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Presenters:

Robert GoodmanManaging Partner

The Mansfield Group

Peter MyhrePresident

MarCap Corporation

ELA Healthcare Finance Summit

September 13-14, 2005

OutpatientAmbulatory Care

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Outpatient Ambulatory Care Session Agenda

Overview: Outpatient Ambulatory Care MarketRobert Goodman

Financial Health of Market ParticipantsPeter Myhre

How Providers Are Obtaining EquipmentRobert Goodman

Structures That Work BestPeter Myhre

Question and Answer Session

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Overview: Outpatient Ambulatory Care Market

Outpatient Ambulatory care services – 35 years in the making

Trends in ambulatory care services

Growth remains strong

Ownership continues to be varied – physicians, management companies and/or hospitals

Competition — saturated markets

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Overview: Outpatient Ambulatory Care Market

Outpatient ambulatory care market

Diagnostic imaging – MRI, CT, PET/CT as well

as other imaging modalities

Surgery – single specialty and multi-specialty centers

Treatment – radiation therapy, dialysis and physical therapy

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Financial Health of Market Participants

Provider (borrower) profile

Typically single purpose entities established by physicians, management- development companies and hospitals

Usually limited liability companies; often joint ventures between two or three of the parties noted above

Generally stand-alone facilities and most often start-ups

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Financial Health of Market Participants

Provider cash flows

Revenues = patient procedure/scans x related

reimbursement

Expenses – largely fixed; debt service and staffing are the most significant outflows

Profitability – once breakeven revenue is exceeded, majority of incremental revenue drops to the bottom line

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Financial Health of Market Participants

Risk considerations

Commitment - equity and guarantees

Patient referrals – the right physician specialties

Self-referral restrictions – state and federal

Payor risk – contracting and reimbursement

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Financial Health of Market Participants

Manufacturers/vendors profile

Manufacturers and vendors vary significantly in financial strength

Dominant full line manufacturers are Siemens,

GE, Philips and Toshiba

Variety of single line/specialty manufacturers

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Financial Health of Market Participants

Evaluating vendor risk

Strength of business - financial statements,

and installed base

Equipment – reliability and operating costs

Sales force – direct and distribution

Service/repair – quality and capability

Potential fraud – management and

motivations

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How Providers Are Obtaining Equipment

Equipment financing options and project financing options

Business Plan – business case or rationale behind equipment purchase or project

Equipment:– Cash (equity)– Capital leases and loans

– FMV leasing – Per-use

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How Providers Are Obtaining Equipment

Project:– Cash (equity)

– Capital leases and loans

– FMV leasing for major equipment (MRI, PET, linear accelerators, etc.)

– Working capital lines of credit, primary and back-up (surgery centers vs. diagnostic imaging

centers)

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How Providers Are Obtaining Equipment

Debt sources

Leasing companies

Captive finance organizations (e.g., Siemens and GE)

Local and regional banks

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Structures That Work Best

Lease Structures

60 to 84 month terms

Payment deferral until reimbursement ramps-up

Interim funding

Equipment and tenant improvements

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Structures That Work Best

Differentiating products

Working capital

Acquisition funding

Physician equity financing

Differentiating terms

Limited to no personal guarantees

Guarantee burn off

No covenants

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Structures That Work Best

Risk management terms

Blanket lien including A/R

Subordination of payments to owners

Covenants before making distributions

Assignment of tenant’s rights

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Peter MyhreMarCap Corporation200 West Jackson, Suite 2000Chicago, Illinois 60606800.621.1677www.marcapcorp.com

Robert GoodmanThe Mansfield Group6 Oak Tree CourtWestampton, NJ 08060609.267.0990www.mansfield-group.com