1. Sustainable Affordability Kaiser Permanente – A Private Health Care Solution for Millions of Americans Bernard J. Tyson Senior Vice President Kaiser Foundation Health Plan, Inc. Kaiser Foundation Hospitals Oakland, California – U.S.A.

2. 2 U.S. Health Care Spending Projected Source: Center for Medicare & Medicaid Services Other: Research and Construction 2003 = $1.7 Trillion 2013 Projected = $3.4 Trillion ($ Billions)

3. 3 Segments within the total population Costs associated with each segment Those with no chronic conditions Those with one chronic condition Those with multiple chronic conditions People $$$ 72% 21% 6% 36% 31% 33% Source: Kaiser Permanente Northern California commercial membership, DxCG methodology, 2001. Chronic Illness Drives Medical Care Costs

4. 4 0% 20% 40% 0%20% 40% 60%80%100% 0% total cost 10% total cost % of People  % of Health Care Costs 70% of people 20% of people Premium level 100% 80% 60% Source: Milliman USA Health Cost Guidelines – 2001 Claim Probability Distribution Cost Distribution of Care

5. 5 70% people account for 10%of total costs 10% people account for 90% of total costs 20% people account for 0% of total health care costs Typical U.S. Health Plan Spending Source: Milliman USA Health Cost Guidelines – 2001 Claim Probability Distribution

6. Managing Costs Product Strategies Shifting Costs The Health Care Dilemma: Managing Costs vs. Managing Care

7. 7 Managing Care Disease Management Preventive Care Coordinated Care Are the Two Mutually Exclusive?

8. 8 Kaiser Permanente’s Strategy for Sustainable Affordability Managing Care Managing Cost

9. 9 Kaiser Permanente: America’s Largest Non- Profit Health Care Program  Integrated health care delivery system  Serve 8.5 million members in nine states and D.C.  $30 billion annual revenues

10. 10 high quality, affordable improve the health of our members communities To provide high quality, affordable health care services and to improve the health of our members and the communities we serve. Kaiser Permanente’s Mission

11. 11 Kaiser Permanente Partnership Kaiser Foundation Hospitals Permanente Medical Group Kaiser Foundation Health Plan Members A Prepaid Integrated Delivery System With Aligned Incentives

12. 2004 National Quality and Service Recognition KP’s Care Management Institute was honored for "Best Overall Disease Management Program for a Managed Care Organization." Disease Management Association of America 2004 KP Colorado was ranked in the top 10 health plans in the United States for HEDIS Effectiveness of Care. NCQA’s “The State of Health Care Quality: 2004 Report" KP Northwest was rated #1 in the United States. KPNW was tied for the top rating with Capital District Physician’s Health Plan in New York. Consumer Reports 2003 Ranking of 49 HMOs and 43 PPOs KP Northwest Top 10 Medicare + Choice plans: Award based on disenrollment rates, HEDIS, CAHPS, HOS results, and biennial audit results The Centers for Medicare and Medicaid Services (CMS) 2003 KP Northern California Ellis J. Bonner Community Leadership Award – Child Health Plans KP Northwest National Exemplary Practice Award – Cardiovascular Risk Factor Management America’s Health Insurance Plans 2004 Hospitals for a Healthy Environment 2003-04 2004: -6 Environmental Awards for comprehensive waste minimization and pollution prevention. -3 awards for virtual elimination of mercury -1 award for self-identification of environmental goal. 2003: 20 Environmental Awards for 18 KP California facilities American College of Medical Quality (ACMQ) 2004 2004 KFHP Institutional Leadership in Quality Awards KFHP Historic Leadership in the Development of Innovative programs in Quality

