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Investor’s Day with PacifiCare Ritz Carlton Battery Park, New York June 4, 2002. Howard G. Phanstiel, President and CEO. .…a health and consumer services company making people’s lives better. Safe Harbor Statement
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Investor’s Day with PacifiCare Ritz Carlton Battery Park, New York June 4, 2002 Howard G. Phanstiel, President and CEO .…a health and consumer services company making people’s lives better
Safe Harbor Statement The statements made during these presentations that are not historical facts are forward-looking statements within the meaning of the Federal securities laws, and may involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from expectations include, but are not limited to, the risks discussed in the company’s most recent filings with the SEC, including Form 10Q as of March 31, 2002, and Form 10K as of December 31, 2000.
.…a health and consumer services company making people’s lives better PacifiCare = largest purchaserof health care services in the western U.S. A Fortune 200 company with • ~$11 billion in revenue • 2.4 million commercial lives • 835 thousand Medicare+Choice lives • ~9 million specialty lives
.…a health and consumer services company making people’s lives better “Crises” of 2000-2001 Executive Leadership Capital Structure Business Model/Mix Strategically Threatened Operations Under Siege Regulatory Challenges Network Instability Legal Uncertainties Stakeholder Confidence
.…a health and consumer services company making people’s lives better “Crises” of 2000-2001 Executive Leadership • Capital Structure • UniHealth overhang • Share repurchase program • Maturity & concentration of bank debt • FAS 142 goodwill exposure
.…a health and consumer services company making people’s lives better “Crises” of 2000-2001 • Business Model/Mix Strategically Threatened • Dependency on M+C/ ACRs locked in • Poor commercial business performance • Conversion to risk model • Operations Under Siege • Retroactive CA provider contracts • Harris integration challenges • Claims inventory build-up
.…a health and consumer services company making people’s lives better “Crises” of 2000-2001 Regulatory Challenges Network Instability • Legal Uncertainties • Class actions • OPM • Stakeholder Confidence • Shareholders • Creditors • Providers • Employees • Members
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 Progress Report • Leadership • Strategically focused • Shareholder-aligned • Committed • Capital Structure • Issues largely resolved • Diversified access to working capital
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 Progress Report • Product Strategies • Reduced M+C dependency • Enhanced commercial profitability • Retention & growth • Operations • Rapidly becoming industry leader • Full service systems platform supports all funding solutions
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 Progress Report • Networks • More stable • Require vigilant monitoring • Legal/Regulatory • Suits/settlements going our way • Positive & collaborative regulatory relationships • TX AG suit remains to be resolved • Technology • Investments in “Future State” underway • Outsourcing generates operational savings & significant flexibility
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 Progress Report • Brand • Advertising/repositioning campaign launched • Quality • Programs advanced- can they catch us? • Earnings • Visibility improved • Increased diversification • Rebuilding investor/creditor confidence
Fix the core • Operational control • Profit margin MCO Product/Segment Extensions • PPO • Med Supp • ASO • Defined Contribution • 3rd party specialty business HMO Full Service MCO Consumer-Aligned Organization • Drug Discount program • Debit Card • Women’s Health Initiative • Senior Caregiver • Tight Network Operations • Quality Measurement • Rx POS Connectivity • Extended Service Hours • Customer Welcome Calls Consumer HealthOrganization (CHO) .…a health and consumer services company making people’s lives better Top-Level Strategy
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 Detailed Strategies • Senior Business • Exit unprofitable/unsustainable markets • Harvest until visible reimbursement improvement • Leverage gross margin for debt repayment • Convert to Senior Solutions business
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 Detailed Strategies • Commercial • Exit unprofitable/unsustainable markets • Implement experience-rated underwriting • Price for margin, not market share • Leverage Western U.S. purchasing power • Implement seamless, full service solutions • Expand product offerings • Cross-sell specialty businesses
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 Detailed Strategies • Specialty Businesses • Increase PHSY member penetration; cross-sell • Increase unaffiliated membership • Expand product/service offerings • Extend integration with core business • Implement leading edge technology • Improve shareholder value recognition
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 Consumer Aligned Business Strategy Reposition & leverage PHSY and Secure Horizons brands with disruptive & unique advertising Leverage leading position as women’s health solutions company Leverage leading position in quality measurement, NCQA ratings, and customer satisfaction
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 Consumer Aligned Business Strategy Offer new products not covered under traditional definition of medical necessity Provide consumer/employers with more informed choices Become theSouthwest Airlines of our industry, with leading back-office technologies and business processes Roll out “hassle-free” e-scribing solutions
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 Cost Reduction Detailed Strategy Completemedical management build-up to support full risk Leverage disease management programs Implement optional tighter network solutions & channel membership through cost & quality measurements Complete implementation of $300M IT Future State with standardization of common, best practices Continue to leverage other outsourced solutions for non-core functions
.…a health and consumer services company making people’s lives better “Brand New Day”at PacifiCare in 2002 CONCLUSION – 2002 Means EBITDA Earnings Brand Investment Texas Debt Achievement
Howard G. Phanstiel, President and CEO Investor’s Day with PacifiCare Ritz Carlton Battery Park, New York June 4, 2002 .…a health and consumer services company making people’s lives better