KAISER PERMANENTE PERSPECTIVES ON

DRIVING VALUE THROUGH

TECHNOLOGY-ENABLED

HEALTH CARE

Karen SchartmanChief Financial & Strategy Officer, Kaiser Permanente Washington Region

November 17, 2017

Innovation and technology

advancement are the new constant

in healthcare

But let’s not forget we are Finance!

How do you justify the ROI?

5

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2002 2004 2006 2008 2010 2012 2014 2016

Annual US Health Care Spending (Billions of Dollars)

Health Care

Spending in

the United

States

Surpassed

$3.4 Trillion in

2016

Introducing Kaiser Permanente

U.S. Health Care Context

KP’s Technology Journey

Return on Investment

7

21,000+ physicians serving 11.8 members

199,000+ employees

8Regions

39Hospitals

660+MOBs

PRIMARY & SPECIALTY CARE | HOSPITAL | LAB | PHARMACY

IMAGING | OPTICAL | DENTAL | INSURANCE | RESEARCH

MISSIONTo provide high-quality, affordable health care services and to

improve the health of our members and the communities we

serve.

About Kaiser

Permanente

Henry J. Kaiser

Pioneering industrialist who

cared for his people

Sidney R. Garfield, MD

A talented young surgeon

and a visionary

Turning Vision of Affordability & Access into Reality

Decades and Decades of Health Care Reform

Source: Milliman Medical Index (MMI), 2017

Costs Nearly Triple for Family of Four

$9,235.00

$25,826.00

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2002 2004 2006 2008 2010 2012 2014 2016

Total Annual Cost of Healthcare Triples from 2002 to 2017

1970

36.4%

26.5%

14.2%

7.4%

15.5%

2010

31.5%

26.6%

13.3%

13.1%

15.5%

2015

32.3%

26.5%

13.5%

12.8%

15.2%

Source: CMS National Health Expenditures (NHE), 2016

Hospitals

Doctors & Other Health Professionals

Drugs & Medical Devices

Nursing Homes & Caretakers

Other

Where Does the Money Go?

12

…Shaping Health Care Today

External

Forces and

Trends…

Kaiser Permanente’s Technology Journey

Building our Foundation

Extending Access to Care

Kaiser Permanente’s Journey: Right Care, Right Time, Right Place

Technology Journey

16

Bui lding Our

Foundation

17

&Outpatient Inpatient

Scheduling

Registration

Billing

Health CareManagement

Clinicals

ClinicalDocumentation

Pharmacy

Operating Room

Billing

Emergency Room

KP HealthConnect

Building Our

Foundation

18

&Outpatient Inpatient

Scheduling

Registration

Billing

Health Care

Management

Clinicals

Clinical

Documentation

Pharmacy

Operating Room

Billing

Emergency Room

A Comprehensive System

Ancillaries

Pharmacy

Lab

Radiology/

Imaging

Health Plan

Membership/

Benefits

ClaimsProcessing

Benefits

Accumulation

Pricing System

Building Our

Foundation

19

Kaiser Permanente HealthConnectChart Reviews and Encounters

Allows providers to review patient charts and patient encounters

Appointments

View scheduled appointments and register patients for their visit

In-Basket View

Access and view items and actions to be addressed/completed

Care Everywhere

Pull patient information from KP and non-KP health care systems

*Screen shots contain test data and not actual patient health information

Building Our

Foundation

Sample Views of

Kaiser Permanente

HealthConnect

20

Extending Access

to Care

21

Care Delivery Continuum

Low Acuity High Acuity

RETAIL CLINIC*

PRIMARY CARE

INPATIENT

Virtual Channels In-Person Channels

CHAT WITH A DOCTOR*

INTEGRATED VIDEO VISITS

TELEPHONE ADVICE VISITS (TAV) — PHYSICIAN

EMAIL WITH CLINICIAN

EMERGENCY

URGENT CARE

ADVICE LINE WITH NURSE

*Pilots are underway with Chat With a Doctor and Retail Clinic

Extending

Access to

Care

22

Building on Our KP HealthConnect Foundation

KP.org (online access)

Message Center

My Coverage and Costs

Appointment Center

Pharmacy Center

My Medical Record

New Members: Get Started

m.kp.org (mobile access)

Physician Messaging

Appointment Scheduling

Integrated Video Visits

View Test Results

Review Medical Record

Order Prescriptions

Extending

Access to

Care

23

Secure Physician Messaging

Medical and

health plan emails

are all in one place

Caregivers can send

messages on behalf

of family members

directly to their

personalized care

teams

Members can easily

share photos and

images with their care

team

Integrated Mailbox Proxy Capabilities Photo Sharing

Extending

Access to

Care

24

Real-Time Appointment Scheduling

Real-time Scheduling

Choose who the

appointment is for

Multiple Appointment Types

In addition to facility

and reason for visit,

members can select

appointment type

Multiple Scheduling Options

Select date and

time as well as

preference for

reminders (text or

email)

