Shriners Hospitals For Children

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Dustin Ross
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Shriners Hospitals For Children Pediatric Specialty Hospitals Douglas E. Maxwell President and CEO Note: This message contains some very important thoughts.

1 Shriners Hospitals For Children Pediatric Specialty Hospitals Douglas E. Maxwell President and CEO Note: This message contains some very important thoughts. Please try to read its entirety Subjects: My thoughts about continuing to serve our philanthropy as your President The Philosophy of our Budget New Affiliation thoughts for our Spokane Hospital and others continue to evolve St. Louis Hospital Dedication Mayo Clinics looking to bring some new pediatric specialty to our Twin Cities Hospital Los Angeles Hospital groundbreaking A new Game Changer A differentiator in our Orthotic & Prosethetic (O & P) labs

2 Continued system expansion of the new low radiation EOS machines 3 new International Outreach Clinics recently held... Taking our humanitarian mission to where the kids live My Dear Fellow Representatives and Friends, With the Houston Imperial Session just around the corner, I wanted to get one more update to you on the recent news of your Shriners Hospitals for Children. As this years State of the Hospitals report may have time constraints out of my control. I d like to cover a few more subjects in this message than I normally would for a pre-session Chairman s Message. I don t think it would be a stretch to say that during these last 6 years, Our beloved philanthropy has successfully weathered the unfortunate position we found it in during the Summer of of a cut back of services and proposed hospital closures And that collectively we have all proudly returned Shriners Hospitals for Children to its position of prominence in the medical community and is back to being as good as it has ever been. I hope we continue to always look forward.to be visionaries to be optimists... to Stay the Course. Since I began writing this message, I believe we have all received a communication from this years Imperial Potentate, stating that he is seeking the Office of President of the hospitals Chairman of the Board of Trustees. My thoughts about continuing to serve as your President When I was first elected by all of you in 2009, it was at a very low point for our hospital system. Our endowment fund had fallen from over $8.5 billion to under $4.8 billion and was continuing a downward spiral due to spending $280 million per year of principal to pay the bills... and We had proposals to not reopen our great Galveston Burns hospital that had been closed since the 2008 hurricane and to close seven of our smaller orthopedic hospitals. I hoped we could right this ship. I accepted the Challenge.

3 I wanted to try to incorporate into our hospitals, some good sound business principles that I had learned both from owning and operating a successful manufacturing company for 35 years and from what I learned getting my Master s of Business Administration Degree in 75. Since 2009 many new ways of running our hospitals I believe we have made meaningful changes in the way we do business. Our Joint Boards have initiated new directions to be able to sustain longevity. We have established as a working guideline, balancing the budget each year using only normal revenues vs. normal expenses. No more overspending as a general course of action. Because our 22 hospitals have an autonomy that needs to be taken into account to make any meaningful changes to the system, we have set out to bring everyone into the thought process to be inclusive of all thoughts. Those new directions were referred to as the Strategic Task Force. A few years ago, your Trustees and Directors began a path to re-establish the entire senior leadership team in Tampa. You were first introduced to them 3 years ago at the Session in Charlotte. This new team, now referred to as the Home Office, has developed a system-wide Metric Analysis. This is a verifiable and systematic tool for measuring the cost effectiveness of each hospital. It allows our management team to account for the variances of the individual hospitals and its patients. It is another of our new tools that is bringing us further financial strength and helping us to protect the endowment. Our new management team is serving us very very well. Our new Leadership Philosophy. When you have good people working for you, encourage them to be creative within established thought guidelines. Let them lead. Don t micro manage those you want to come up with new and better ways to do business. Don t stifle their creative thoughts. The same philosophy holds true with each of our 22 Board of Governors. These are very talented businessmen. We also want them to be creative in thought in finding new and better ways to run their hospital. With that thinking, we have opened many new paths of communications between the national boards, senior staff, and the 22 boards of governors. A new rapport has been developed between Home Office and each hospital s leadership team. We all believe we are now truly going in a better direction to be the best this philanthropy has ever been.

