1. Create and interpret Commonwealth's statement of cashflows for 2013. What information does it provide regarding the HMO's sources and uses of cash over the past year?

Cases in Healthcare Finance 18 EXHIBIT 2.2 2013 2012 Commonwealth Health Plans: HMO $12790 Commercial premium revenue PMPM $12782 Plan Operating and $449,37 $43723 Medicare revenue PMPM Enrollment Data Commercial patient days per 1,000 enrollees 302.9 266.4 (millions of dollars) 1,418.1 Medicare patient days per 1,000 enrollees 1,622.4 Commercial member-months 1,607036 1,337036 594,381 622.749 Commercial physician encounters Commercial inpatient days 43,661 39,763 347643 Medicare member-months 317,778 149.622 185.283 Medicare physician encounters PMPM: per member per month EXHIBIT 2.3 2013 2012 Selected State HMO Industry Financial and Operating Data (millions of dollars) Total Margin 4.8% 5.8% WellLife 3.0 3.2 Signet Healthcare 9.1 (0.7) Proxima 10.5 9.1 Sparta 3.8 (3.9) State average State median 4.8 4,7 Percent Administrative Expense 11.5% 12.1% WellLife 12.2 13.4 Signet Healthcare 16,4 13.6 Proxima 23.9 26.8 Sparta 17.4 15.5 State average 14.8 15.7 State median Percent Inpatient Expense 32.2% 30.3% WellLife 22,8 22.4 Signet Healthcare 21.2 23.0 Proxima 18.8 18.2 Sparta 25.2 23.3 State average 24.3 23.6 State median Case 2: Commonwealth Health Plans 19 EXHIBIT 2.3 2012 2013 (continued) Percent Physician Expense Selected State HMO Industry Financial and Operating Data (millions of dollars WellLife 54.1% 56.9% Signet Healthcare 31.3 30.3 Proxima 22.7 24.9 Snarta 12.8 18.6 eds average 28.8 31.3 State median 31.1 31.6 Percent Other Medical Expense WellLife 0.1% 0.1% Signet Healthcare Proxima 8.9 78 30.2 27.5 Sparta State average 45.7 35.0 14.6 12.5 State median 10.2 8,9 Commercial Premium Revenue PMPM WellLife $108.68 $110.19 Signet Heaithcare 39.86 2750 Proxima 120.68 124.27 Sparta 88.41 95.06 State average 101.17 102.53 State median 108.32 108.95 Medicare Revenue PMPM WellLife $406.57 $421.57 Signet Healthcare N/A N/A Proxima N/A N/A Sparta N/A N/A State average 365.12 376.04 430.57 State median 426.18 Commercial Inpatient Days per 1,000 Enrollees 245.4 246,0 WellLife Signet Healthcare 258.4 248.8 251.8 259.2 Proxima 198.2 248.9 Sparta State average 278.0 2370 248.8 State median 279.1 20 Cases in Healthcare Finance EXHIBIT 2.3 2013 2012 (continued) Selected State HMO Medicare Inpatient Days per 1,000 Enrollees Industry Financial and WellLife 1,388.4 1,323.8 Operating Data (millions of dollars) 1,188.7 Signet Healthcare 1,165.2 Proxima 1.382.2 1,518.8 Sparta State average 1,623.8 1.566.9 1,375.5 1,432. State median 1.350.6 1,380.5 Commercial Physician Encounters per Member 3.6 WellLife 2 2 Signet Healthcare 1.5 1.4 2.6 Proxima 2 7 Sparta 3.5 3.6 3.8 State average 3.8 3 7 3.9 State median Medicare Physician Encounters per Member WelLife 9.8 9.6 6.6 6.9 Signet Healthcare 10 10,0 Proxima 113 Sparta 11.2 9. 