Disease Management Programs Health Care Summit October 29, 2003

1. Caring is Good. Doing Something is Better. Disease Management Programs Health Care Summit October 29, 2003 Sam Ho, M.D. SVP, Chief Medical Officer

2. Pedigree = Quality & Accountability • Since 1991 – commitment to NCQA Accreditation. 99% of commercial HMO members in NCQA Excellent Accredited plans. 100% of PBH members in NCQA Full Accredited MBHO. • Since 1997 – exemplary disease management programs • Since 1998 – first consumer-disclosed report cards on providers and rewards to best practices – QUALITY INDEX profiles • Since 2002 – first tiered networks based on clinical quality and costs • Since 2002 – augmented existing market share rewards to better performing providers, with Quality Incentive Program (QIP) • 2003 – Health Credits for members engaged in healthier & cost effective behavior • 2003 – DMAA’s Best Disease Management Program Award and FACCT’s Innovator Award for Health Financing

3. Health & Disease Management • Catastrophic Care Management • Complex cases • Special Population Care • Frail member, End of Life, Centralized Transplant Unit • Disease Management • CHF, CAD/stroke, COPD, ESRD, Diabetes, Depression, Cancer, Asthma, Neonatal, Orthopedics • Care Coordination Model • Pareto analysis of outlier hospitals • Onsite & telephonic concurrent review, Continuity of Care • Preventive Health Management • HRA, immunization programs, cancer screening, smoking cessation, member education Catastrophic Special Populations Member Continuum Chronically Ill Acutely Ill Well

4. Focused Medical Management • Care coordination model • State-of-the-art clinical decision support – MUSA • Focus on 20% of hospitals with 85% of outlier days • PacifiCare as consultant and resource • Integrated informatics and reporting – census, auth, claims • Integrated onsite and telephonic concurrent review • Hospitalist programs – 24/7 care managers • Medical director-led regional medical teams • Referrals to DM/CM programs

5. Care Management • Special Population Care • Frail Member – Coordinating fragmented needs • End of Life Patients – Compassionate care • Transplant Care – Narrow national network of benchmark quality facilities and services • Catastrophic Case Management • Coordination of complex services • Integration of multiple providers of care • Coordination with DM • Continuity of Care – transitional services • Employer-specific CM

6. Population-based Case Management – Frail Member Program

7. End Of Life CM • Active, early engagement of terminal patients for hospice, palliative care yields $1.9M reduction in paid claims per death episode in latest rolling 12 months

8. Disease Management Continuum 2003 • Case-based Orthopedics 2002 • Taking Charge of Asthmasm • Case-based Cancer • Case-based NICU 2001 • Case-based CHF • Case-based CVD/Stroke • Case-based ESRD • Case-based COPD 1999 • Taking Charge of Depressionsm 1998 • Taking Charge of • Your Heart Healthsm 1997 • Taking Charge of Diabetessm

9. Disease Management - Opportunity Analysis • High prevalence • High total costs and pmpm costs • High cost Pareto groups • Impact potential on quality • Evidence-based medicine, standardized metrics, feasibility • Wide variation in medical performance • Clinical quality and patient safety outcomes • Impact potential on savings • Literature review, industry due diligence • In-source and out-source • Short-term and sustainable ROI

10. Institutional Cost by Diagnoses 2001 Top 5% of Commercial members PC DM Programs Non-DM Other

11. Institutional Cost by Diagnoses 2001 Top 5% of M+C members PC DM Programs Non-DM Other

12. Institutional Costs* for Top 5% Members *Costs for Mbrs who received Institutional Svcs **Excludes OB/Neonatal

13. Disease Management Programs • In-sourced DM (population-based) • Taking Charge of Your Heart Healthsm (CAD, CHF) • Taking Charge of Diabetessm • Taking Charge of Depressionsm • Taking Charge of Asthmasm • Out-sourced DM (case-based) • CAD/stroke – Cancer – Orthopedics • CHF – Neonatal care • COPD – ESRD • In-sourced Care Management Programs • End-of-life care, Frail Members • All DM/CM programs are available to HMO & PPO members • Modules available for self-funded accounts

14. PHS Cardiovascular Disease Management Coronary Artery Disease (BB Rx) Congestive Heart Failure -- M+C (ACEI Rx)

15. Stroke – Intermediate Clinical Outcomes Improvements over baseline for 384 members with prior CVA, TIA with >2 evaluations through 6/30/03

16. PHS-Wide Diabetes Comprehensive Care Measures D 17% D 29% D 22% D 13% Note: HgbA1C -- poor control is an inverse measurement; a lower rate is better

17. 2003 Disease Management ResultsIncurred claims through February 2003, paid through June 2003 • Enterprise savings from baseline for most recent 12 months • *Change is contract period versus baseline • CAD includes CA and TX performance incurred through January 2003; CAD eligibility/enrollment is not applicable • ESRD all eligible members are enrolled; results for membership with eligibility greater than 100 members • Frail Member includes CA and TX performance incurred through March 2003 and March 2003 enrollment

18. DM Savings – e.g., large group 11% of members account for 81% of costs

19. DM Program SavingsLast 12 Months • CHF = $62.6M • COPD = $37.5M • ESRD = $9M • CAD = $4.3M • Cancer = $3.7M • Cumulative DM Savings since 12/00 = $163.1M

20. Innovation Quality Information Integration