluate the effectiveness of our business strategies; and
• in communications with our board of directors and investors concerning our financial performance.
Driving Growth Through Measured Results 4
Agenda
Accretive Health Overview Mary Tolan – Founder and Chief Executive Officer
Revenue Cycle Management Joe Bellini – Chief Revenue Officer, RCM Michael Rosenthal – Senior Vice President, RCM Operations
Quality and Care Services Tim Barry – President, Quality and Care CoordinationDr. Walter Ettinger – Chief Medical Officer
Physician Advisory Services Patrick Sinclair – General Manager, PAS
Client Panel Greg Kazarian – Chief Talent Officer (Moderator)
Financial Overview John Staton – Chief Financial Officer
Q&A Accretive Health Executive Team
Lunch Accretive Health Executive Team
Driving Growth Through Measured Results 5
MARY TOLAN Founder and Chief Executive Officer
Driving Growth Through Measured Results
ACCRETIVE HEALTH OVERVIEW
Driving Growth Through Measured Results 7
• Our primary goal is to help our healthcare clients strengthen their financial stability and deliver better care to the communities they serve
• We use technology to drive best practices and best outcomes
• We work collaboratively with clients to create solutions to existing challenges
• We promote an entrepreneurial culture to encourage innovation and continuously upgrade our functionality with a focus on value creation
Our Guiding Principles
Driving Growth Through Measured Results 8
Founded in 2003, headquartered in Chicago
Win – Win Proposition with our Client Partners
• We are paid based on our results; no upfront costs for Quality or Revenue Cycle Services
• We have partnered with some of the most well-respected health systems in the U.S.
We Drive Measured Results for our Partners
• Since inception we have delivered $1.5 billion in cash benefits to clients
Innovation and Operational Excellence is at the Core of What We Do
• Success of our RCM offering is driven by applying technology and innovative process improvements to drive measurable results
• Seeded Physician Advisory Services in 2009, now a $60 million run-rate business
• Developed unique offerings to improve care quality at lower costs – Intra-Stay Quality and Population Health Management Infrastructure
Accretive Health Snapshot
Driving Growth Through Measured Results 9
Three Distinct Offerings
Proven end-to-end solution that lowers collection costs and
reduces yield leakage
Utilize physician-driven best practices to
improve care quality at a lower cost
Compliance services that maintain detailed audit trails for claims
Physician Advisory Services
Quality and Care Coordination
Revenue Cycle Management
Driving Growth Through Measured Results 10
Revenue Cycle Management
• Large market opportunity, low current penetration
• Proven end-to-end solution with a win-win proposition
• Margin expansion by driving further efficiency and reducing reimbursement leakage
Quality and Care Coordination
• Population Health Management is developing as the next frontier of healthcare
• Lack of provider infrastructure for population health management
• Intra-Stay Quality has broad appeal and could create beachhead into new hospitals
Physician Advisory Services
• Increasing frequency of audits
• Opportunity for continued market share gains
• Expansion into compliance and workflow advisory services
Multiple Growth Drivers in Each Business
Driving Growth Through Measured Results 11
Providers are Getting Squeezed
• Capital constraints
• Significant variance in provision and quality of care
• Declining reimbursement
• Rising bad debt
• Rising costs from medical innovation
• Value-based payment models
• Medicaid expansion/State budget constraints
