strategic outlook on healthcare market : a medical group perspective

2008 Health Care ForecastFeb 22, 2009

Strategic Outlook on Healthcare Strategic Outlook on Healthcare Market :Market :

A Medical Group PerspectiveA Medical Group Perspective Don CranePresident and CEO

OverviewOverview

IntroductionIntroduction

Environmental AssessmentEnvironmental Assessment

Challenges for GroupsChallenges for Groups

Medical Group ResponsesMedical Group Responses

Q and AQ and A

California Association of California Association of Physician GroupsPhysician Groups

OverviewOverview

IntroductionIntroduction

Environmental AssessmentEnvironmental Assessment

Challenges for GroupsChallenges for Groups

Medical Group ResponsesMedical Group Responses

Q and AQ and A

Underlying Premium Underlying Premium PressuresPressures

New Tech

nologies

Uninsura

nce

Gov’t Cost

Shift

Hosp

ital U

nit Cost

Benefit Mandate

s 8+%More than doublerate of inflation!

Pharmacy

Source: CHCF/Health System Change (HSC) California Employer

Health Benefits Survey, 2006

EMPLOYER REACTIONEMPLOYER REACTION

Annual Growth in Private Health Insurance Premiums

12.0%

18.0%

14.0%

8.5%

0.8%

5.3%

8.2%

10.9%

12.9%

13.9%

11.2%

9.2%

7.7%

6.1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

1988 1989 1990 1993 1996 1999 2000 2001 2002 2003 2004 2005 2006 2007

Percentage Growth

YearSource: KFF/HRET Survey of Employer- Sponsored Health Benefits 2007

Premium TrendPremium Trend

Premiums: HMO vs. PPOPremiums: HMO vs. PPO

Premium IncreasesPremium Increases

HMO PremiumsHMO Premiums

Premium Trend by ProductPremium Trend by Product

Enrollment by Plan TypeEnrollment by Plan Type

High Deductible PenetrationHigh Deductible Penetration

Employer Coverage TrendEmployer Coverage Trend

Concentration of HMO Concentration of HMO Enrollment - CaliforniaEnrollment - California

33.0%

12.0%

5.0%

11.0%

12.0%

19.0%

36.0%

16.0%

9.0%

11.0%

10.0%

14.0%

2000 2006

All Others

CIGNA

Aetna

PacifiCare

HealthNet

Blue Shield

Blue Cross

Kaiser

73%82%

Source: Cattaneo & Stroud, Inc.

2.0%

4.0%

Commercial HMO Commercial HMO Concentration - Concentration -

CaliforniaCalifornia

39.0%

11.0%

7.0%

11.0%

12.0%

11.0%

45.0%

13.0%

12.0%

10.0%

11.0%

3.0%

2000 2006

All Others

CIGNA

Aetna

PacifiCare

HealthNet

Blue Shield

Blue Cross

Kaiser

80%91%

Source: Cattaneo & Stroud, Inc.

3.0%

5.0%

2.0%

Concentration of Concentration of Medicare HMO Medicare HMO

Enrollment - CaliforniaEnrollment - California

36.0%

8.0%

36.0%

9.0%

49.0%

7.0%

26.0%

9.0%

2000 2006

All Others

Aetna

PacifiCare

HealthNet

Blue Shield

Blue Cross

Kaiser

87%89%

Source: Cattaneo & Stroud, Inc.

