Gordon Norman, MD, MBA VP, Health Care Quality

1. .…a health and consumer services company making people’s lives better Disease Management Gordon Norman, MD, MBA VP, Health Care Quality

2. .…a health and consumer services company making people’s lives better Pre-CY2000 – DM Behind “Veil Of Capitation” Pre-2000 Era HEALTH IMPROVEMENT DISEASE MANAGEMENT Population-based

3. .…a health and consumer services company making people’s lives better Post-CY2000 – Risk Shift = Paradigm Shift Post-2000 Era Post-2000 Era HEALTH IMPROVEMENT DISEASE MANAGEMENT HEALTH MANAGEMENT Population-based Case-based

4. Catastrophic Special Populations Member Continuum Chronically Ill Acutely Ill Well .…a health and consumer services company making people’s lives better “Disease Management” – Spectrum Of Needs • Catastrophic Care Management • Complex case management • Special Population Care • Frail members, ER frequent • users, Pre-catastrophic care, • Terminally ill members • Chronic Disease Management • CHF, CAD/stroke, COPD, ESRD • Diabetes, Depression, AMI • Acute Episode Management • In-/Out-pt. Medical Management • Transitional, Continuity of Care • Preventive Health Management • Preventive care/Risk reduction • Health improvement, Member education

5. .…a health and consumer services company making people’s lives better Origins of a Bedday

6. Classic BD/K Mgt. ALOS .…a health and consumer services company making people’s lives better Classic Utilization Management – ALOS Focus

7. .…a health and consumer services company making people’s lives better Focused Acute Episode Management • ALOS Management • managing capitation to shared risk conversions • change from PMG to Pareto group hospital focus • PacifiCare as consultant and resource • “Every Patient, Every Day” mantra • sophisticated informatics and reporting • onsite concurrent review coverage at outlier hospitals • Medical Director-led regional medical teams • Hospitalist programs increasing • achieving Commercial and Medicare utilization results

8. Membership-adjusted, Seasonally-adjusted Average Daily Census Budget Actual AverageDaily Census .…a health and consumer services company making people’s lives better Daily Census – PCC, PHS Commercial Medicare

9. .…a health and consumer services company making people’s lives better ER – Slippery Slope to Hospital Admission Hippocratic Oath: “primum non nocere” Division of clinical roles, responsibilities Rescue ethos: active over passive mgt. Little time for discharge planning Legal risks (COBRA, EMTALA) Clinical uncertainty of dx, px Uncertainty of patient F/U Financial reimbursement Family/caregiver anxiety Discretionary gray zone Limited clinical history Patient expectations Relative time, effort Hospital economics Patient advocacy Malpractice risk Convenience Liability risk Habit Easy out-pt. coordination Primary care continuity Member disincentives Diversion alternatives Social work resources Hospitalist incentives Family expectations Quick, easy HH svcs Available SNF beds 24 hr. observation Full hospital beds Onsite RN triage DSS, protocols ER Discharge Admit Lesson: it’s often too late by the time the member is in ER – avoiding the slippery slope requires upstream medical management

10. Admits Upstream BD/K Mgt. .…a health and consumer services company making people’s lives better Upstream Medical Management – Admits/K Focus

11. Pareto Analysis – Top 5% Most Costly Members

12. Outsourcing preferred major focus is primary disease driving majority of members’ utilization/costs specialized skills not easily developed or recruited use of proprietary tools economies of scale, scope performance data available performance risk accepted Insourcing preferred major task is support, integration of many unmet member needs that result in excessive health care resource consumption generalist, social mgt more critical than specialist skills integrating community resources important no proprietary tools needed .…a health and consumer services company making people’s lives better Disease Management – Sourcing Preferences

13. .…a health and consumer services company making people’s lives better DM Opportunity Analysis – Conclusions • Most promising choices for outsourced DM • ESRD – cancer • CHF – rare complex disease medley • CAD/stroke – neonatal care • COPD – asthma • Appealing insourced CM candidates • End-of-life care (cancer, chronic diseases, HH services, family support, hospice, AMDs, palliative care) • Frail members (chronic disease, disabled, homebound) • ER frequent utilizers (chronic disease, access, compliance)

14. Congestive Heart Failure – California 11,741 66,297 Mem Mos 11,741 66,297 0% -55% -51% 1% SH Net Savings $6.3M Mem Mos 1,069 6,408 1,069 6,408 -11% -49% -10% -62% CO Net Savings $2.3M Baseline Period: 12/1/99 - 11/30/00 Intervention Period: 12/1/00 - 11/30/01

15. Chronic Obstructive Pulmonary Disease – California 11,395 15,815 Mem Mos 11,395 15,815 -4% -3% -37% -28% SH Net Savings $2.9M Baseline Period: 4/1/00 - 3/31/01 Intervention Period: 4/1/01 - 11/30/01

