Anthem Blue Cross

1. Anthem Blue Cross Quality, Engagement and Affordability – Innovations for the Future CPEEHCC January 16, 2012 Tammy Tucker Vice President, California Large Group

2. Agenda • Why Do We Need a New Model? • How Do We Improve Quality? • When Will Our Members Engage? • What Will it Take to Drive Affordability?

3. Improving Quality

4. The Business Case for Patient Safety • As many as 98,000 patients in American hospitals die of avoidable medical errors each year • The cost to the health care system has been estimated at $11 billion each year • The human cost of these errors cannot be calculated

5. Patient Safety First Statewide Patient Safety Collaborative

6. Patient Safety First… Our First Year Successes

7. IBM Watson - Healthcare Innovation with WellPoint • Watson innovation will deliver: • Efficient and informed medical decisions • Transparency into care delivery variability • Improved quality and total cost of care • Improved evidence-based medicine

8. The Watson Opportunity • Real-life, real-time application in conjunction with leading oncology centers • Synthesizes millions of scientific data points - patient specific data, medical studies, literature, radiology films etc… • Using the spoken word, Watson instantly listens and recommends answers to physician questions • Shared decision making to help providers identify the most likely diagnosis and treatment options in complex cases

9. Engaging Members Using Technology

10. Benefits Of A Consumer Focus Mobile Provider Directory Capabilities: Sample Mockups • Look up a doctor or facility • Enter location (city & state or zip code) • Find a provider near me • Search by provider type • Doctor • Hospital • Urgent Care, etc. • Find a provider by specialty • Provider profile details • Mapping and directions • Public and secure directory

11. Click here to view original Anthem Care Comparison Anthem Care Comparison

12. Benefits Of A Consumer Focus Enhanced Transparency Capabilities: Capabilities: • Anthem care comparison and out of pocket cost information will be available to logged in members • New capabilities will integrate information into the provider directory • Access to procedure level cost and quality information • Out of pocket cost information for PPO members • Expand Zagat Health Survey to remaining markets

13. Benefits of A Consumer Focus ER Alternatives • Focuses on potentially avoidable ER visits by directing care to lower cost alternatives • Leverages technology by using multiple communication channels (EOB, brochures, email, web, IVR and Google Mapping) to educate members about ER alternatives Decreased ER-related PMPM by 31% 1 Decreased ER-related Visits/1000 by 23% 2 1, 2 Pilot conducted with a large client in Virginia within our parent company comparing results from Jan-Apr/2009 to Jan-Apr/2010 when intervention implemented.

14. Improving Affordability

15. Why Payment Innovation? – Increasing Premiums California Premiums vs. Inflation Cumulative Premium Increases Compared to Inflation, California, 2002 - 2010 • Since 2002, health insurance premiums in California have increased by 134.4%, more than five times the 25.4% increase in California’s overall inflation rate. • The marketplace can not sustain this trend. Traditional methods to keeping costs down have not been successful enough. • Anthem Blue Cross is implementing many new initiatives to address this growing problem. % % % % % % % % % % % Sources: California Health Care Foundation; California Employer Health Benefits Summary Survey 2007-2010; California Division of Labor Statistics %

16. Why an ACO?: California Hospital Revenue 2000-2009: Absolute Growth in Net Inpatient Revenue per Day 159% 76% 18% MEDI-CAL MEDICARE COMMERCIAL Source: State of California, Office of Health Planning and Development (OSHPD). Calculations by AHIP Center for Policy and Research

17. Payment Innovation Improving Value and Affordability • Align ALL payment with quality, cost and value • Lower cost without adversely affecting outcomes • Improve quality • Inadequate focus on outcomes • Payment sometimes aligned with quality and value • Reward unit cost Current Model: Rate increases not tied to value New Model: Rate increases tied to quality, safety, and value

18. California ACO Partners with Anthem Blue Cross Defining ACO Principles • 3 to 5 year contractual relationships • Focus is on PPO Fully Insured population • Transition to a global payment over the term of the relationship • Participation in upside savings is dependent on passing a Quality Gate • Success is dependent on data exchanges with ACO partners Santa Clara County IPA based in Silicon Valley HealthCare Partners based in Torrance, CA • Brookings-Dartmouth ACO Pilot • Medical Group & IPA Model • ~1,200 employee and affiliated PCPs • ~3,400 employed and contracted specialists • Medical Group & IPA Model • ~280 PCPs • ~550 specialists Sharp Community Medical Group based in San Diego, CA Sharp Rees-Stealy Medical Group based in San Diego, CA • Medical Group Model • ~200 PCPs • ~200 specialists • IPA Model • ~200 PCPs • ~500 specialists