4 No longer are we overstaffed at our hospitals. We are now right-sized everywhere to meet the existing Clinical Needs of that location. As we continue to get our financial house into a stronger position each year, we have not forgotten about our Research mission. We have been re-growing that budget every year since we began to see the light at the end of the tunnel a few years ago. And we are continuing to keep our system at the top of the Specialty Hospitals medical community with the continued acquisition of additional new State of the Art equipment that we are becoming recognized for. (These are referenced further down in this message) This is the Renaissance of our Philanthropy. Our next goals To continue to completely balance the budget we still have further to grow our patient base and we still have additional new affiliations to create and finalize, to take us far into the future. During the 94 years of Shriners Hospitals, there have only been 15 Presidents. 4 of the 15 served for only 1 year. The other 11 Presidents have served an average of over 8 years each. It has been said that our forefathers wanted to keep the Masonic tradition of changing leaders every year away from the business of running and operation of our hospitals. They felt the presidency was not meant be a political position but an actual hands on position as the CEO and leader of our 6,000 employees. Final thoughts These last 6 years, I have attempted to keep each of you informed of all of these steps and their progress through these hand-written messages. Each of these messages has always been vetted by at least 6 other board members and senior staff for content, accuracy and tone We have tried not to leave anything out that you need to know. My Passion and Philosophy for the Shrine Mission To have us continue to focus on our Operational Efficiencies and long term financial strength So as to allow for our beloved fraternity, Shriners International,

5 the continued desire to reaffirm and recommit to the heart of the Shrine Mission the Care of Children. I have attempted to be that steady hand on the tiller Of our very Large Ship of Care. I hope you feel as good about where we have come during these last 6 years as I do. I would appreciate being allowed the honor to keep working on everything we started back in 2009 and to continue to serve you and our kids as your President. The Philosophy of the Budget Periodically, we will hear a comment Can t we Balance the Budget this year and Can we afford to take care of children beyond our typical Care Areas? For the last 6 years, we ve all worked very hard getting our hospitals back to where we want them. without leaving any location where we provide care. The Goal: To keep the high level of care we have been providing without spending the principal of the Endowment so as to survive long term. This has been quite a balancing act. Fortunately, with the modifications of the By-laws in 2009 giving us the tools needed we have done the balancing act and are almost there. Any business finding itself in this dilemma as we did in 2009 has two choices. Either cut costs or find more revenue. Shriners Hospitals has been doing both. The Revenue side: We have two groups of patients Group 1: These are the children whose parents have commercial insurance and come to Shriners because they know we can provide the best care. Group 2: These children come to us with some form of Government assistance to cover their health cost. This is best known as Medicaid.

6 The Mission side: Again we have two groups here Group 1: These are the children who have fallen through the cracks, such as the Working poor and those who have nothing available to them because of family conditions. Our stated Policy to help those regardless of the families ability to pay Group 2: These are the children who live beyond the borders of Canada and the United States. The Mission of Shriners Hospitals for Children, is to help children in need regardless of their insurance status, whether they are uninsured or underinsured and regardless of where they live. For Budget Planning purposes, the Revenue group allows us to help the Mission group again the Balancing Act referred to earlier I know none of us ever want to forget The Mission Children". Our senior staff has been advising your joint boards, to not go too aggressively at the reducing expenses part of balancing the Normal revenues vs. Normal expenses business plan as this would put undo stress on some of our hospitals. This staff advice is based on a sound philosophy. As long as we are continuing to have good growth and good income from the Endowment Fund, we should allow for a planned reduction of the annual deficit. This rationale and philosophy can be quickly reversed if we begin to see another Market Correction as we did in 2003 and We are working on a new Affiliation for Spokane As with all of our hospitals in this new world of The Affordable Care Act, known as ObamaCare. we are having to strengthen affiliation agreements where they already exist and seek new ones where they don t. Our Senior Staff has just had a very successful meeting with leaders from the largest healthcare system in the Pacific Northwest. A new relationship with this organization has great potential for the expansion of services and our hospitals continued leadership in the area.

