© 2005 ibm corporation j. mack robinson college of business 7 degrees of success | march 3, 2006 |...
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© 2005 IBM Corporation
J. Mack Robinson College of Business
7 Degrees of Success | March 3, 2006 | Dr. Rajeev Dhawan
Health CareHealth CareAlyse MinskyRodney SmithGary DonaldsonMarty StackMike ClantonEphram Bowman
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J. Mack Robinson School of Business
Topics for DiscussionTopics for Discussion
Introduction U.S. Health Care Industry
Kaiser Firm Analysis
Future of U.S. Health Care Economics and Health Care
Macro-Impacts within U.S. Health Care
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Forces Causing Health Care To ChangeForces Causing Health Care To Change
Changing Demographics
Increased Customer Expectations
Increased Competition
Intensified Governmental Pressure
Source www.ncbi.nlm.gov
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J. Mack Robinson School of Business
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J. Mack Robinson School of Business
What’s Happening Today?What’s Happening Today?
Health Care Spending Has Risen 40% Since The Year 2000
Insurance Premiums Have Gone Up By More than 60%
Employer Based Health Care Insurance Has Gone Down From 70% to 60% Today.
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J. Mack Robinson School of Business
US Health Care StatisticsUS Health Care Statistics
Largest Employment Sector
Health Care Expenditure More Than French GDP
60% Employer Based Insurance
Source: http://www.eia.doe.gov
1350014000145001500015500160001650017000175001800018500
US NHE FR GDP
2004 US Health Care spend $1.8 Trillion vs. French GDP
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Gross Domestic Product (GDP) and InflationGross Domestic Product (GDP) and Inflation
Source:http://hspm.sph.sc.edu/Courses/Econ/Classes/nhe00
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J. Mack Robinson School of Business
Health Care Percentage of GDPHealth Care Percentage of GDP
Source:http://hspm.sph.sc.edu/Courses/Econ/Classes/nhe00
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Strengths of the US Health Care SystemStrengths of the US Health Care System
Source: http://www.eia.doe.gov
Source: http://www.advamed.org/newsroom/chartbook.pdfSource: http://www.advamed.org/newsroom/chartbook.pdf
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Weaknesses Of The Current US Health SystemWeaknesses Of The Current US Health System Inadequate Coverage
Inconsistent Levels Of Quality
High Cost
Source: http://www.eia.doe.gov
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Types of Health Insurance CoverageTypes of Health Insurance Coverage
Health Maintenance Organizations (HMO’s)– Least expensive, but least flexible type of health plan
Preferred Provider Organizations (PPO’s) – Lower fees with a network of health care providers
Point-of-Service (POS)
– Point-of-service plans are similar to PPOs, but they introduce the gatekeeper, or Primary Care Physician.
Source: http://www.quotit.net/resources/plan_types.htm
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US Health Care Spending Is $1.9 trillion or One-Sixth of US Health Care Spending Is $1.9 trillion or One-Sixth of the Nation’s Economy: US GDP $12 trillion.the Nation’s Economy: US GDP $12 trillion.
