The Future is Ours to Create Navigating Change

The Future is Ours to Create: Navigating Change in 2017 © 2017 Southern California Permanente Medical Group – not for distribution

“The BEST WAY to predict the future is to CREATE IT. ” - Abraham Lincoln - Peter Drucker 2 | © 2017 Southern California Permanente Medical Group

Our Vision: PATIENT-CENTERED KP, SCPMG and TSPMG The Answer to Health, Health Care and Physician Wellness in America CARE ANYWHERE CULTURE OUR PEOPLE HIGHEST PERFORMANCE CONSISTENCY IN CARE AFFORDABLE INNOVATION AND TECHNOLOGY 3 | © 2017 Southern California Permanente Medical Group

LOOKING BACK 2012 – The New Normal 2013 – Best at Getting Better 2014 – ACA & Covered California 2015 – Creating Capacity 2016 – Embracing Transformation 2017 – Creating a Healthy Future while navigating change | © 2017 Southern California Permanente Medical Group

The CHALLENGES and OPPORTUNITIES of MEMBERSHIP 5 | © 2017 Southern California Permanente Medical Group

1980 – 2016 GROWTH +765, 084 4. 5 new members Membership Millions 4. 0 Physicians * 4, 690 5, 391 4, 416 3. 5 +555, 373 3. 0 new members +421, 442 2. 5 2. 0 new members 1, 072 1996 1999 new members 2011 2016 2013 2016 19 80 19 81 19 82 19 83 19 84 19 85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 1. 0 2, 615 1, 766 1987 1990 1. 5 3, 301 2, 423 +625, 757 * Physicians (Partners only) 6 | © 2017 Southern California Permanente Medical Group

MEMBERSHIP TRENDS Budget ACA Actual ACA Budget 2012 7 | © 2017 Southern California Permanente Medical Group 2013 109, 000 99, 283 65, 404 80, 002 61, 000 56, 935 2011 140, 000 161, 446 1 41, 00 0 170, 000 7 5, 00 0 55, 400 43, 514 93, 000 95, 813 66, 000 157, 389 176, 584 287, 469 Actual 2014 2015 2016 33, 833 21, 400 2017(1+11) (3+9)

TOTAL GROWTH (YE 2011 – 2017 P) Year End 2011 2017 (Projected) 3. 5 Growth Percentage Million 4. 4 Million +854, 638 +24% Physician FTEs 6, 756 8, 403 +1, 647 +24% SCPMG General $5. 8* $8. 7* +$2. 8 +49% Physician Budget $1. 9 $2. 85 +$0. 95 +50% SCPMG $144. 82* $167. 13* +$22. 31 +15% Members Budget PMPM Budget Billion * Excludes CAMs 8 | © 2017 Southern California Permanente Medical Group Billion

2016 AFFORDABILITY CHALLENGES 9 | © 2017 Southern California Permanente Medical Group

KFHP AND SCPMG EXPENSE PMPM TRENDS 6. 0% Combined Exp Trend SCPMG Exp Trend 5. 0% KFHP expenses in 2015 driven by Outside Hospital, Pharmacy and Claims. 4. 0% 3. 0% SCPMG Increase primarily driven by CAM expenses, Outside medical, and labor settlement 2. 0% 1. 0% 0. 0% 2011 A 2012 A 10 | © 2017 Southern California Permanente Medical Group 2013 A 2014 A 2015 A 2016 A

FINANCIAL IMPACT OF EXPENSIVE NEW CLINIC DRUGS 25% Chemotherapy Drugs PMPM Trends 20% 15% 10% 5% 0% -5% -10% 2012 11 | © 2017 Southern California Permanente Medical Group 2013 2014 2015 2016

KFHP AND SCPMG EXPENSE PMPM TRENDS 6. 0% Combined Exp Trend SCPMG Exp Trend Combined Exp Trend Adj SCPMG Increase primarily driven by CAM expenses, Outside medical, and labor settlement 5. 0% 4. 0% 3. 0% 2. 0% 1. 0% 0. 0% 2011 A 2012 A 2013 A * Combined Exp. Trend is adjusted for several one-time expenses 12 | © 2017 Southern California Permanente Medical Group 2014 A 2015 A 2016 A

SCPMG REVENUE AND EXPENSE PMPM TRENDS 195 185 175 165 155 145 135 2011 2012 2013 Revenues PMPM 13 | © 2017 Southern California Permanente Medical Group 2014 2015 Expenses PMPM 2016

STEPS TO ENSURE FINANCIAL SECURITY • CAMS • Portfolio management • Outside medical management – Autism/Developmental Delay workgroup – Maximize EPRP and COUM repatriations • Medical center accountabilities • Continue our strong commitment to evidence-based medicine and remove unwarranted variation in our outpatient medication utilization. • Fully leverage appropriate use of Telemedicine • Utilize unused capacity in schedules, ORs, procedure rooms and executing IQM. 14 | © 2017 Southern California Permanente Medical Group

“How we CONFRONT our challenges is precisely WHAT MAKES US GREAT. ” - Unknown 15 | © 2017 Southern California Permanente Medical Group