• Insurance exchanges
• ICD-10
• RAC Audits
• Patient satisfaction scores
• Higher out-of-pocket costs
• Aging population
• Personalized medicine
Patients
Compliance
HealthReform
Economic
Insufficient Resources
Driving Growth Through Measured Results 12
Market Size
% to AH Revenue
Revenue Opportunity
Sources: CMS National Healthcare Expenditures, September 2011 and Definitive HealthcareRCM market scope includes net patient revenue at all hospitals based on CMS 2014 projected expendituresQuality market scope includes all hospital and physician expendituresPAS market scope includes all hospitals with >$250 million in net patient revenue
Market Opportunity
$50Billion
$100Billion
$850Million
0.12%6.25% 5.0%
$1.0 Trillion $1.6 Trillion $ 710 billion
PASQualityRCM
Driving Growth Through Measured Results 13
Revenue Cycle and Quality Require No Upfront Investment from Clients
• Accretive Health is compensated based on Measured Value delivered to clients
Our End-to-End Solution Delivers Superior Results by Combining People, Process and Technology
• People: Well-trained professionals who work directly with the client
• Process: Market-leading best practices to allow seamless workflow at all stages of the revenue collection process
• Technology: Comprehensive tools to measure and improve efficiency for clinical and financial outcomes
Value Proposition
Driving Growth Through Measured Results 14
Pay for measured results
Unparalleled form of collaboration
End-to-end scope
AH makes significant investment of resources
Pay for results not input
A Differentiated Offering
We create operating partnerships that result in distinctly
different outcomes than other models
NOT a consulting firm
Accretive Health Operating Partnership
NOT a software provider
NOT an outsourcing model
Driving Growth Through Measured Results 15
SaaS / Technology-
Supported RCM
Consulting
IT Outsourcing / Non-HC BPO
PayorFollow-Up
Patient Advocacy
Patient Share
LostCharges
Compliance
4-6% (Measured)
Value Proposition
(% revenue lift)
Est. 0.5-1% (Not Measured)
Est. 0.5-1% (Measured)
Est. 0.5-1.5% (Not Measured)
Note: Based on Accretive Health’s estimates
End-to-End RCM Solution Provides Competitive Advantages
Driving Growth Through Measured Results 16
Partnering with Innovative Leaders
Driving Growth Through Measured Results 17
JOE BELLINI Chief Revenue Officer, RCM
MICHAEL ROSENTHAL Senior Vice President, RCM Operations
Driving Growth Through Measured Results
QUALITY AND CARE COORDINATION
Driving Growth Through Measured Results 19
DR. WALTER ETTINGER
TIM BARRYPresident, Quality and Care Coordination
Chief Medical Officer
Driving Growth Through Measured Results 20
Market Overview
1960 1970 1980 1990 2000 2009 $-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
$148 $356
$1,102
$2,851
$4,791
$8,223
$78 $187 $628
$1,185
$1,888
$3,265
5.1%
7.1%
9.0%
12.4%
13.7%
17.6%
3.8%
5.1%
6.6%
6.9%7.8%
9.5%
USA
Hea
lth
care
Sp
end
per
Cap
ita
(US
D)
Hea
lth
care
Sp
end
as
a %
of
GD
P
Source: The Organization for Economic Cooperation and Development (OECD) Health Expenditure Data
2010
Healthcare Spend in the U.S. is Unsustainable…
Driving Growth Through Measured Results 21
IRE
Market Overview
...and Care Quality Outcomes are Sub-Optimal
$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,00070
75
80
85
TUR
MEX
HUN
SLREST
POL
CHL
CZH
ISR
KORSLV
JPN
ITASPA
NZLGRC
POR
ICE
FINGBR
AUSSWE
FRN
BLG
DMK
GER
AUTCAN
SWI
NOR
HOLLUX
USA
Source: OECD Health Expenditure Data
Health Spending per Capita (USD)
Lif
e E
xp
ec
tan
cy
in
Ye
ars
“If home building were like healthcare, carpenters, electricians, and plumbers each would work with different blueprints, with very little coordination.”
