1. "Delivery System Reform in Rhode Island: BCBSRI's role in 2013 and beyond" Gus Manocchia, chief medical officer, BCBSRI September 20, 2013

2. The Rhode Island Healthcare Landscape The U.S. spends more per person on care than any country in the world, with the average family of four spending more than $20,000 annually. In Rhode Island, skyrocketing healthcare costs contribute to an ongoing weak local economy. Flaws in the current healthcare system have led to increased costs and fragmented and inconsistent care. The current system focuses on: Patients who are already ill Paying for the number of services, not the quality of those services The service provided but not the cost/benefit of providing it

3. Key Cost Drivers The cost of healthcare services for BCBSRI’s insured members exceeded $1.3 billion in 2011. A breakdown of those costs: Pharmacy: Drug costs are expected to grow faster than those for both hospitalcare and other professional servicesthrough 2019. Professional services:Providers’ reimbursementis based on the number ofpatients he/she sees, notthe quality of caredelivered.Hospitals: Increases in hospital reimbursementscontinue to outpaceinflation and account formore than one-third of ourmembers’ claims.

4. BCBSRI’s perspective on transformation

5. Informed Patient makes better choices We are committed to providing our members with more transparent data on the quality and cost of healthcare services We want them to be informed healthcare consumers Currently, our members can read and write “reviews” about a provider they have seen This fall they will be able to use a member out of pocket estimator as well as a “Ways to Save” tool

6. 6 Giving our members tools to be educated consumers- Physician Finder

7. 7 Members can search “Estimated Costs by Treatment”

8. 8 Members can also search “Estimated Costs by Doctor”

9. Coordination of Patient Care Coordinated, team based care is the future of healthcare Rhode Island’s healthcare providers, with the support of payers and regulators, must evolve to an aligned, patient-centric healthcare delivery system resulting in: –Improved patient health outcomes and care experience –Higher quality of care and patient safety –Lower cost of care for patients

10. In total, 38% of Blue Cross local adult membership has an affiliation with either a PCMH or CSI-sponsored physician. Patient-Centered Medical Homes GroupCovered Adult Lives Anchor6755 Aquidneck1973 Coastal24085 Medical Assoc of Rhode Island5211 RIPCPC28678 University Internal Medicine3038 University Medicine8709 WellOne1996 Wood River785 Total92657

11. Primary Care Practice Transformation RI has the highest per capita rate of NCQA recognized PCMH sites, which offers a level of discipline not found in non-PCMH practices 200k unique member encounters by nurse case managers per year Implementation of team-based care maximizing the use of each individual Consistent use of EHR systems greatly improved – 245 PCMH Providers already attested to Meaningful Use Pre-visit planning saving time and empowering employees Improved After Hours and Same Day Access through weekend pilots and NCQA required same day visit slots Patient portal roll out at most sophisticated sites High sense of camaraderie and collaboration across program – shared learning Quality, utilization, and cost of care benchmarks increasingly becoming a part of practice life * Specific to BCBSRI program only 11 Our investments in PCMH’s have helped create infrastructure, process, technology, and expertise in patient – centered care

12. Benchmark Blue Cross Commercial members in a PCMH could incur 15% fewer emergency room visits than members who are not in a PCMH. This 15% translates to a potential of 3,227 avoided emergency room visits. Avoided ERMean $/ER VisitSavings 3,227×$1,200=$3,872,400 Patient-Centered Medical Homes

13. Benchmark Blue Cross Commercial members in a PCMH could incur 11% fewer inpatient admissions and 17% fewer inpatient readmissions than members who are not in a PCMH. This translates to a potential of 756 fewer inpatient admissions and 100 fewer inpatient readmissions. The decreased utilization ultimately equates to more than $12M in potential savings. BCBSRI Commercial Membership Inpatient Patient-Centered Medical Homes

