Insight Report2016 Annual Report

2016 - What’s In the Pages That Follow

March31st,2017

DearFriends,

PleasefindtheenclosedCVPMemberNetwork2016YearinReview.Inthepagesthatfollow,youwillfindreportsonrevenue,transaction,andnewclientdynamicscomparedto2015.

Asalways,pleasedon’thesitatetocallshouldyoueverhaveaquestionorneedregardingthisoranyInsightreport.

Here’stoahealthyandprosperous2017forallofourMemberHospitals.

BestRegards,

-TravisMeredithTravis.meredith@cvpco.com(302)690-2187

2016

The Data….

Revenue Dynamics vs. Full Year 2015

In2016,revenuedynamicsweregenerallystrongacrossthestudypopulation.Acrossthegroup,most(25/30)membersreportedgrowthcomparedto2015.Inadatasetofalmost$68Mofhospitalrevenue,theaverageincreaseinrevenuewas6%andandthemedianincreasewas5.7%.

10.5%

2.1%7.0%

6.7% 7.3%

15.9%

28.0%

-2.3%

29.5%

0.4% 3.8% 5.7%

-0.2%

2.6% 3.2%7.5% 7.9% 10

.9%

4.8%

-7.1%

8.7%

8.6%

5.1%

-3.1%

1.7%

-2.8%

5.8% 9.

3%17.5%

-15.2%

8.7%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

C1

C2

C3

C4

C5

C6

C7

C8

C9

C10

C11

C12

C13

C14

C15

C16

C17

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C19

C20

C21

C22

C23

C24

C25

C26

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C28

C29

C30

TOTAL

Transaction Dynamics vs. Full Year 2015

2016provedamoderatelysuccessfulyearfortransactiongrowth,anindicationthatpracticesgrewbothbyvolumeandpricingdecisions.Aslightlylessermajorityofpractices(20/30)observedincreasedvolumegrowthwiththeaveragegrowthrateof3.7%andthemediangrowthrateofandmedianrateofgrowthrateof2.7%.

3.4%

10.0%

3.7%

-0.1%

3.4%

12.7%

23.6%

-1.2%

27.4%

-0.4%

6.5%

2.1%

0.7%

-5.8%-0.3%

1.9% 4.5% 6.5%

-1.1%

-4.6%

2.5% 4.1%

11.6%

2.7%

-2.7%

-6.4%

7.5%

2.7%

8.0%

-13.2%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

C1

C2

C3

C4

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C6

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C8

C9

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C11

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C13

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C15

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C20

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C22

C23

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C25

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C27

C28

C29

C30

New Client Dynamics vs. Full Year 2015

NewclientacquisitionrateshavealwaysvariedconsiderablyacrosstheMemberNetworkreflectingabroaddiversityinmaturityofeachbusinessandlocaldemographicimpacts.

Fortheyear,only13of30practicesreportedanincreaseinthenumberofnewclients,suggestingthepossiblematurationofmanyclientbasesandtheneedforpracticestofindnewwaystoattractclientsandpatientstotheirbusiness.Themedianchangefortheyearwas-1.9%andtheaveragewas1.3%

9.3%15.2%

-17.4%

-4.6%

-17.1%

5.6%

18.2%

1.4%

14.6%

-5.6%

42.0%

23.6%

-13.9%

-26.0%

5.2%

-7.3%

6.6%

-5.9%

-10.2%

42.1%

28.1%

1.7%

-8.7% -2.6%

-16.5%

-23.5%

16.0%

-1.2%

-13.0%

-18.3%

-0.9%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

C1

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C3

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C6

C7

C8

C9

C10

C11

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C13

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C15

C16

C17

C18

C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

TOTAL

First Quarter (Q1) 2016

The Data….