–Institute of Medicine 2012 Report on Best Care at Lower cost
Driving Growth Through Measured Results 23
Market Drivers
• Shift away from fee-for-service model to population-based accountability
• Provider performance standards tied to total patient quality and cost
• Systems required to provide insight into total patient medical history
• Requires significant investment and expertise for population-based delivery
Accretive Health Solution
• Turn-key accountability-based model that improves quality of patient care
• Strengthens relationship between hospitals and physicians
• Creates aligned interest between payors, hospitals, physicians and Accretive Health
• Generates significant savings for the healthcare system
Quality & Care Initiative
Driving Growth Through Measured Results 24
Intra-Stay
Quality
PopulationHealth
Quality and Care Initiative
Optimizing
quality and
financial results
within each
episode of care Physician Engagement
Predictive Analytics
Workflow and Decision Support Technology
Optimal Skill Sets for Execution
Optimizing quality
and financial
results across all
episodes of care
Accretive Health
Quality &Care
Driving Growth Through Measured Results 25
Continuous care assessment allows physicians to focus on the sickest patients and coordinate care to improve outcomes
End-to-end Infrastructure for Population Health Management
Sickest and most
responsive patients
Patient-specific care
plans and care
coordination workflow
Real-time clinical
pathway adjustment
Starting point
Driving Growth Through Measured Results 26
End-to-End Infrastructure for Population Health
Sophisticated Business and Payor Contracting Model
Proprietary Data and Technology Platform
Physician Performance and Change Management
Patient Engagement and Real-time Care Management
Continuous R&D and Predictive Performance
Driving Growth Through Measured Results 27
Year 0 Year 1 Year 2 Year 3
Cost and Saving Trend
$1,000
$1,050
$1,158
$1,103
$290
Saving ($ in mm)
$945
$904
$868
10% 18% 25%
Market Trend:
5%ACO
Savings Efficiency
To Accretive Health
To participating providers and payors
(splits may vary)
$70
$220
Projected Cost and Savings Trend
Note: Based on Accretive Health’s estimates
Driving Growth Through Measured Results 28
Oncology Care: A Complex System for the Patient to Navigate
Routine Visit/ Maintenance
CriticalTrial
Infusion TherapyLab
Psych Counseling
Pharmacy
Palliative Care
Nutritional Counseling
Genetic Testing
Imaging
Genetic Counseling
E/RVisit
Oncology Consult
In-patientstayLab
ImagingPCP
Pharmacy Specialist
Other Counseling
Surgery RadiationOncology
Cancer related
Non-Cancer related
Executed at Oncology ClinicMay or may not be executed at Oncology ClinicUsually not executed at Oncology Clinic
Driving Growth Through Measured Results 29
% of Membership % of Total Spend
Cost of Care – Cancer v. Non-Cancer (PMPM) ($)*
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,0002010A
2020E
39% Adjusted+ Growth
Total Expenditures (2010A): $124.5Total Expenditures (2020E adjusted): $157.7+
$10,317.76
$2,708.16
$363.64
Oncology Care: Significant & Growing Costs
<1%4%
<1%4%
99+%92%
National Health Expenditures – Oncology (US) ($ in bn)**
* Source: Milliman, 2010; study of costs for ~14mm commercially-insured lives; assumes 11 mm’s / member; all figures depicted in 2013 $’s** Source: Yabroff, 2011; 2020 figures depicted in 2010 $’s + Adjusted for recent trends in dx incidence, survival, and cost
Driving Growth Through Measured Results
Simplifying a Complex Process
Outside clinic activities: cancer related
Outside clinic activities: non-cancer related
In clinic activities (existing)
In clinic proposed pilot activities
Care coordinationCare coordinator ‘connects
dots’ across full care spectrum to anticipate / respond to care
gaps to drive triple aim
24X7 symptom management
On-call triage helps ensures patient centric, cost effective
solutions to current symptom(s)
End of life/Palliative CareConsistent approach to
