A Message from the President and Chairman of the Board

Choose Wisely...

Making wise choices is not a matter of chance.Whether you are selecting a hospital or physician, or making a business or financial decision,choosing wisely involves effort and information.

Hospitals must make wise choices, as well.This Annual Report chronicles some of the strategic decisions that have defined The William W.Backus Hospital in 2006. Our choices will position us to continue to serve the changing, and growing, needs of our community by staying focused on five guiding principles:

• Patient-centered care - a focus on safety and quality that has earned Backus national recognition.
• Leading edge technology - some of which is not available elsewhere in New England.
• Dedicated, caring providers - from a workforce that's 1,800 strong.
• Expert medical staff - from primary care physicians to specialists.
• Local,accessible resources - programs and services right here, in eastern Connecticut.

In the pages that follow, you will learn how Backus has made advances in each of these areas in the past year.We share this information not just from the hospital perspective, but also from the people who matter most — the people who choose Backus for their healthcare needs.

We chose strategic growth.

Backus Hospital's ambitious BackusCare project — the largest in our proud 113-year history — is more than halfway complete.This $50-million undertaking is on schedule, and on budget.

In Summer 2007, when the C-Wing expansion is opened, all major facets of this project will be finished. Our region will benefit from an Emergency Department that has doubled in size, and a Surgical Services area that has been redesigned to meet today's needs and tomorrow's demands.

This past year saw the opening of one all-new inpatient unit, and renovations to another. Also in 2006,we expanded the Dr. Sultan Ahamed Radiation Therapy Center, and became the first hospital in the region to offer Elekta's Image-Guided Radiation Therapy for the benefit of our cancer patients.

Our strategic growth extends offcampus, as well. The Backus Outpatient Care Center — which has seen the addition of so many important services in the past year — is about to open its newly designed Arthritis Center and the DaVita outpatient dialysis center is now under construction, and will open in February.

The expanded Emergency Department & Trauma Center will be named after donors Edward & Mary Lord.	Anticoagulation is amound the new services at the Backus Outpatient Care Center.	Information Services moved forward with a number of technology initiatives.

We chose to make investments in patient safety and technology.

Backus Hospital was an early leader in the healthcare technology revolution,working to create a true electronic medical record while many institutions were still debating its merits.We continue to pursue this vision of technology as a partner in care because of its measurable benefits to patient safety and clinical quality.

Today, four years after we began to implement an electronic medical record, our $14-million investment continues to pay dividends for patients and their healthcare providers. The Meditech hospital information system has eliminated much of the inefficient paperbased recordkeeping. It allows the appropriate clinicians to securely obtain up-to-date medical information about patients from nearly any computer. Computer stations in our new E-Wing inpatient units are located at the patient bedside, for ready access.

Approximately 3,000 medication orders are filled each day at Backus, and accuracy and timeliness are paramount. Our all-new Pharmacy opened in March, and it is outfitted with a medicationdispensing robot.

Technology is expensive,but not all patient safety initiatives involve large expenditures. A critical focus on safety led all constituents of our patient care team to create a medication reconciliation process that fundamentally enhances safety.

Whether it's hardware or software, processes or programs, patient safety is at the core of what we do, and why we do it.

We chose to focus on financial stability.

It costs nearly a half-million dollars a day to operate your community hospital. By choosing wisely, that expense is really an investment — in the quality of our workforce, in the strength of our programs and services, in the health of our community. Our year-end positive $3.1-million operating margin, though modest, is impressive considering the $1.1-million operating loss incurred in the first quarter of 2006.Continued growth in our outpatient services, and diligent efforts at fiscal constraint by the entire staff, allowed us to turn the corner. Achieving a positive operating margin allows not-forprofit hospitals like Backus to make important investments in technology and infrastructure — investments aimed at continually improving our delivery of care.

We cannot know all that the future holds, but we are certain that good people and responsive programs will drive our hospital there successfully. Backus is fortunate to have a highly competent staff who have helped transform our plans into reality, and who touch thousands of lives each year. Our continued development of the Backus Outpatient Care Center in Norwich, and enhancements to our other regional health centers, are critical components of our vision to grow more convenient, patient-centered care off the main hospital campus.

Today,we again take up the task of charting our course through a comprehensive strategic planning process that is well under way. We know that changing realities, emerging technologies and a growing region will require us to be even more agile and innovative.

It has been quite a year — a time of both celebrations and challenges. Through the efforts of our employees, medical staff, and volunteers, the support of Auxiliary and Alumnae, and the financial contributions of our donors, 2006 has been successful because we have made wise choices.

We hope you will agree,when you need to make a wise healthcare choice, you will...

...Choose Backus

Richard H.Strouse
Chairman of the Board

Thomas P.Pipicelli
President and Chief Executive Officer