Revenue Dynamics vs. Q1 2015

AVERAGE:9.6%MEDIAN:7.5%LOW:-5.3%HIGH:41.6%

1.0% 2.1%7.6%

13.6%

6.9%

14.8%

41.6%

14.2%

24.0%

3.0%

-0.7%

13.0%

4.3% 8.1%

-1.5%

14.4%

6.3% 7.9%

5.2%

-5.3%

15.8% 19.6%

7.5%

-0.4%

4.5% 8.0%

5.7%

22.8%

22.4%

2.0%

-10%

0%

10%

20%

30%

40%

50%

C1

C2

C3

C4

C5

C6

C7

C8

C9

C10

C11

C12

C13

C14

C15

C16

C17

C18

C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

Transaction Dynamics vs. Q1 2015

-2.1%

17.2%

0.5%

-2.6%

4.3% 8.

2%30.2%

23.5%31.8%

6.1%

2.5% 3.2% 5.0% 5.3%

-2.6%

6.4%

2.4%

9.6%

2.3%

-4.3%

6.7%

5.8% 9.

7%3.3%

1.3%

-4.6%

6.0%

1.4%

9.0%

-15.5%

5.5%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

C1

C2

C3

C4

C5

C6

C7

C8

C9

C10

C11

C12

C13

C14

C15

C16

C17

C18

C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

TOTAL

AVERAGE:5.7%MEDIAN:4.7%LOW:-15.5%HIGH:31.8%

New Client Dynamics vs. Q1 2015

26.2%

18.0%

-27.3%

-0.4%

7.4% 10.4%

12.5%

7.9%

-52.2%

4.3%

16.9%

21.4%

-12.2%-3.5%

-0.5%

-9.2%

3.9%

-16.4%

-13.2%

-20.9%

-21.1%

14.2%

8.3%

-8.3%

-22.3%

-9.3% -2.1%

30.5%

4.0%

-48.3%

-2.6%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

C1

C2

C3

C4

C5

C6

C7

C8

C9

C10

C11

C12

C13

C14

C15

C16

C17

C18

C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

TOTAL

AVERAGE:-2.7%MEDIAN:-0.5%LOW:-52.2%HIGH:30.5%

Second Quarter (Q2) 2016

The Data….

Revenue Dynamics vs. Q2 2015

13.8%

6.8% 8.6%

2.7%7.3%

15.1%

36.2%

-2.5%

13.6%

-3.5%

17.7%

11.3%

-2.7%

3.5% 6.1%

-1.7%

16.9%

1.7%

-1.1%

-6.6% -0.8%

6.6% 8.8%

-5.6%

3.8%

-10.9%

3.0%

19.0%

14.3%

-20.5%

4.2%

-30%

-20%

-10%

0%

10%

20%

30%

40%

C1

C2

C3

C4

C5

C6

C7

C8

C9

C10

C11

C12

C13

C14

C15

C16

C17

C18

C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

TOTAL

AVERAGE:5.4%MEDIAN:5.0%LOW:-20.5%HIGH:36.2%

Transaction Dynamics vs. Q2 2015

3.9% 4.2% 6.2%

-0.5%

0.4%

11.1%

26.4%

6.9%11.7%

-7.4%

5.6%

3.6%

-5.3%

0.4% 2.4%

-1.0%

15.0%

2.5%

-4.9%

-5.2%

-5.9%

5.5%

17.3%

9.0%

-3.2%

-15.6%

4.0% 5.7%

3.7%

-18.3%

1.9%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

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C2

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C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

TOTAL

AVERAGE:2.6%MEDIAN:3.6%LOW:-18.3%HIGH:26.4%

New Client Dynamics vs. Q2 2015

-9.1%

15.5%

2.0%

-15.6%

1.3%

-2.4%

16.7%

-9.5%

-1.2%

-7.0%

30.9% 58

.2%

-15.3%

-28.0%

22.9%

-9.7%

-2.8%

-6.0%

24.1%

175.5%

24.7%

4.1%

-3.9%

-21.3%

-19.4%

-35.7%

9.5%

-14.5%

-15.5%

5.6%

2.7%

-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

C1

C2

C3

C4

C5

C6

C7

C8

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C10

C11

C12

C13

C14

C15

C16

C17

C18

C19

C20

C21

C22

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C24

C25

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C27

C28

C29

C30

TOTAL

AVERAGE:5.8%MEDIAN:-2.6%LOW:-35.7%HIGH:175%

Third Quarter (Q3) 2016

The Data….