EOL discussions to ensure patient fully understands
treatment / quality of life tradeoffs
Evidence-based protocolsDevelopment and consistent
application of best practice treatment protocols
Optimal lab and Imaging utilization
Application of protocols to remove unneeded / redundant utilization
30
5 High Impact Interventions to:• Improve the patient experience• Manage complexity • Enhance outcomes• Reduce cost
Driving Growth Through Measured Results 31
The Need for Intra-Stay Quality
Source: AHD, October 2012
$10,255
$16,533
-$6,278
$6,255
$16,533
-$6,278• Reduced
payments
• Readmission penalties
• Penalties for hospital acquired conditions
• Wage increases
• Investment in new technologies
• Aging population
Source: AHA, June 2012
$4,749Direct Care Cost
Many US hospitals do not recoup the cost of care provided for Medicare beneficiaries
Medical CenterMedPar FY11 Medicare P/L per Patient
Potential FutureMedicare P/L per Patient
Payment Cost Operating Income
-$15,000
-$10,000
-$5,000
$0
$5,000
$10,000
$15,000
$20,000
Payment Cost Operating Income
Driving Growth Through Measured Results 32
Intra-Stay Quality Timeline
ISQ Solution Today Tomorrow
Align Partners • Establish a shared vision• Prepare for changes from Health Reform• Administer payment model and disburse
payments
Analytics and Reporting
• Analyze DRG and service level performance
• Establish system/hospital scorecard and targets
• Introduce real time DRG cost buildup tool• Establish evidence-based plans of care to
reduce variation
Accountability Across the Continuum
• Implement defined plan of care model for high priority patients
• Implement tools and technology to support efficient through-put
• Establish post discharge relationships and communication
• Introduce pre-stay communication, education, and decision support
• Integrate care plans with primary care providers
Operational Excellence and Innovation
• Identify enterprise wide and DRG specific opportunities and implement solutions
• Identify and implement next wave of enterprise-wide and DRG opportunities
• Embed CI behaviors and outcomes into individual performance goals
Driving Growth Through Measured Results 33
DRG X
98 avoidable days per yearfor DRG (16% reduction)
Top performer (shortest LOS)
Bottom performer
Top quartile cut-off (target)
Client
“Avoidable days” calculated as difference between client and bottom of top quartile
FacilityAvg
cases/yrGMLOS AMLOS Median Quartile
Site 1 7 3.44 5.04 4 1
Site 2 34 3.96 4.79 4 1
Site 3 27 4.09 5.06 4 1
Site 4 14 4.22 4.96 4 1
Site 5 31 4.37 5.16 5 1
Site 6 35 4.41 5.77 5 1
Site 7 14 4.48 5.46 4 1
Site 8 12 4.49 5.58 4 1
Site 9 40 4.51 5.49 4 2
Site 10 18 4.56 5.87 5 2
Site 11 64 4.58 5.80 5 2
Site 12 54 4.63 5.50 5 2
Site 13 247 4.66 5.77 5 2
Site 14 128 4.70 5.61 5 2
Site 15 83 4.84 6.22 5 2
Site 16 108 5.09 6.45 5 2
Site 17 35 5.10 6.11 5 2
Site 18 13 5.29 6.63 5 3
Site 19 129 5.31 6.34 6 3
Site 20 64 5.38 6.55 5 3
Site 21 210 5.38 6.90 5 3
Site 22 51 5.58 6.59 5 3
Site 23 43 5.60 6.44 6 3
Client 88 5.60 6.97 6 3
Site 25 55 5.66 6.72 5 3
Site 26 32 5.73 6.75 6 3
Site 27 54 5.75 7.16 6 4
Site 28 21 5.86 7.00 6 4
Site 29 24 5.94 7.43 6 4
Site 30 68 6.21 7.85 6 4
Site 31 46 6.50 8.32 7 4
Site 32 76 6.62 8.26 7 4
Site 33 64 6.63 8.60 6 4
Site 34 6 6.79 8.96 9 4
Total 2264 5.04 6.33
CMS (2011) 5.22 6.61
3.44
4.49
5.60
6.79
1.11 days per case
Database mean 5.04CMS 5.22
GMLOS
x 88 cases per year
=
Our database calculates “avoidable days” opportunity for each DRG
Based on Accretive Health data
Driving Growth Through Measured Results 34
ISQ Objectives
Lower Cost of Care
Reduce costs per inpatient encounter due to optimized resource utilization, correct care setting, and reduced practice variation
Improve Quality
Improve quality metrics (readmissions, core measures, falls, hospital-acquired infections, pressure ulcers, adverse drug events, serious safety events, medication management)
Improve Patient Satisfaction