13. Maryland Health Care Commission 2003 Quality KP Mid-Atlantic States rated a “Star Performer” in 10 of 23 measures. No other plan achieved this level. Service KP Mid-Atlantic States rated a “Star Performer” on customer service and few customer complaints. Colorado Business Group on Health 2003 Clinical Care Top scores (above NCQA benchmarks) on 8 of 15 measures for KP Colorado. No other Colorado health care plan achieved this level. California Office of Patient Advocate 2003 HMO Quality: KP Northern California “Excellent” rating for Care for Getting Better“Excellent” rating for Care for Getting Better Medical Group Quality: The Permanente Medical Group Southern California Permanente Medical Group “Good” rating for Communication with Patients“Good” rating for Communication with Patients 2003-04 State & Business Groups Health Plan Report Cards Cultural Competence Award National Minority Health Month Awards 2003 KP Northern California Top rated HMO out of plans surveyed in 2003. Pacific Business Group on Health 2004 2003: #1 for Quality measures: Kaiser Permanente received more “top 10 percent” ratings than all other health plans in California combined.

14. 14 New York Times October 31, 2004 “Is Kaiser the Future of American Health Care?” Third-Party Endorsements

15. 15 Third-Party Endorsements The Economist July 15, 2004 “Without question Kaiser has achieved a greater degree of integration than the NHS— integration between prevention and cure, out-patient and in-patient services and between primary- care physicians and hospitals.” Richard Feachem Executive Director Global Fund to Fight AIDS

16. 16 10 Clinical Priority Areas KP Members Clinical Area with this Condition Self Care8.4MM Chronic Pain~1,000,000 Elder Care917,000 Diabetes577,000 Depression 411,000 Coronary Artery Disease256,000 Asthma 141,000 Heart Failure 94,000 Cancer25,000 new cases/yr Obesity~25% of adults

17. 17 Population Management: More than Care & Case Management Usual Care with Support Level 1 70-80% of a CCM pop Assisted Care or Care Management Level 2 High risk members Intensive or Case Management Level 3 Highly complex members Targeting Population(s) Redesigning Processes Measurement of Outcomes & Feedback

18. 18 Professional Satisfaction: Primary Care Physicians of KP Are Better Supported in Delivering Quality Care and Service Source: Grumbach, et. al., California Physicians 2002: Practice and Perception Percent of Physicians Reporting Factors as Affecting Incentive Compensation Percent of Physicians Reporting That Pressure Compromises Care

19. 19 KP HealthConnect  : $4 Billion Investment to Bring 21 st Century Technology to Health Care Essential Tools to Improve Safety, Quality, Service and Efficiency Efficiency and Productivity Service and Satisfaction Safety and Quality Evidence Based Care PCPs Specialists Pharmacy Data Management Scheduling Systems Billing and Coding Lab/X-ray Nurses Advice Line Health Encyclopedia Patients Patients KPHealth-Connect

20. 20 EMR – A Necessity for the Future

21. 21 EMR – A Necessity for the Future “…The Americans also got the lowest marks for medical records being unavailable at the time of the patient's appointment…” Release of International Survey Findings Commonwealth Fund, Health Policy Symposium Washington, D.C., Nov. 3, 2005

22. 22 Feds Relax Rules on Use of E-Records October 6, 2005 President George W. Bush has made expanding the use of electronic medical records one of the top healthcare priorities for his administration. The systems are widely thought to have the potential to cut healthcare costs and reduce the estimated 44,000 to 98,000 deaths caused by medical errors each year in the United States.

23. 23 Charting/Documentation Automated Reminders (Preventative & Monitoring Tasks) Improve compliance with practice guidelines Internet Access Email Communications, Online Health Information, etc. Medication Order Entry HealthConnect Application Benefit Remote Access Clinical Decision Support Reduce prescribing errors Increased physician timeliness & efficiency Degree of comprehensive data and integration Improved diagnosis & disease management Quality measurement, improvement & research Integrated EMR Inpatient, Outpatient, Lab, Pharmacy. Improved patient access and convenience Improve effectiveness through access to patient history

24. 24 high quality, affordable improve the health of our members communities To provide high quality, affordable health care services and to improve the health of our members and the communities we serve. Kaiser Permanente’s Mission

25. 25 Questions, Comments & Answers