UNIVERSITY MEDICAL CENTER Tucson Arizona Presentation to Arizona

UNIVERSITY MEDICAL CENTER Tucson, Arizona Presentation to Arizona Board of Regents January 2007

Accomplishments • • First Magnet Hospital in Arizona Southern Arizona’s Sole Level One Trauma Center 1 to 4 Nurse to Patient Ratio The most recent U. S. News and World Report Publication, America’s Best Hospitals, lists UMC among the top 50 hospitals in the nation for the following programs (July 2006): – – – – Heart and Heart Surgery (ranked 16 th in the nation) Cancer (22 nd) Neurology and Neurosurgery (22 nd) Respiratory Disorders (20 th) Urology (26 th) Kidney Disease (39 th) Orthopaedics (41 st) Digestive Disorders (45 th) 1

Accomplishments UMC is one of two Arizona Hospitals to be recognized by Solucient as one of the nation’s Top 100 Hospitals. The Solucient 2005 100 Top Major Teaching Hospitals – – – – University Medical Center Denver Health Medical Center Evanston Northwestern Healthcare University of Chicago Hospitals Advocate Lutheran General Hospital Beth Israel Deaconess Medical Center University of Michigan Hospitals & Health Centers St. John Hospital & Medical Center Mayo Clinic—Rochester Methodist Hospital Summa Health System University Hospitals of Cleveland Geisinger Medical Center Vanderbilt University Medical Center Scott and White Memorial Hospital University of Virginia Medical Center Tucson, AZ Denver, CO Evanston, IL Chicago, IL Park Ridge, IL Boston, MA Ann Arbor, MI Detroit, MI Rochester, MN Akron, OH Cleveland, OH Danville, PA Nashville, TN Temple, TX Charlottesville, VA 2

Strategic Plan • Emphasis on Five Pillars (Oncology, Cardiology, Trauma/ED/OR, Pediatrics, Transplant) - Continuous Quality Improvement and Community Service - Sustained Earnings - Improved liquidity - Stabilized investment portfolio returns • Increased Market Presence through - Joint ventures - Targeted Acquisitions - Philanthropy 3

Growth in Average Daily Census UMC has experienced a 34% increase in volumes since fiscal year 2001. 4

Key Statistics Key Driver: • Average Daily Census Projected (Achieved): – – FY 05: FY 06: FY 07: FY 08: 272 (272) 281 (279) Inpatient volume 288 (290 through December) growth is limited by 300 including 9 from CDU capacity constraints • We are turning away patients – Seasonal fluctuations in volumes – Semi-private room utilization impacted by gender and isolation requirements 5

A Brief Recent History • FY 2002 – 2003 UMC undertook the following – Became Southern Arizona’s Sole Level 1 Trauma Center – Adopted a 1: 4 nurse to patient ratio – Reprocessed our revenue cycle/renegotiated major payor contracts • FY 2004 – Invested in a new ICU – New Cancer Center undertaken – Capacity challenges are on the horizon • FY 2005 – – • Revenue cycle efforts provide earnings growth Undertake patient flow process enhancement to improve effective capacity Begin facility expansion planning Receive favorable settlement of Medicare DSH FY 2006 – Cancer Center construction underway (opened January 2007) – Increasing costs for labor, employee medical and supplies outpace payor rate increases – UMC projects reaching effective full capacity in FY 2008 – Financing obtained for facility expansion 6

Growth in Revenues and Expenses ($ in millions) UMC has experienced a 70% increase in revenues since fiscal year 2000. Annualized 7

Financial Results ($ in 000 s) 2004 2005 2006 Dec YTD 2006 YTD 2007 TOTAL REVENUES $337, 386 $372, 813 $406, 697 $197, 881 $217, 999 TOTAL EXPENSES 322, 631 350, 737 389, 064 192, 466 211, 332 Operating Results $ 14, 755 $ 22, 076 $ 17, 633 $5, 415 $6, 667 Net Income $ 12, 311 $ 22, 911 $ 23, 141 $9, 363 $13, 754 Budgeted Operating Results $500 $10, 600 $17, 000 $8, 289 $6, 470 8

Financial Ratios *UMC carries a rating of Baa 1 from Moody’s Investor Services and a rating of BBB+ from Standard and Poor’s 9

Financial Ratios *UMC is required to maintain a Debt Service Coverage ratio of no less than 1. 1 10

QUESTIONS 11