Improve communication with patients about their condition, their care plan, and expectations for their stay and discharge plan, resulting in higher HCAHPS scores
Improve Reimbursement
Improve value-based purchasing and affordable care metrics resulting in reduced hold-backs and increased pay for above-average performance
Lower Cost of Care
Reduce costs per inpatient encounter due to optimized resource utilization, correct care setting, and reduced practice variation
Improve Quality
Improve quality metrics (readmissions, core measures, falls, hospital-acquired infections, pressure ulcers, adverse drug events, serious safety events, medication management)
Improve Patient Satisfaction
Improve communication with patients about their condition, their care plan, and expectations for their stay and discharge plan, resulting in higher HCAHPS scores
Improve Reimbursement
Improve value-based purchasing and affordable care metrics resulting in reduced hold-backs and increased pay for above-average performance
Driving Growth Through Measured Results 35
• Current episodic care environment offers tremendous opportunity to improve resource utilization, reduce variation in treatment practices and ensure care is provided in the optimal setting
• Competitors have not driven successful or sustainable results
• Accretive believes it can favorably impact length of stay and improve quality through:
• Patient care coordination
• Physician engagement
• Optimal care setting
• Proprietary tools and technology
• Quick deployment upon contract execution
Maximizing Value in Episodic Care
Driving Growth Through Measured Results
PHYSICIAN ADVISORY SERVICES
Driving Growth Through Measured Results 37
PAS provides a range of compliance services to help hospitals with billing classification
• Concurrent or Preemptive Reviews: Proactively manage cases at the point of entry to provide proper classification
• Retrospective or Appeals Management Services
• Fixed-fee pricing model (per case)
• Rapid implementation process
$850 million market opportunity
• We estimate PAS has ~7% market share
• Growth drivers include:
• Changing audit criteria and regulations
• Increased frequency of formal audits
PAS Overview
Driving Growth Through Measured Results 38
Our priority is to identify misclassified patients, and to protect compliant revenue
PAS Value Proposition
Low
High
ComplianceRev
enu
e in
teg
rity
Low
ACCRETIVE PAS® OBJECTIVE• High Compliance• High Revenue Integrity
OVER CLASSIFYING• Low Compliance• Revenue At Risk
PROBLEMATIC• Low Compliance• Low Revenue Integrity
UNDER CLASSIFYING• Perception of High Compliance• Lost Revenue
Driving Growth Through Measured Results 39
The decision to classify a patient as inpatient versus observation for billing purposes is based on complex medical judgment
Accretive’s licensed physicians consider a number of factors when making their billing classification recommendations to our clients’ medical staff:
• Patient’s medical history and current medical needs
• Types of facilities available to outpatients and inpatients
• Relative appropriateness of treatment in each setting
• Severity of signs and symptoms
• Medical predictability of adverse events
Process - The Classification Decision
Driving Growth Through Measured Results 40
PAS Value Proposition
Similar to our other businesses, PAS provides superior people, process and technology to deliver value
• Only licensed
physicians
• Thorough training on
CMS rules and
regulations
• Workflow focused on
service levels by
patient location
• On-site process
improvement
discussions with
hospital staff
• Automated referral management
• Integration with hospital EMR and/or Case Management suites
• Operational reports
• Monthly reports highlighting risk areas
• Real-time analytics – key stats and metrics
• Case level detail with drill down capabilities
• End-of-quarter reconciliation report
People Process Technology
Driving Growth Through Measured Results