14. ROI – Quality Performance 14 Our PCMH partners have materially higher quality scores when compared to our network

15. Expanding our PCMH Footprint * Specific to BCSRI program only 15 We’ve experienced rapid growth rates in both physician adoption and PCMH membership since 2009 and will continue to drive new ways to enroll our physicians and members in PCMH’s * The # of PCMH providers has grown from 32 to an expected 330, an annual growth rate of 58% * The # of members in a PCMH has grown from 15k to an expected 127k, a compound annual growth rate of 63% # of Providers % of RI Providers in PCMH’s # of Members % of BCBSRI Members in a PCMH

16. Forecasted Value Claims Expense w/o PCMH Claims Expense w/ PCMH Aggregate Savings Year 1 $ 1,790.6 M $ 1,772.8 M $ 17.8 M Year 2 $ 1,898.1 M $ 1,865.2 M $ 32.9 M Year 3 $ 2,012.0 M $ 1,969.7 M $ 42.3 M Total $ 93.0 M Patient-Centered Medical Homes

17. Adoption of value-based contracting Reimbursing providers based value, not volume improves care and affordability –Future reimbursement increases are based on actions that measurably improve patient experience, health outcomes and cost improvement –Provider cost and quality data become transparent –Non-participating (engaged) providers could see fee reductions

18. Moving to value-based contracting Shared savings agreements: –Coastal Medical –University Medicine Foundation Bundled payment arrangements in development Creating new products with provider partners: –Lifespan –CNE New relationships emerging in the market –CNE affiliation with RIPC –CNE merger with Memorial Hospital

19. PAYMENT MODEL Spectrum of Payment Models for Health Plans and Providers Fee for Service Negotiated Payment for Volume Performance Based Fee for Service Negotiated Payment for Volume + Escalators for Quality and Patient Experience (Prospective without “settle up”) Shared Savings Global Target with Shared Savings If Interim Costs < Target Risk Sharing Global Target with Shared Savings if Interim Costs < Target and Shared Losses if Interim Costs > Target Full Capitation Global Target with All Savings / Losses Going to Provider

20. Care Delivery System Today and in Five Years Traditional ModelBCBSRI / Delivery System Collaboration Value Creation for Care Delivery  Contractual Fee For Service Relationship  Contractual Relationship with Shared Value  Contractual Relationship with Shared Value with BCBSRI integrated services Level of Delivery System and BCBS Integration (Financial, Capabilities, People) Low High  Credentialing  In Network Benefits  Pay for Performance  Care Model Coordination  Aligned vision / planning  Shared economics  Information Sharing  Enterprise alignment with an integrated view of patient Description Value Levers  60%  35%  5%  40-50%  30-40%  20-30% % of members in each model Today 2015

21. A simpler, less expensive system Parity with national benchmarks for administrative cost levels across the system Processes and information are directly related to patient care and simplified Unnecessary and redundant process between delivery system and partners are identified and eliminated

22. Operating Leaner and Smarter By 2014, we plan to reduce our overall operating expense base by 25% since 2009 through more efficient operations and technology Focused efforts to improve performance in key areas of staffing, operations, and supplier contracting have resulted in an annual expense reduction of close to $15 million.

23. SelectRI SelectRI is an innovative network option that empowers members to get the care they need at the best price. They’ll still have the flexibility to choose any provider in our national network, but when they use SelectRI providers, they’ll have the lowest out- of-pocket costs and access to comprehensive primary care with many extra services. Lower costs. Enhanced primary care. Better value. SelectRI gives employers and their employees more for their healthcare dollars. —James Schwartz, MD, Coastal Medical SelectRI is changing the way care is delivered in Rhode Island through a partnership with Coastal Medical, the state’s largest private primary care group. 23

24. SelectRI 24

25. SelectRI Wellness Features Wellness Portal – Health Assessment (HA) - $50 Incentive for Completion – Online Tools and Programs – PureRunner Mobile App Telephonic Wellness Coaching 25

26. Questions?