InvestigationOverview

RootModel Solutions Business Plan
Private and Confidential

Company Description

Vision Statement
Our vision is to be the leader in providing Incident Management/Root Cause Analysis
software to the Healthcare community.

Mission Statement
Our Mission is to improve patient safety in the healthcare community across the world by
producing intuitive Root Cause Analysis software that supports all phases of an investigation
and built on the four core principles of Automation-Communication-Implementation-Education.

Business Philosophy
Listen to and understand our target user. Our task is to make our customers job simpler
through automation and create a deeper understanding of root cause analysis through
continual education.

Company Goals and Objectives
Goal: Create relationships with well known patient safety experts.
Objective: Because RootModel is a new company, developing endorsements with well known
patient safety experts will lend credibility to the RootModel name.

Goal: Create relationships with patient safety experts currently working in the RCA field.
Objective: One or more experts need to be affiliated with RootModel.

Goal: Create a relationship with the Joint Commission.
Objective: The Joint Commission has become an important touch point in the healthcare
market. A relationship with the Joint Commission will establish credibility within the industry.

Goal: Create a relationship with a healthcare company having multiple hospitals in its chain.
Objective: The initial launch of RootModel should be contained to a single hospital chain so
enhancements and modification can be controlled.

Target Industries

Overview
Root Cause Analysis can be Proactive or Reactive. Proactive RCA is used to determine
'what could happen' and Reactive is used to understand 'what just happened'. All industries
can utilize both Proactive and Reactive but tend to depend more on one RCA type than the
other. As a general rule, markets that have more 'moving parts' have a higher number of
adverse events and a greater need for Reactive RCA.

The ideal target industry is one that utilizes Reactive Root Cause Analysis (RCA). Industries
that have a higher rate of workplace injuries or failures of machines/procedures need
Reactive RCA to determine why the undesirable result occurred. Understanding why can
eliminate injuries, avoid lawsuits and design more efficient procedures.

Workplace Injury Comparison Industry Comparison – Bureau of Labor Statistics

Looking at industries with higher workplace Industry 2011 2012

injury rates is a good indicator of the need for 1 Nursing and residential care 13.10% 13.60%

Reactive RCA. To the left are the top 5 2 Manufactured Home manufacturing 10.9 11.8

industries as published by the Bureau of Labor 3 Police Protection 11.3 11.8
Statistics. The top industry is Nursing and
4 Travel trailer and camper manufacturing 11.2 11.7
residential care and in more general terms
5 Iron foundries 10.9 11.5
'healthcare'. Healthcare consistently finishes
2 - 3% above all others. The incidence rates represent the number of injuries and illnesses per
100 full-time workers / total hours worked by all employees during the

calendar year x 200,000 - (working 40 hours per week, 50 weeks per year)

Healthcare's Patient Safety Numbers
Healthcare is unique in that the industry itself results in the highest number of workplace
injuries in addition, almost every service it provides can result in a patient safety injury known
as an Adverse Event and require Reactive RCA. The actual number of adverse events
occurring in healthcare is somewhat unknown. According to the Joint Commission:

How Many Hospitals and Other Health Care Facilities Record and Track Medical Errors?
The exact number of hospitals and other health facilities that record and track medical errors, as well as
types of reporting that is occurring, is unknown at this point, or at least not documented to any degree of
accuracy..... However, virtually every hospital in the country has in place some form of medical error
reporting system because the current JCAHO requirements provide that some form of patient safety event
reporting must be in place to track, at a minimum, a variety of events, such as falls and the use of
restraints. - The Joint Commission

The Joint Commission was created as a Setting Total Error%

touch point for all hospitals to report adverse 1 Hospital 4844 65.10%
events and use a standardized event
classification system on a voluntary basis. 2 Psychiatric Hospitals 811 10.90%
After examining 9981 events, the Joint
Commission calculated that 4844 of the 3 Emergency Department 453 6.10%
adverse events resulted in injury. That is a
65% error rate in hospitals. 4 Psych unit in general hospital 402 5.40%

5 Ambulatory care 300 4.00%

6 Behavioral health facility 268 3.60%

Based on examining 9981 events – The Joint Commission

Initial Industry Focus
Based on the number of workplace injuries and Adverse Event rates, the initial industry target
will be Healthcare with a focus on hospitals.