Revenue Dynamics vs. Q3 2015

10%

-2%

2%9%

7%13%

25%

-9%

26%

-1%

-5% -3%

3%0%

3%7%

4%19%

6%-13%

17%

3%0%

-4% -2%

-4%

6%1%

17%

-18%

4%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

C1

C2

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C24

C25

C26

C27

C28

C29

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TOTAL

AVERAGE:3.9%MEDIAN:2.9%LOW:-17.8%HIGH:26.5%

Transaction Dynamics vs. Q3 2015

4.4%

9.7%

2.4% 4.4%

1.8%

13.7%

24.9%

-17.7%

25.5%

-4.7%

4.5%

2.3%5.8%

-16.6%

0.8%

0.5%

0.5%

6.6%

-3.3%

-8.4%

10.0%

-1.0%

10.5%

-1.8%

-5.5%

-4.8%

11.5%

-3.1%

9.4%

-8.1%

1.8%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

C1

C2

C3

C4

C5

C6

C7

C8

C9

C10

C11

C12

C13

C14

C15

C16

C17

C18

C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

TOTAL

AVERAGE:2.5%MEDIAN:2.0%LOW:-17.7%HIGH:25.5%

New Client Dynamics vs. Q3 2015

7.1% 13.0%

-22.4%

12.7%

-36.3%

11.9% 27.1%

-15.8%

75.7%

-1.6%

100.0%

4.8%

1.3%

-33.2%

-9.1%

-14.5%

19.3%

12.7%

-12.6% -7.9%

85.9%

-5.2%

-15.7%

1.8%

-17.0%

-25.9%

32.5%

-14.7%

-25.7%

-20.9%-1.8%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

C1

C2

C3

C4

C5

C6

C7

C8

C9

C10

C11

C12

C13

C14

C15

C16

C17

C18

C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

TOTAL

AVERAGE:4.2%MEDIAN:-3.4%LOW:-36.3%HIGH:100%

Fourth Quarter (Q4) 2016

The Data….

