G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202 The Continuing Evolution of an IPA: Hill Physicians Medical Group Steve McDermott December 2, 2002 Managed Care Online - HealthWebSummit G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202

Hill Physicians Medical Group 340,000 HMO Members 2,000 Physicians and 20 Affiliated Hospitals Largest Capitated Medical Group in CA Largest IPA in U.S. “Top Performing” Medical Group (PBGH) Among Top Ten ‘Elite’ Medical Groups in U.S. G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202

G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202 Goals for 2002 1. Enrollment Growth/Geographic Expansion 2. Clinically Oriented/Performance-Driven Culture 3. Continued Development of Information Technology Infrastructure 4. Strengthen Delivery System Management 5. Improve Administrative Efficiencies G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202

Ongoing Long Term Initiatives 1. Group Practice Development 2. Health Services Development 3. E-Connectivity/Information Systems G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202

G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202 Recent Innovations Clinical Snapshots: Notifications/Prompts to PCPs Group Visits: Asthma, Diabetes, Migraines, Back Pain PCP Pay for Performance: $6M in 2002; 10% of Comp. Referral/Auth Re-engineering: Simplify Process Practice Support Programs: Emphasis on Managers G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202

Anticipate Managing Populations (as well as patients) Tie physicians together clinically and financially through accountable medical organizations. Standardize acute medical services, manage chronic care conditions, and create more proactive health-care orientation. Compensation: balance capitation (population management) and fee-for-service (individual patient care) against performance/results. G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202

G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202 Next Steps Integration through Practice Consolidation / Electronic Connectivity/Culture Expand Clinical Support Programs, Particularly for Chronic Disease Electronic Clinical Information System G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202

Administrative Expense Trends Increasing Trends Decreasing Trends 2000 2001 2002 (Projected) Information Services Health Services Network Support All Other Financial Services Customer Services Claims Payment

Customer Satisfaction Members 90%  Practice Managers 85%  Physicians 76%  G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202

Three California Experiments 1. Delegated model: health plans capitate medical groups who, in turn, manage the care and the resources for 8 million people. 2. Integrated Healthcare Association: open collaboration among all health care stakeholders to address common issues. 3. Pay for Performance: adopt common statewide medical group report card and tie significant financial incentives to results. G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202

G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202 Medicare 900 LB. GORILLA “Fee-for-Service” Medicare continues to be the primary driver of American medicine. CPT codes pay for time and cost; no codes for quality, performance, or outcome: promotes quantity rather than quality. Day-to-day practice of medicine has not changed in thirty years; not coincidentally, payment methodology hasn’t changed either. G:/CorpSvc/APowerpoint//SM/MANAGED_CARE_ONLINE_HEALTHWEBSUMMIT_1202