Industry RCA Status
Reactive RCA was introduced to the healthcare industry around 1999, and is still considered
young. Most hospitals have a system that tracks details about adverse events but the
investigation processes are manual and are not standardized. This is an ideal place for
RootModel to automate the manual processes and add standardization.

Target Industry Growth

Overview
The healthcare market is currently in transition and hospitals must respond to rapidly
changing market forces, which include the requirements for health record systems, changes
in reimbursements and less available capital. The transition in healthcare requires significant
capital investment which is forcing the industry look for ways to achieve greater economies of
scale.

Greater Economies of Scale - Systems and Networks
For many hospitals, merging with another hospital or system may be the only hope for
remaining competitive. Changes in the industry have already started a “national explosion of
consolidation”. .(Moody’s Investors Service, New Forces Driving Rise in Not-for-Profit Hospital Consolidation, Mar. 8, 2012)

A System is two or more hospitals owned, leased, sponsored, or contract managed by a
central organization. System affiliation does not preclude network participation.

A Network is a group of hospitals, physicians, other providers, insurers and/or community
agencies that work together to coordinate and deliver a broad spectrum of services to their
community. Network participation does not preclude system affiliation.

Hospital Statistics The 10 largest healthcare systems total 988
The total number of Registered Hospitals in hospitals making 17% of the market owned by
the US is 5724 with 3007 being part of a 10 parent companies.
System and 1535 being part of a Network.

Hospital Type Total Rank Healthcare System # Owned
Total Number of All U.S. Registered Hospitals 5724 1 Department of Veterans Affairs (Washington, DC) 158
4973 2 Universal Health Services Inc (King of Prussia, PA) 157
U.S. Community Hospitals 2,903 3 HCA Inc (Nashville, TN) 140
Non-government Non-Profit Community Hospitals 1,025 4 Community Health Systems (Franklin, TN) 110
Investor-Owned (For-Profit) Community Hospitals 1,045 5 Select Medical Corporation (Mechanicsburg, PA) 108
State and Local Government Community Hospitals 208 6 Kindred Healthcare Inc (Louisville, KY) 100
533 7 HealthSouth Corporation (Birmingham, AL) 76
Federal Government Hospitals 3007 8 LifePoint Hospitals Inc (Brentwood, TN) 51
Non-federal Psychiatric or Long Term Hospitals 1535 9 Catholic Health Initiatives (Englewood, CO) 45
Community Hospitals in a System 10 Tenet Healthcare Corporation (Dallas, TX) 43
Number of Community Hospitals in a Network

Hospital Stability
Although the growth of the industry is somewhat constrained right now, there will always be
hospitals. The number of total hospitals will fluctuate over the next few years but economies
of scale will be realized through consolidation, mergers and designing efficient support
systems.

Hospital Growth and Demand Dilemma
While healthcare is in transition and struggling to redefine itself, the baby boomers are coming
of age with the first boomer arriving on January 1, 2011. The baby boom lasted 18 years and
now totals over 70 million people moving towards retirement and needing additional
healthcare. As the population ages, the demand for more healthcare will increase.

Baby Boomer Facts 50
Seventy seven million people were born between 1946 45
and1964, and defined as the baby boomers. 40

The senior age group is now, for the first time, the Hospital Admissions 35 22.9
largest in terms of size and percent of the population in (M illions) 16.5
the U.S. 30 8.9
8.7

25

20

By 2015, those aged 50 and older will represent 45% of 15 25.5 24.0 23.0
the U.S. population (AARP) 10 23.0

5

0 2010* 2020* 2030*
2004

YEAR
Non-Boomer Adults Boomers

Pressures on Healthcare