Revenue Dynamics vs. Q4 2015

17.9%

2.0%10.5%

3.1% 8.4%

20.1%

12.6%

-9.4%

55.6%

3.3% 4.5%

2.9%

-5.1% -0.3%

5.3%12.1%

4.4%

16.8%

9.9%

-3.3%

4.5% 6.8%

4.7%

-2.1%

0.1%

-2.5%

8.9%

-1.4%

16.4%

-22.5%

6.5%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

C1

C2

C3

C4

C5

C6

C7

C8

C9

C10

C11

C12

C13

C14

C15

C16

C17

C18

C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

TOTAL

AVERAGE:6.1%MEDIAN:4.5%LOW:-22.5%HIGH:55.6%

Transaction Dynamics vs. Q4 2015

7.2% 9.6%

5.9%

-2.0%

7.3%

17.6%

14.7%

-11.6%

42.3%

5.5%

13.5%

-0.3%

-1.8%

-11.4%

-2.0%

2.2%

0.9%7.3%

1.7%

-0.4%

0.3%6.5% 9.0%

0.6%

-3.4%

0.2%

8.5%

6.9% 10.3%

-10.9%

3.9%

-20%

-10%

0%

10%

20%

30%

40%

50%

C1

C2

C3

C4

C5

C6

C7

C8

C9

C10

C11

C12

C13

C14

C15

C16

C17

C18

C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

TOTAL

AVERAGE:4.5%MEDIAN:3.8%LOW:-11.6%HIGH:42.3%

New Client Dynamics vs. Q4 2015

16.9%

15.3%

-21.0%

-14.0%

-40.5%

2.8% 14

.5% 27.8%

100.0%

-16.8%

29.3%

15.4%

-27.0%

-38.0%

12.6%

5.4%

5.3%

-13.6%

-29.3%

17.5% 28.8%

-4.8%

-16.9%

30.3%

-4.4%

-20.3%

20.3%

7.0%

-12.8% -6.7%

-2.1%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

C1

C2

C3

C4

C5

C6

C7

C8

C9

C10

C11

C12

C13

C14

C15

C16

C17

C18

C19

C20

C21

C22

C23

C24

C25

C26

C27

C28

C29

C30

TOTAL

AVERAGE:2.8%MEDIAN:4.0%LOW:-40.5%HIGH:100%

In Summary¡ 2016provedtobereasonablysuccessfulformostgroupmembers.Forthethirdstraight

yearinarow,mostkeyperformanceindicatorsendeduponthepositivesideoftheequation.

¡ Revenue– Revenuegrowthincreasedthroughouttheyearforthemajorityofmemberhospitals.Totalrevenuefortheentirestudypopulationwascloseto9%withthemedianvaluejustunder6%.¡ Thefirstquartershowedthemostaggressivegrowthfortheyearwiththemedianvaluejustunder8%.¡ Growthinthesecondquarterseemedtoslow(medianvalue5%)comparedtopriorperiodandthen

furtherintothethirdquarter(medianvalue2.9%).¡ Thefourthquarterseemedtorecoversomewhatasmediangrowthwasreportedat4.5%overprior

period.

¡ Transactions– Althoughfollowingsimilarseasonality,transactionvolumedidnotkeeppacewithpracticerevenuedynamics.Fortheyear,mediangrowthdidnotexceed3%acrossthestudypopulation.¡ Peaktransactiongrowthwasobservedinthefirstquarterat5.7%.¡ Significantvolumeslowingwasobservedintheremainderoftheyearwiththesecond,thirdandfourth

quartersseeingtransactiongrowthlessthan4%overprioryear.

¡ NewClients– Newclientgrowthvalueswerehighlydiversewithmanypracticesreportingsignificantgrowthinnewclientnumberswhileotherreportedsubstantialcontractionofnewclientvalues.Fortheyear,thetotalpopulationfinishedflatwithnewclientnumbersjustunder1%lessthan2015.

¡ Movinginto2017,wewillwatchfornewclientnumberdynamicsasanindicatorifthemarketisseeingabroadermaturationandreductioninthetotalpoolofnewclients.

Appendix 1: Policies: CVP Member Network Management Group Antitrust Compliance Policy

ThepurposeoftheMemberNetworkManagementGroupistoaggregateanddisseminaterelevant,timely,localindustrytrendsandmarketdynamicsinordertobetterserveandmeettheneedsofourclientsandpatients.Membersshallnotenactorenforceanyrulewhichrestricts,limits,orinterfereswithparticipantsintheirrelationswitheachother,intheirdoctor/patient/clientrelationshipsorintheconductoftheirbusinessinthefollowingareas.ParticipatingMembersandtheirrepresentativesshallnot:

¡ Fix,control,recommend,orsuggestfeeschargedforservices.¡ Fix,control,recommend,orsuggestthecompensationofferedbyother

participants.¡ Basedues,fees,orchargesoncommissions,listedprices,orsalespricesonanother

participant’spricingstructure.Feesandchargesshoulddirectlyrelatetothecostsincurredinbringingservicestoclients.

¡ ProhibitordiscouragecooperationbetweenparticipantsandotherveterinaryprofessionalsthatdonotparticipateintheMemberNetworkManagementGroup.

¡ Prohibitordiscourageparticipantsfromparticipatinginpoliticalactivities.¡ Thesepolicyprohibitionsaresubjecttoandlimitedbyapplicablestatutes,

ordinances,andgovernmentalregulations,toagreementsenteredintobytheMemberNetworkManagementGroupandanagencyofgovernment,andtofinaldecreesofcourtsoradministrativeagencies.

¡ Version1.6– September15,2016