Extending

Access to

Care

25

Integrated Video Visits

Virtual “Waiting

Room” provides

regionally-

personalized event

information

Patient View Physician View

Images and other

diagnostics may be

viewed during the

video visit session

Family members and

specialists may also

be invited to join the

virtual visit

Extending

Access to

Care

26

View Test Results

Ability to view

Medical Record

information,

including test

results

View present and

past test results

Visualize trends

Extending

Access to

Care

27

Online Pharmacy

Ability to view prescriptions along with

ordering and pickup options online

Select

pickup or

delivery

options, ship

to home,

preferred

method for

payment

and

shipping,

and track

status online

View

personal

prescription

list online

Extending

Access to

Care

28

Return on Investment

29

Price PositionAdvantage to Market

& Affordable

Member Growth Gain Share

Expense Trend Flat

EBITCover Capital and

Community Investments

IRR WACC + Risk

KPIs

Planning and

Measurement

30

Strategic

PortfolioFacilities

Maintenance

Equipment

Technology

Grow Integrated

Care & Coverage

Deliver KP

Technology Solutions

Strengthen the

Brand

Maintain Core

Infrastructure

Technology Facilities Total

Region $89 $224 $313

Company-wide $73 $232 $305

CapEx per Member, 2017-2021

A Portfolio of Investments Aligned with Strategy

KPWA Strategy

31

Triple aim:

Improve

Health

Improve

Patient

Experience

Reduce the

Per Capita

Cost of

Healthcare

Patient/ Consumer Satisfaction

High Quality Care

Cost Improvement and Revenue Growth

Return on Investment

32

OPTIONS

WA State Average

HEDIS 90th

PercentileKP – best in market

Breast Cancer Screening- WA State

Competitor A

Competitor D

Competitor E

Competitor C

Competitor B

Treatment/

Clinical:

Using

Integrated

System to

Drive Nation

Leading

Outcomes

33

$72.20

$81.66

$88.40

$53.14

$60.08

$51.98

$57.18

$67.08

$64.72

$39.38$44.98

$54.21

$100.00

$90.00

$80.00

$70.00

$60.00

$50.00

$40.00

$30.00

2013 2014 2015

Commercial PMPM Comparison

Express Scripts (PBM) MedImpact (PBM) OptumRx (PBM) KFHPW

KP – best in market

Market Leading Drug Management

Competitor A Competitor B Competitor C

Treatment/

Clinical:

Using Data to

Eliminate

Variation that

Does Not Add

Value

34

Quality:

Reducing the

need for

inpatient care

Inpatient Days per Thousand Members

1,177

1,155

1,212

1,184

1,222 1,233

1,141

1,108

1,061

905

857

797 805

761

700

800

900

1,000

1,100

1,200

1,300

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

Medicare Advantage

203 203 205

211

220 220

216 215

216

196

179

173

169

166

150

160

170

180

190

200

210

220

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

Commercial

35

WA State Average

HEDIS 90th

PercentileKP – best in market

Rating of Personal Doctor- WA State

OPTIONS

Competitor E

Competitor D

Competitor C

Competitor B

Competitor A

Satisfaction:

Delivering

Personalized

Care

36

Driving Virtual

Care

150M lab tests

annually

45M lab results

viewed

online

81.5M prescriptions

dispensed by

OP pharmacies

in 2016

21.8Monline

prescriptions

submitted

248M visits to

kp.org

23.6M secure

messages to

providers

5.1M online

appointments

120M+ notifications

sent from

KPHC to

members

85,000 video

visits

Electronic Secure Data

37

12.6%

9.9%

12.0%

8.0%

7.0%

7.6%

4.3%4.7%

4.2%

3.1%

4.1%

2.2% 2.0%

0.1%

13.0%

11.3%

9.2%

8.3%

6.4%

5.3%

6.8% 6.8%

5.5% 5.5%

4.2%

4.9%

4.0%

5.0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

KP Normalized Expense Trend Industry Expense Trend

Reducing Per Capita Expenses

KP Expense

Trends lower

than market

over 10 years

38

Revenue and Membership Growth

-1.2%

0.3%

2.5% 2.5%

0.2%-0.3%

-0.7%

1.2%

2.9%

1.5%

0.3%

5.7%

6.7%

4.2%

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

RevenueRevenue Per Member Change

Member Growth

Operating revenue $64.6 billion in 2016

10.7 million members in 2016

39

Unlocking the Power of KP’s Data & Technology

Cognitive Computing

Taking advantage of self-

learning systems to

supplement diagnosis

and treatment decision

support

Data Analytics

Opportunity to improve

quality and efficiency of

delivery system through

analysis/evaluation of big

data sets

Machine Learning

Learn from past events and

ingest vast amounts of data

to provide input and support

complex decision making

Care Settings Of The

Future

Inserting technology to

transform traditional care

settings and re-imagine the

design of our care facilities to

put patients first

Remote Patient

Monitoring

Piloting remote monitoring to

learn how it can improve patient

outcomes (e.g., Cardio Rehab)

Exploring the

Future:

New

Technologies

Being

Explored