7 The mission of this group is very similar to ours in many respects but most particularly in treating those who would not otherwise receive care if not for them. A portion of their mission reads. Especially the poor and the vulnerable, through our compassionate service. This aligns very nicely with our hospitals focus. With them not providing pediatric orthopedic services as part of their services we believe a partnership with our Spokane Hospital is an excellent path for the future. Their philosophy is to grow by optimizing expert-to-expert capabilities without duplicating resources unnecessarily. This multidisciplinary approach allows patients with many varied health issues to receive the optimal care in the most timely and efficient way possible. This can also reduce the families travel burdens. At some point in the future we may need to consider moving our operations closer to each other. Currently, their facilities are less than a half of mile from our structure. In addition to taking better care of the kids it will also provide additional opportunities for new clinical research and medical education. This is truly a great opportunity with more to come in the future. Shortly after the Session ends, the two organizations are looking to have a CEO to CEO meeting. This strategy of having the two CEO s sit across the table from each other with each organizations senior staff on both sides, has been very successful for us at Cincinnati s Children and the University of Kentucky s Medical School in Lexington. In both cases, negotiations were getting bogged down in the minutia. It took both CEO s agreeing that this would be good for both organizations and jointly making the statement Let s make it happen and within a limited definite time. If this newly formulated planned affiliation approach comes to fruition, it should establish our Spokane hospital as the interior Northwest s premier Pediatric orthopedic facility. St. Louis Dedication On Sunday, May 17 th, we had a beautiful day to dedicate the first of our new Full Services Models of Care since The St. Louis Hospital is a very efficient, right sized, Full Service hospital with 12 inpatient beds in 6 rooms, family quarters in the building, and a very high tech research lab.all within 90,000 sq. ft. Our kids were the MC s of the event and did a beautiful job. Over 2200 Shriners, families, and guests attended.

A very well done to all involved in putting on this event. Mayo Clinics and our Twin Cities Hospital During the last number of years, Mayo Clinics headquartered in Rochester, MN.

8 A very well done to all involved in putting on this event. Mayo Clinics and our Twin Cities Hospital During the last number of years, Mayo Clinics headquartered in Rochester, MN. has been a very good friend of our Twin Cites Hospital. Our hospital is located in a very prominent place near downtown Minneapolis. Mayo Clinics would like to bring their pediatric sports medicine and pediatric endoscopy to our hospital on River Road so that it is closer to the larger population of young people they serve in the greater Minneapolis/St. Paul area. This will be a very positive step in the ongoing relationship between our hospital and the excellent Mayo Care group. Who knows what other disciplines of care they might like to do this for. Also in early May we were able to finalize the Mayo Clinic Care network agreement with Mayo Clinics. On May 26 th, we had the Mayo Clinic senior management join the SHC leadership at our Tampa headquarters to share the podium for the public Press Release of the great news. It was a very nice step towards new levels of Shriners Hospitals Care Excellence. Here is a brief re-print of the details that were mentioned in my Spring Message This new relationship with Mayo will allow Shriners Hospitals for Children to continue to further transform our children s lives in a very positive way through a reference library called Ask a Mayo Expert. This is a huge excellent database of prior thoughts and proven procedures for the most complex of operations. Our physicians will also be able to conduct e-consults with Mayo Physicians. This virtual tool will allow Shrine physicians to be able to connect with Mayo physicians on our children s very complex conditions. This is very valuable consultation support available to our doctors, on a voluntary basis, if