9.1 State average 8.6 8.9 State median Note: The Virgin the HMO for illustrative purposes only, These data should not be used to conduct actual financial analyses Case 2: Commonwealth Health Plans EXHIBIT 2,4 Selected 2013 National HMO Industry Financial and Operating Data Average copay per office visit Average copay per hospitalization 36 Average copay per pharmacy prescription Medical Loss Ratio Upper quartile 89.0% Median 84.9 Lower quartile 80.0 Administrative Cost Ratio Upper quartile 14.4% Median 12.0 Lower quartile 9.0 Operating Margin Upper quartile 5.0% Median 2.5 Lower quartile 1.1 Total Margin Upper quartile 5.5% Median 2.9 1.5 Lower quartile Return on Assets (ROA) Upper quartile 16.5% Median 11.3 Lower quartile 4,8 Return on Equity (ROE) Upper quartile 50.2% Median 31.4 Lower quartile 18.2 Current Ratio Upper quartile 1,29 Median 0.95 Lower quartile 0.49 Days Cash on Hand Upper quartile 32.7 Median 10.3 Lower quartile 0.8 27 Cases in Healthcare Finance EXHIBIT 2,4 Current Asset Turnover (continued) Selected 2013 National HMO Industry Financial and Operating Data Upper quartile 14.1 Median 6.4 Lower quartile 3.7 Total Asset Turnover Upper quartile 4.1 Median 3.1 Lower quartile 2.2 Days Premiums Receivable Upper quartile 14.0 Median 8.9 Lower quartile 7.0 Debt Ratio Upper quartile 81.3% Median 68 4 Lower quartile 59.7 Note: The netional data for the HMO industry contained in this exhibit are for illustrative purposes only. These data should not be used to corduct actual financiai analvses Case 2: Commonwealth Health Plans 23 EXHIBIT 2.5 Medical Loss Ratio Selected Ratio Medical expenses. Definitions Premium revenue Administrative Cost Ratio Selling and administrative expenses Depreciation Premium revenue Operating Margin Net income-Interest income Premium revenue Percent Administrative Expense Selling and administrative expense Total operating expenses Percent Inpatient Expense Inpatient expense Total operating expenses Percent Physician Expense Physician services expense Total operating expenses Percent Other Medical Expense Other medical expense Total operating expenses Cases in Healthcare Finance 18 EXHIBIT 2.2 2013 2012 Commonwealth Health Plans: HMO $12790 Commercial premium revenue PMPM $12782 Plan Operating and $449,37 $43723 Medicare revenue PMPM Enrollment Data Commercial patient days per 1,000 enrollees 302.9 266.4 (millions of dollars) 1,418.1 Medicare patient days per 1,000 enrollees 1,622.4 Commercial member-months 1,607036 1,337036 594,381 622.749 Commercial physician encounters Commercial inpatient days 43,661 39,763 347643 Medicare member-months 317,778 149.622 185.283 Medicare physician encounters PMPM: per member per month EXHIBIT 2.3 2013 2012 Selected State HMO Industry Financial and Operating Data (millions of dollars) Total Margin 4.8% 5.8% WellLife 3.0 3.2 Signet Healthcare 9.1 (0.7) Proxima 10.5 9.1 Sparta 3.8 (3.9) State average State median 4.8 4,7 Percent Administrative Expense 11.5% 12.1% WellLife 12.2 13.4 Signet Healthcare 16,4 13.6 Proxima 23.9 26.8 Sparta 17.4 15.5 State average 14.8 15.7 State median Percent Inpatient Expense 32.2% 30.3% WellLife 22,8 22.4 Signet Healthcare 21.2 23.0 Proxima 18.8 18.2 Sparta 25.2 23.3 State average 24.3 23.6 State median Case 2: Commonwealth Health Plans 19 EXHIBIT 2.3 2012 2013 (continued) Percent Physician Expense Selected State HMO Industry Financial and Operating Data (millions of dollars WellLife 54.1% 56.9% Signet Healthcare 31.3 30.3 Proxima 22.7 24.9 Snarta 12.8 18.6 eds average 28.8 31.3 State median 31.1 31.6 Percent Other Medical Expense WellLife 0.1% 0.1% Signet Healthcare Proxima 8.9 78 30.2 27.5 Sparta State average 45.7 35.0 