19. What is an Accountable Care Organization? Source: Dartmouth-Brookings ACO pilot project

20. Options for Payment Reform Source: Dartmouth-Brookings ACO pilot project

21. Transparency: a New Way to Engage with Providers Membership • Electronic membership file • Membership additions/deletions Census • Hospital census • Emergency census Claims • Two years of historical • Monthly claims data file Medical Management • Utilization Management • Case Management • Disease Management Pharmacy • Claims data files • Analytic reports Reporting • Series of analytic reports Exchanges to the Health Plan • Lab • Functional Status • Bio-metric data • Smoking status

22. Anthem Blue Cross ACO Model 2011: Shared Savings – Quality Gate Quality Gate • Physician Quality Metrics • Hospital Quality Metrics Can participate in Shared Saving if passed Quality Gate Note: Points are scored based on both improvement and an attainment threshold

23. Anthem ACO Model for 2011: Quality and Performance Metrics – Physician & Hospital • Breast cancer screening • Colorectal cancer screening • Childhood immunization status (MMRVZV) • Chlamydia screening in women • HbA1C screening • LDL screening • Cholesterol management LDL screening (cardiovascular) • Nephropathy monitoring • Use of imaging studies for low back pain • Appropriate testing for children: pharyngitis • Treatment/upper respiratory infection • Avoidance of antibiotic treatment of adults/acute bronchitis • Medication monitoring • JC/CMS NHQM – AMI, PN, CHF & SCIP • ACC metrics for cardiology • STS metrics for cardiac surgery • Deep sternal wound infection • Prolonged ventilation • Operative mortality for CABG • Surgical re-exploration • Pre-operative beta blockade • National Health Surveillance Network – • Central line /bloodstream infections • Ventilator /pneumonia • Catheter /urinary tract infections • Patient satisfaction - CAHPS

24. Clinical Efficiency Objectives • Accountable Care Components Chronic Care Disease Management Cost Complex Case Management Preventive Care Outreach Ambulatory Surgery Centers Care Navigation Hospitalists Pricing of ACO Product – 3-7% Savings, before benefit design changes

25. ACO Product: 2012 California ACO Product/Benefit design is targeted to be available with an effective date of January 1, 2012 • 3 Tier PPO offering • Tier 1 – ACO Providers • Tier 2 – PPO Providers • Tier 3 – Non-contracted Providers • Flexibility to move between tiers when accessing care • Attractive option for Large Group Employers ACO FLEX ACO CORE • Only ACO Providers can be accessed • Self-referral option within ACO network • Attractive option for Small Group Employers

26. Anthem Leads Trend Mitigation in California Hospital and Pharmacy Cost of Care 2 Year Projections* Source: Anthem Actuarial – Q42010.* Excludes Pricing Trend Adjustments of approximately 3% for deductible leveraging - 0.7%, demographic aging - 1.3% and adverse deviation - 1% ; of enrollment. No profit in trend.

27. The Cost Conundrum “the federal budget is on an unsustainable path . . . rising costs for health care . . . will cause federal spending to increase rapidly under any plausible scenario . . .” (The Long-Term Budget Outlook, CBO, 2009) “Here … a medical community came to treat patients the way subprime mortgage lenders treated home buyers: as profit centers.”Atul Gawande 2006 Spending 92-06 Growth McAllen $14,946 8.3% La Crosse $5,812 3.9% Gawande, Atul. The Cost Conundrum: What a Texas town can teach us about health care. The New Yorker, June 1, 2009

28. Value-based Purchasing Design (Reference-based pricing) Hip and Knee replacements - cost of the hospital alone can vary with little to no differentiation in quality measures, between $15,000 and $110,000 - commercial PPO population Anthem Blue Cross pilot with CalPERS and has established a threshold of $30,000 to cover inpatient services for routine single knee and hip joint replacement hospital stays Results: 1.6% of Annualized Premium Savings

29. VBPD – How it Works? Cost Cost Effective Facilities Identified Member Awareness Campaign Reference Price Point Anthem Care Compare Informed Decision Cost Calculator

30. Anthem Care Comparison - Transparency

31. Value-based Purchasing DesignCurrent and Expanded Procedure List

32. Transformational Change