4.0% -- 2.0%

- 5.0%- 2.0%

4.0% -2.0% -

OverviewOverview

IntroductionIntroduction

Environmental AssessmentEnvironmental Assessment

Challenges for GroupsChallenges for Groups

Medical Group ResponsesMedical Group Responses

Concluding Remarks; Q and AConcluding Remarks; Q and A

ChallengesChallenges

Declining Commercial HMODeclining Commercial HMO– erosion of revenueerosion of revenue– tipping point tipping point

ChallengesChallenges

Medicare Advantage funding Medicare Advantage funding flush…at the momentflush…at the moment

…….funding cuts .funding cuts possiblepossible

ChallengesChallenges

Powerful Competitors: KaiserPowerful Competitors: Kaiser– market share market share – competition in physician competition in physician

recruitmentrecruitment

ChallengesChallenges

HMO vs PPO HMO vs PPO

Hospital utilization?Hospital utilization? Price differential shrinking?Price differential shrinking? Influence of P4P?Influence of P4P? Uneven Playing fieldUneven Playing field

ChallengesChallenges

Influx of high deductible products Influx of high deductible products coupled with inability to coupled with inability to administer deductiblesadminister deductibles

Risk segmentation Risk segmentation death spiraldeath spiral

Can’t participateCan’t participate

ChallengesChallenges

Time of Uncertainty; Time of Uncertainty;

Healthplan commitment to Healthplan commitment to ModelModel

OverviewOverview

IntroductionIntroduction

Environmental AssessmentEnvironmental Assessment

Challenges for GroupsChallenges for Groups

Medical Group ResponsesMedical Group Responses

Q and AQ and A

Medical Group ResponsesMedical Group Responses

1.1. Get BetterGet Better

2.2. Get BiggerGet Bigger

3.3. CollaborateCollaborate

4.4. LobbyLobby

Medical Group ResponsesMedical Group Responses

1. Get better1. Get better

– ITIT– Pay for PerformancePay for Performance– QI ProgramsQI Programs– CAPG Standards of ExcellenceCAPG Standards of Excellence

Medical Group ResponsesMedical Group Responses

CAPG Standards of ExcellenceCAPG Standards of Excellence

1.1. What: A recognition program that What: A recognition program that rewards members exhibiting rewards members exhibiting established attributes of excellence. established attributes of excellence.

2.2. Goals: Goals: • Stimulate all groups to Stimulate all groups to improveimprove• BrandingBranding

Medical Group ResponsesMedical Group Responses

CAPG Standards of Excellence CAPG Standards of Excellence -- Three Domains:-- Three Domains:

Care Management ProcessesCare Management Processes

Health Information TechnologyHealth Information Technology

Accountability and TransparencyAccountability and Transparency

Medical Group ResponseMedical Group Response

2. Get Bigger2. Get Bigger

– Mergers and Acquisitions Mergers and Acquisitions – Knox Keene LicensureKnox Keene Licensure

Global Risk ContractingGlobal Risk Contracting Go into healthplan business?Go into healthplan business?

Medical Group ResponsesMedical Group Responses

3. Collaborate3. Collaborate– With PlansWith Plans– With HospitalsWith Hospitals– With EmployersWith Employers– With GovernmentWith Government

Medical Group Responses Medical Group Responses

Data Sharing Code of ConductData Sharing Code of Conduct

WHO?: WHO?: CAPG and top 6 PlansCAPG and top 6 Plans

WHAT?:WHAT?:1.1. Reciprocal Sharing of new data setsReciprocal Sharing of new data sets2.2. Coordination of Disease management Coordination of Disease management

programs programs

STATUSSTATUS:: Being adopted and implemented. Being adopted and implemented.

Medical Group ResponsesMedical Group Responses

4. Lobby, lobby, lobby4. Lobby, lobby, lobby

Wither Universal Coverage?Wither Universal Coverage?

Medicare AdvantageMedicare Advantage

MiscMisc

Medical Group ResponsesMedical Group Responses

OverviewOverview

IntroductionIntroduction

Environmental AssessmentEnvironmental Assessment

Challenges for GroupsChallenges for Groups

Medical Group ResponsesMedical Group Responses

Q and AQ and A

2008 Health Care ForecastFeb 22, 2009

Strategic Outlook on Healthcare Strategic Outlook on Healthcare Market :Market :

A Medical Group PerspectiveA Medical Group Perspective Don CranePresident and CEO