14.6 12.5 State median 10.2 8,9 Commercial Premium Revenue PMPM WellLife $108.68 $110.19 Signet Heaithcare 39.86 2750 Proxima 120.68 124.27 Sparta 88.41 95.06 State average 101.17 102.53 State median 108.32 108.95 Medicare Revenue PMPM WellLife $406.57 $421.57 Signet Healthcare N/A N/A Proxima N/A N/A Sparta N/A N/A State average 365.12 376.04 430.57 State median 426.18 Commercial Inpatient Days per 1,000 Enrollees 245.4 246,0 WellLife Signet Healthcare 258.4 248.8 251.8 259.2 Proxima 198.2 248.9 Sparta State average 278.0 2370 248.8 State median 279.1 20 Cases in Healthcare Finance EXHIBIT 2.3 2013 2012 (continued) Selected State HMO Medicare Inpatient Days per 1,000 Enrollees Industry Financial and WellLife 1,388.4 1,323.8 Operating Data (millions of dollars) 1,188.7 Signet Healthcare 1,165.2 Proxima 1.382.2 1,518.8 Sparta State average 1,623.8 1.566.9 1,375.5 1,432. State median 1.350.6 1,380.5 Commercial Physician Encounters per Member 3.6 WellLife 2 2 Signet Healthcare 1.5 1.4 2.6 Proxima 2 7 Sparta 3.5 3.6 3.8 State average 3.8 3 7 3.9 State median Medicare Physician Encounters per Member WelLife 9.8 9.6 6.6 6.9 Signet Healthcare 10 10,0 Proxima 113 Sparta 11.2 9. 9.1 State average 8.6 8.9 State median Note: The Virgin the HMO for illustrative purposes only, These data should not be used to conduct actual financial analyses Case 2: Commonwealth Health Plans EXHIBIT 2,4 Selected 2013 National HMO Industry Financial and Operating Data Average copay per office visit Average copay per hospitalization 36 Average copay per pharmacy prescription Medical Loss Ratio Upper quartile 89.0% Median 84.9 Lower quartile 80.0 Administrative Cost Ratio Upper quartile 14.4% Median 12.0 Lower quartile 9.0 Operating Margin Upper quartile 5.0% Median 2.5 Lower quartile 1.1 Total Margin Upper quartile 5.5% Median 2.9 1.5 Lower quartile Return on Assets (ROA) Upper quartile 16.5% Median 11.3 Lower quartile 4,8 Return on Equity (ROE) Upper quartile 50.2% Median 31.4 Lower quartile 18.2 Current Ratio Upper quartile 1,29 Median 0.95 Lower quartile 0.49 Days Cash on Hand Upper quartile 32.7 Median 10.3 Lower quartile 0.8 27 Cases in Healthcare Finance EXHIBIT 2,4 Current Asset Turnover (continued) Selected 2013 National HMO Industry Financial and Operating Data Upper quartile 14.1 Median 6.4 Lower quartile 3.7 Total Asset Turnover Upper quartile 4.1 Median 3.1 Lower quartile 2.2 Days Premiums Receivable Upper quartile 14.0 Median 8.9 Lower quartile 7.0 Debt Ratio Upper quartile 81.3% Median 68 4 Lower quartile 59.7 Note: The netional data for the HMO industry contained in this exhibit are for illustrative purposes only. These data should not be used to corduct actual financiai analvses Case 2: Commonwealth Health Plans 23 EXHIBIT 2.5 Medical Loss Ratio Selected Ratio Medical expenses. Definitions Premium revenue Administrative Cost Ratio Selling and administrative expenses Depreciation Premium revenue Operating Margin Net income-Interest income Premium revenue Percent Administrative Expense Selling and administrative expense Total operating expenses Percent Inpatient Expense Inpatient expense Total operating expenses Percent Physician Expense Physician services expense Total operating expenses Percent Other Medical Expense Other medical expense Total operating expenses