86%
14%
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Demand factorsDemand factors
• Providing Quality Health Care While Controlling Costs
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Medical CPI As Compared To CPIMedical CPI As Compared To CPI
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History of Employer Based Health Care and the History of Employer Based Health Care and the US Economy - The US Health Care LegacyUS Economy - The US Health Care Legacy
Source: http://www.eia.doe.gov
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© 2005 IBM Corporation
KAISER FOUNDATION HEALTH PLAN, INC. AND KAISER FOUNDATION HEALTH PLAN, INC. AND SUBSIDIARIES/KAISER FOUNDATION HOSPITALS AND SUBSIDIARIES/KAISER FOUNDATION HOSPITALS AND SUBSIDIARIESSUBSIDIARIES
FIRM ANALYSISFIRM ANALYSIS
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Kaiser BackgroundKaiser Background
A Major US Ship Builder During WWII Began Offering Health Care To Their Employees during
WWII
Source: http://www.eia.doe.gov
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DESCRIPTION OF BUSINESSDESCRIPTION OF BUSINESS
PROFILE Headquartered in Oakland, CA. 8.3 Million Members In Health Plan Large Not-For-Profit Health Maintenance Organization 30 Hospitals 8 Independent Medical Groups 11,500 Physicians Total Operating Revenues Of $28 Billion
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Kaiser’s Presence GeographicallyKaiser’s Presence Geographically
Source: http://kaiserpermanente.org/kpwebentrypage.do
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PRINCIPAL OPERATING SUBSIDIARIESPRINCIPAL OPERATING SUBSIDIARIES
Kaiser Foundation Health Plan of Colorado Kaiser Foundation Health Plan of Georgia, Inc. Kaiser Foundation Health Plan of the Mid-Atlantic States, Inc. Kaiser Foundation Health Plan of the Northwest Kaiser Foundation Health Plan of Ohio Kaiser Health Plan Asset Management, Inc. (KHPAM)
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Kaiser Demand FactorsKaiser Demand Factors
Cost Trends and Inflation Levels For Health Related Services
Shift From Employer To Employee Contributions
Federal and State Health Care Regulations
Employment Levels and Equity Market Returns
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FIRM COMPARISONSFIRM COMPARISONS
Kaiser Aetna Cigna
Operating $26.1B $17.2B $18.1BRevenues
Net Income $1.6B $1.1B $1.4B
Number of 8.3M 13.7M 9.7MMembers
Source: http://kaiserpermanente.org/kpwebentrypage.do
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2004 INCOME STATEMENT SUMMARY2004 INCOME STATEMENT SUMMARY
Year ended December 31, 2004(In millions)
Revenues:Members’ dues $19,911 71.0%Medicare 6,241 22.3Co-pays, deductibles, fees/other 1,872 6.7
Total operating revenues 28,024 100.0Expenses:
Medical services 13,178 47.0Hospital services 7,484 26.7Outpatient pharmacy/optical 3,119 11.1Other benefit costs 1,873 6.7Health Plan administration/adjustments 896 3.2
Total operating expenses 26,550 94.7
Other Income and expenseInvestment income- net 208 0.7Interest expense (71) (0.3)
Total other income and expense 137 0.4
Net Income 1,611 5.7%
Source: http://kaiserpermanente.org/kpwebentrypage.do
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2004 KEY FINANCIAL RATIOS2004 KEY FINANCIAL RATIOS
Liquidity Ratios Quick Ratio 1.03Cash to Debt (%) 173.1
Profitability RatiosProfit Margin 5.0Cash Flows from Operations Margin 12.8
Debt RatiosDebt to Assets (%) 11.8Capital Expenditures as %of Depreciation Expense 221.4
Source: http://kaiserpermanente.org/kpwebentrypage.do
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STRENGTHSSTRENGTHS
Sound Financial and Operating Performance
Diverse Mix of Health Care Delivery System
Including new Product Developments
Technology Investments: New Clinical Information System KP-
Health Connect New Internal Medical Cost Administration System
Low Debt Levels
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WEAKNESSESWEAKNESSES
Rising Cost of Health Care
Medicare Funding and Uncertainties About Future Funding Levels
Substantial Future Capital and Technology Expansions
Challenges Associated With Implementation of KP-Health Connect In All Of Its Medical Groups
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““Forecast Please!’’Forecast Please!’’
Spending In Health Care Will Be Greater Than Growth In GDP Through 2013
Health Care Spending is expected to double over the next 10 years according to government projections
It’s Projected That The US Will Spend
18.7% Of Its GDP On Health Care By 2014
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Projected to reach 18.7% by 2013
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Economic EnvironmentEconomic Environment
GDP Inflation Unemployment Interest Rates
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Effects on the IndividualEffects on the Individual
Increased spending on health means less disposable income.
Employers will be less likely to provide coverage due to the rising costs.
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Effects On The GovernmentEffects On The Government
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Recommendations to KaiserRecommendations to Kaiser
Concentration on IT and Medical Records (KP Health Connect) to improve operating efficiencies, patient safety, and lower overall costs
Points for health system modeled after South Africa (points for healthy living)
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Recommendations For US Heath Care IndustryRecommendations For US Heath Care Industry
Provide Incentive to consumers to know the total cost
Promote and encourage electronic documentation.
To reduce the burden on the economy– Market driven
– Consumer awareness of total cost
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Thank you!Thank you!
Questions and AnswersQuestions and Answers