American Red Cross Biomedical Services Recent Changes and the Path Forward Town Hall Meeting June 16, 2015 Proprietary and Confidential Agenda ?1519 age/1,065 Current Addressing How You Environment Challenges Can Help American Red Cross Current Reality I We?ve made significant progress - Re-engineering efforts are on track to reduce costs by $250 million - We have gained market share in certain areas - Recruiting and Collections are consistently meeting goal I Updated forecast: decline in demand for blood products not expected to level off until 2018 - Biomedical Services is forecasting a loss of over $100 million in fiscal year2015 Without additional actions, losses will continue grow to $300 million by fiscal year 2020 I We must continue to size our organization in relation to the industry and explore new opportunities to grow revenues American Red Cross We?ve Made Significant Progress I 72 total re-engineering projects 9 in Design/Dev I 60 complete . 3 in Implementation I 12 In process American Red Cross Projected hospital gains in FY15 Hospital Gains Hospital Losses (4) HCA 33 66,690 COUNTY 28,760 COMMUNITY HEALTH SYSTEMS (34) 48,583 CONE HEALTH (5) 18,065 ASCENSION (17) 41,794 WESTERN NC HEALTH NETWORK (4) 13,868 IU HEALTH (7) 41,748 HOAG MEMORIAL HOSPITAL (1) 9,843 VCU MEDICAL CENTER (1) 18,120 DIMENSIONS HEALTHCARE SYSTEM (2) 8,001 PROVIDENCE 13,200 CHS-LONG ISLAND (6) 6,908 GWINNETT MEDICAL CENTER (2) 8,533 ST. VINCENT HEALTH SYSTEM (3) 6,382 SOUTHCOAST 6,235 MEDICAL COLLEGE OF GA-AUGUSTA (1) 4,983 CAREPOINT (3) 5,705 MUSKOGEE REGIONAL MED CENTER (1) 4,509 UNION HEALTH (3) 5,600 GATEWAY MEDICAL CENTER (1) 4,243 Other 43,847 Other Losses (32) 70,862 Total Gains 300,055 Total Losses 176,424 American Red Cross FY15 YTD Results: 99.8% of Goal FY15 Goal and Actual FYTD 490,000 470,000 450,000 430,000 UNITS 410,000 390,000 370,000 350,000 - . Jul-14 Aug?14 Sep-14 Oct-14 Nov-14 Dec-14 Jan?15 Feb-15 Mar?15 Apr-15 May?15 I Goal Actual Units American Red Cross Factors Driving Demand for Blood Products NET IMPACT DEMAND DRIVERS ON DEMAND Demographic Shift Improved Blood Management Advances Medical American Red Cross Predicted RBC Transfusions in the US U'l .b 48.9 44.2 000 xx. Actuals 2013 estimate 2015 estimate 1 .9 13 .9 :3 12 37.2 (D x\ 11 V. 40.0 10 30American Red Cross Projection Scenario $2,500,000,000 $(50,000,000) $2,000,000,000 $(100,000,000) $(150,000,000) $1,500,000,000 ?Total Revenue $(200,000,000) ?Total Expense ?T0ta Margin $1,000,000,000 $(250,000,000) $(300,000,000) $500,000,000 $(350,000,000) 5(400,000,000) FY15 FY16 FY17 FY18 FY19 FY20 American Red Cross The Way Forward Core Principles I Move to a fully functional structure in Collections and Recruitment as we have previously done in other areas - Improves donor, hospital and employee satisfaction - Increases opportunities for standardization Strengthens alignment between those who develop and manage processes and the teams who execute those processes I Remove layers of management to bring oversight closer to the front-line workforce and lifesaving work Ideally, no more than 5 layers from front-line to executives - Broaden the span of control for management in functional areas - Eliminate Division Vice President, Regional CEO and Community CEO positions American Red Cross Functional Alignment of Collections Collections Chief Ghle Director, ?"843? . . . Pramss Analytics Process Volunteers . . and Parfurmance Exocutlv-a . Evaluation Dlrauturs. Direclurs. Vulun'lear An?erems Managers American Red ross 1O Functional Alignment of Recruitment Marketing Recruitment and Field Marketing Recruitment Vice Presidents Field Marketing and Cnmmunicatiuns Teletecmitment Operations I . Listen-her Relationship Management Rec ru itment Process and Plan ning Directors. Directors. Donor Acquisition Recruutmtam Planning and Scheduling Amer ic an Red Cross 11 The Way Forward - Core Principles (cant) I Increase the use of technology to automate or accelerate key processes I Greatly expand use of volunteers, even into regulated activities I Focus on collections profitability I Leverage existing Humanitarian Services infrastructure to reduce costs and improve sponsored drive profitability I Take advantage of opportunities for growing revenues in other areas American Red Cross 12 Summary: What?s Changing What i Changing I Reducing layers of management I Transitioning to a fully functional structure I Integrating more fully as One Red Cross: I Moving toward one local Board - Regional Executives representing all Red Cross services in local communities 0 Leverage investment in common operations I Focus on Collections profitability What is NOT Changing Biomed continues to manage the day?to-day operations and regulated activities Blood services regions and districts Biomed mission and our commitment to the safety and availability of blood supply Continued commitment to scale our operations and make productivity improvements Focus on hospital, sponsor and donorexpe?ence American Red Cross 13 How You Can Help I Remain focused on quality and compliance I Continue to deliver high levels of customer service to our donors, sponsors and hospitals I Engage in change and be an active part of driving our collective success I Have confidence in our ability to succeed believe we can do this I During transition, identify any gaps and step up to make sure nothing falls through the cracks American Red ross 14 Open American Red Cross 15 Together, We are Crafting the Future of Biomedical Services To Help Patients Survive and Thrive