2016 REGIONAL ACCOMPLISHMENTS 16 | © 2017 Southern California Permanente Medical Group

2016 NEW FACILITIES Downtown LA 14 Exam Rooms Temecula 16 Exam Rooms Laguna Hills B. H. Offices 28 provider offices and 5 Group Rooms Downtown LA 14 Exam Rooms In 2016, $1. 5 Billion approved for capital projects in Southern California Santa Monica 14 Exam Rooms 17 | © 2017 Southern California Permanente Medical Group Tehachapi 4 Exam Rooms Chino Hills Regional Reference Laboratory 3 new RAD MOBs opened with 6 more on the way Signal Hill 18 Exam Rooms

2016 TELEHEALTH / INNOVATION 1. 3 Million telephone appointments – 46% increase 21, 000 overall video visits – 75% increase 7, 000 Integrated Video Visits – 500% increase KP NOW – 24/7 – 20, 000 visits per month Tele-derm 18 | © 2017 Southern California Permanente Medical Group SCPMG i. Phone Pilot Cardiac Rehab

2017 AREAS OF FOCUS • Business Management Financial Performance • Systems and Technology Value Creation Revenue National Systems Deployment Capacity New Business Development 19 | © 2017 Southern California Permanente Medical Group

ACCESS Get the red out and keep the red out Interdependence • • SERVICE • An extraordinary care experience AFFORDABILITY 2017 • Operations Priorities Financial Fitness QUALITY • The Garfield Operational Excellence Distinction PEOPLE AND SYSTEMS • • 20 | © 2017 Southern California Permanente Medical Group Care Transformation Leadership and team development

LEANING IN… REALIZE THE POWER OF INTERDEPENDENCE ANTELOPE VALLEY • FO Neurology • KC Psychiatry BALDWIN PARK • KC Urology • FO Neurology • DO Otolaryngology • RIV Dermatology LOS ANGELES • KC Allergy • KC Urology • SB Otolaryngology • OC Neurology • OC General Surgery • SB Psychiatry PANORAMA CITY • WH, FO, AV Psychiatry • AV Neurology • AV Otolaryngology • AV Hematology/Oncology • KC Endocrinology SOUTH BAY • KC Urology • KC Allergy • RIV & LA Dermatology 21 | © 2017 Southern California Permanente Medical Group FONTANA • DO Otolaryngology • KC Allergy • KC Urology • OC Orthopedics ORANGE COUNTY • DO General Surgery • DO, LA, FO Orthopedics DOWNEY • FO, Pain Management (Psychologist) • FO, Psychiatry RIVERSIDE • OC & FO Otolaryngology • OC Neurology • OC Urology • OC General Surgery WOODLAND HILLS • KC Dermatology • OC Neurology WEST LOS ANGELES • KC Urology • LA Dermatology San Diego • RIV Primary Care • Dermatology

QUALITY NOT JOURNEY, a DESTINATION… is a 2017 PRIORITIES Patient Safety National Quality Priorities Including Diagnostic Errors Including Depression Diabetes o. PAP Cancer Care Optimization Women’s and Children’s Health 22 | © 2017 Southern California Permanente Medical Group – not for distribution

PERMANENTE-LED NATIONAL QUALITY PRIORITIES IQM Palliative Care 23 | © 2017 Southern California Permanente Medical Group Depression Total Joint Program Complex ESRD Life Care Planning

DIABETES FOCUS: Improve A 1 c Control ü Diabetes Playbook ü Predictive Modeling ü Medication Management ü Member Engagement 24 | © 2017 Southern California Permanente Medical Group

CANCER CARE OPTIMIZATION Colon Cancer Moonshot 14 13 12 11 10 9 8 7 6 13. 8 Three-Year Averaged CRC Mortality Rate per 100, 000 Persons Targeted Actual 12. 5 11. 9 11. 4 6. 9 Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 • Sub-specialization • Creation of other moonshot goals 25 | © 2017 Southern California Permanente Medical Group Year 9 Year 10

HIGH QUALITY IMPACTS MEMBERS LIVES! • 222, 909 • Lives impacted over 10 years! 24, 780 4, 478 9, 000 Remission of Depression Lives saved with superior 5 -YEAR SURVIVAL rates Patients with suicidal ideation in ED tracked for follow up 144, 320 27, 000 13, 331 DM patients brought into control Members lost an average of 10 pounds Reduction in hospital mortality 26 | © 2017 Southern California Permanente Medical Group

COMMUNICATING The POWER of PERMANENTE MEDICINE 28 | © 2017 Southern California Permanente Medical Group

Our SCPMG Culture Accountability to patients, society and the profession Altruism Excellence putting the best interests of the patient over self commits to life-long learning Permanente Professionalism Honor & Integrity exhibits the highest standards of behavior Humanitarianism Respect for Others collaborates with patients, colleagues and staff Copyright © 2017 Kaiser Permanente commitment to service

STRATEGIES FOR A HEALTHY FUTURE: RADICAL REDESIGN of CARE DELIVERY 30 | © 2017 Southern California Permanente Medical Group

STRATEGIES FOR A HEALTHY FUTURE: “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has. ” —Margaret Mead 31 | © 2017 Southern California Permanente Medical Group

AND SCPMG CONTINUES OUR QUEST TO BE THE ANSWER TO HEALTH, HEALTH CARE AND PHYSICIAN WELLNESS IN AMERICA 32 | © 2017 Southern California Permanente Medical Group