9 they chose to add it to their tools of Care. This will be good for our kids Los Angeles Hospital groundbreaking On May 27 th we had a beautiful groundbreaking in Pasadena California for our 2 nd new construction Out-patient Surgical Center. Just as in St. Louis, the kids of the hospital were the MC s to keep all of the speakers on schedule. It had a Hollywood awards show touch to it it was cute. For the next 18 months, our great site will keep changing appearance month by month. As was mentioned at the ceremony.after all of the years of planning, this is the Fun Part. To see the Fruits of our Labors happening before our eyes. 3 new International Outreach Clinics In the world of the 1920 s that our forefathers lived, no one had medical insurance and many children went without care In the United States and Canada that world is no longer. There are very few children who have no options for care anymore. Today, every child has at least, some level of government assisted reimbursed care available. Even the Not for Profit hospitals across the street that used to send us these children as charity care, now are pursuing these kids into their system to help them balance their budget. Shriners have always wanted to help the children that society has forgotten. That need still exists in a major way beyond our borders. We are looking to help where we can closer to where the child lives as we did in Tijuana As we continue to move closer to having our financial house back in a long-term stable position and as we continue to have the endowment fund back to a healthy

10 stable position. We are looking to see what we can do to help children in some countries where the needs are greatest. Primarily, we are doing this through new Outreach Clinics where we have a Shrine Temple or Club. An Outreach Clinic is an event to help our medical teams determine in an orderly fashion, who we can help. It is best to do this where the children live. Some times it can be done without travel back to our North American Shrine Hospitals. For example, if the patient simply needs bracing or other non-surgical procedures. But there are also those who will require surgical treatment and will need to be transported to one of our 22 hospitals for care. Recently, we have had our Honolulu hospital expanded their Pacific Outreach clinics back to the Philippines. Our Mexico City hospital recently had a clinic in Guatemala City where they identified 18 new patients of which 6 need to go back to Mexico City for further care, and Our Shreveport hospital did a clinic in Panama City Panama where they saw 700 children. A new Game Changer in our O & P labs Something that has made Shriners Hospitals unique for many generations in the care we provide, is the ability to make orthotics and prosthetics in most of our own hospitals. It greatly helps to provide our families the option to not have to go to a different location to have this most necessary of medical procedures. For years, behind the fitting room we had complete workshops for these plaster limbs to be created with molds. Then they would be sawed, scraped and sanded to make them comfortable and just right. The cost of all of this at our many locations was large but it was who we were. After an extensive study and analysis, your Boards voted to create an LLC to manufacture these regionally at 5 of our current SHC in-house O & P labs. Each location will supply for other SHC Orthopedic Hospitals in their region. Now, all of our hospitals will be able to provide Shrine manufactured limbs a definite benefit to the child. Now the thing that makes this new process a differentiator, sometimes referred to as a game changer is the new equipment we have just acquired for our Philadelphia hospital. It is a computer driven CNC 3-axis carver. We have already had similar technology being used in our Northern California Hospital, but that unit took minutes to do the creating.

11 This new unit, will do the same work in 8-10 minutes. This will substantially speed up the process for our patients so that it can be a much quicker turn around from measuring to fitting. For our hospital system continuing to work towards a balanced budget within 3 years, it is expected to lower our cost by $18 million. The process is quite slick. Apparently the patient has the needed dimensions scanned at the hospital where he is, and then this information is electronically transmitted to one of our 5 manufacturing facilities where it can quickly be created and next day Fed Ex back to the patient for proper fitting. This is the second generation of the recent State of the Art pieces of equipment that makes us the provider of choice for families that we serve. The 1 st differentiator being the very low radiation EOS machines that we keep adding to our hospitals. More EOS machines being added. We have 5 more request for permission to do the fundraising to acquire this new low radiation x-ray machine. Again, if you were a parent who was aware that my child is going to require a lot of x-rays wouldn t you want to have their treatment at a place, like Shriners, where those collectively harmful rays are minimized. Again a differentiator for Shriners. Add this to the Motion Analysis labs (gait labs) that we already have in many of our hospitals to study the real effects of the child s motions we are definitely that place for the best care. We are special We are back And we are Better than ever Fraternally yours, Douglas E. Maxwell Chairman of the Board of Trustees

Shriners Hospitals for Children

Shriners Hospitals for Children Pediatric Specialty Hospitals Douglas E. Maxwell President & CEO Subjects for April: Groundbreaking for new St. Louis Hospital A wonderful Charitable girl in Virginia Shriners