1. 2008 Health Care Forecast Feb 22, 2009 Strategic Outlook on Healthcare Market : A Medical Group Perspective Don Crane President and CEO

2. Overview Introduction Introduction Environmental Assessment Environmental Assessment Challenges for Groups Challenges for Groups Medical Group Responses Medical Group Responses Q and A Q and A

3. California Association of Physician Groups

4. Overview Introduction Introduction Environmental Assessment Environmental Assessment Challenges for Groups Challenges for Groups Medical Group Responses Medical Group Responses Q and A Q and A

5. Underlying Premium Pressures New Technologies Uninsurance Gov’t Cost Shift Hospital Unit Cost Benefit Mandates 8+% More than double rate of inflation! Pharmacy Source: CHCF/Health System Change (HSC) California Employer Health Benefits Survey, 2006

6. EMPLOYER REACTION

7. Annual Growth in Private Health Insurance Premiums Percentage Growth Year Source: KFF/HRET Survey of Employer- Sponsored Health Benefits 2007

8. Premium Trend

9. Premiums: HMO vs. PPO

10. Premium Increases

11. HMO Premiums

12. Premium Trend by Product

13. Enrollment by Plan Type

14. High Deductible Penetration

15. Employer Coverage Trend

16. Concentration of HMO Enrollment - California 73% 82% Source: Cattaneo & Stroud, Inc. 2.0% 4.0%

17. Commercial HMO Concentration - California 80% 91% Source: Cattaneo & Stroud, Inc. 3.0% 5.0% 2.0%

18. Concentration of Medicare HMO Enrollment - California 87% 89% Source: Cattaneo & Stroud, Inc. 4.0% - - 2.0% - 5.0% - 2.0% 4.0% - 2.0% -

19. Overview Introduction Introduction Environmental Assessment Environmental Assessment Challenges for Groups Challenges for Groups Medical Group Responses Medical Group Responses Concluding Remarks; Q and A Concluding Remarks; Q and A

20. Challenges Declining Commercial HMO –erosion of revenue –tipping point

21. Challenges Medicare Advantage funding flush…at the moment ….funding cuts possible

22. Challenges Powerful Competitors: Kaiser –market share –competition in physician recruitment

23. Challenges HMO vs PPO Hospital utilization? Hospital utilization? Price differential shrinking? Price differential shrinking? Influence of P4P? Influence of P4P? Uneven Playing field Uneven Playing field

24. Challenges Influx of high deductible products coupled with inability to administer deductibles  Risk segmentation death spiral  Can’t participate

25. Challenges Time of Uncertainty; Time of Uncertainty; Healthplan commitment to Model Healthplan commitment to Model

26. Overview Introduction Introduction Environmental Assessment Environmental Assessment Challenges for Groups Challenges for Groups Medical Group Responses Medical Group Responses Q and A Q and A

27. Medical Group Responses 1. Get Better 2. Get Bigger 3. Collaborate 4. Lobby

28. Medical Group Responses 1. Get better –IT –Pay for Performance –QI Programs –CAPG Standards of Excellence

29. Medical Group Responses CAPG Standards of Excellence 1. What: A recognition program that rewards members exhibiting established attributes of excellence. 2. Goals: Stimulate all groups to improveStimulate all groups to improve BrandingBranding

30. Medical Group Responses CAPG Standards of Excellence -- Three Domains: Care Management Processes Care Management Processes Health Information Technology Health Information Technology Accountability and Transparency Accountability and Transparency

31. Medical Group Response 2. Get Bigger –Mergers and Acquisitions –Knox Keene Licensure  Global Risk Contracting  Go into healthplan business?

32. Medical Group Responses 3. Collaborate –With Plans –With Hospitals –With Employers –With Government

33. Medical Group Responses Data Sharing Code of Conduct WHO?: CAPG and top 6 Plans WHAT?: 1.Reciprocal Sharing of new data sets 2.Coordination of Disease management programs STATUS: Being adopted and implemented.

34. Medical Group Responses 4. Lobby, lobby, lobby Wither Universal Coverage? Medicare Advantage Misc

35. Medical Group Responses

36. Overview Introduction Introduction Environmental Assessment Environmental Assessment Challenges for Groups Challenges for Groups Medical Group Responses Medical Group Responses Q and A Q and A

37. 2008 Health Care Forecast Feb 22, 2009 Strategic Outlook on Healthcare Market : A Medical Group Perspective Don Crane President and CEO