16. End Stage Renal Disease – California 4,238 Mem Mos 4,238 -26% -8% SH Net Savings $0.7M 875 Mem Mos 875 -43% 8% CO Net Savings ($0.4M) Baseline Period: 4/1/00 - 3/31/01 Intervention Period: 4/1/01 - 11/30/01

17. Frail Member Care – PCC 5,121 13,654 Mem Mos 5,121 13,654 -1% -29% -17% 0% SH Net Savings $4.8M Mem Mos 1,072 2,228 1,072 2,228 -10% -8% -16% 4% CO Net Savings $0.4M Baseline Period: 11/99 - 10/00 Intervention Period: 11/00 - 11/01

18. End of Life Care – PCC 579 8,241 Mem Mos 579 8,241 -24% 12% -6% 1% SH Baseline Period: 1/00 - 12/00 Intervention Period: 1/01 - 11/01

19. .…a health and consumer services company making people’s lives better Disease Management Portfolio – 2002 • Outsourced DM • original 4 outsourced: CHF, CAD/stroke, ESRD, COPD • launching commercial Oncology DM • design “middle tier” diabetes pilot • pursue pediatric asthma • reconsider rare disease medley • maximize appropriate, early provider referrals • promote successful programs to capitated providers • increase penetration in non-capitated provider groups • implement DM programs for PPO, ASO business

20. .…a health and consumer services company making people’s lives better Disease Management Portfolio – 2002 • Insourced DM • Frail members • End of Life members • selective catastrophic case management • comorbid, EOL patients from outsourced DM programs • maximize appropriate, early provider referrals • integrate workflow with outsourced vendors • pre-catastrophic case management as predictive modeling allows (DCG, RxGroups, ACG, CRG, CRxG, Ingenix, Medical Scientists, M&R, RxSols) • combine predictive modeling with HRA stratification

21. .…a health and consumer services company making people’s lives better Disease Management Portfolio – 2002 • Apply DM learnings to other outsourced service providers • Hospitalist contracting for in-pt. care management, ER intervention • neonatal/NICU management • Improve integration – across comorbidities, vendors and PHS, providers • Subject our DM performance to rigorous challenges • CMS Disease Management Demonstration Program • CMS PPO Demonstration Program • external validation of savings methodology • external audits of DM capabilities, effectiveness

22. .…a health and consumer services company making people’s lives better Double-Barreled Approach – CAD CAD Programs Lower Risk Higher Risk Population-based Case-based Taking Charge of Your Heart HealthSM DM vendor Includes all members with CAD Evidence-based management of CAD Member and Provider Interventions Member Testing, Provider Intervention

23. .…a health and consumer services company making people’s lives better Triple-Barreled Approach – Diabetes Diabetes Programs Low Risk Moderate Risk High Risk Population-based Case-based* Case-based Taking Charge of DiabetesSM 1 DM vendor 4 DM vendors Includes all members with diabetes Diabetics with worst control, highest risk, readiness to change Manage diabetes-related end-organ conditions Member and Provider Interventions Intensive Member Case Management Coronary artery disease Congestive heart failure End-stage renal disease *pilot program in negotiation

24. .…a health and consumer services company making people’s lives better Newest DM Program – Cancer • Why cancer? • Shortage of medical oncologists (cancer doctors), all “too busy” • MDs unfamiliar with oversight of total patient care • Technical, sophisticated treatment emphasized over education, empathy, preparation for end of life • MDs tend to use most convenient setting for them, not the patient • Difficulty discussing, dealing with death • Futile and unwanted treatment not uncommon within commercial populations • Preparation for end of life is variable, late, or neglected

25. .…a health and consumer services company making people’s lives better What’s Different about Cancer DM? < 1 Month (Futile Treatment) Diagnosis Primary Treatment (Unwanted Treatment) End-of-Life - Traditional Practice Curative Anticancer Treatment Palliative Care Pain Hospice Referral Management Diagnosis Primary Treatment End-of-Life Curative Anticancer Treatment Cancer DM Approach Anticancer Treatment Palliative Care Palliative Care Psychosocial Counseling Pain Management Cancer Rehabilitation Advanced Care Planning Hospice Referral Ongoing Symptom Management Nutrition Services Fatigue Management

26. .…a health and consumer services company making people’s lives better Today – Full Service Health Management HEALTH IMPROVEMENT DISEASE MANAGEMENT ü ü ü ü ü ü ü ü ü HEALTH MANAGEMENT Population-based Case-based

27. Catastrophic Special Populations Member Continuum Chronically Ill Acutely Ill Well .…a health and consumer services company making people’s lives better Disease Management – “Baked Into” Our... • Brand Promise • Quality Initiatives • HEDIS Performance • NCQA Accreditation • Medical Management • Member, Provider Satisfaction • Competence/Achievement Culture • Financial Performance & Membership Growth