J.P. Morgan Healthcare Conference, Kaiser Permanente Aims for “Total Health”

SAN FRANCISCO, Westin St Francis Hotel, January 7, 2013. The Alexandra’s room at the 32^nd floor was filled with attendees. Many people were standing around the seating area and out into the hall to hear speakers from Kaiser Permanente (KP) give their talk.

President and COO, Bernard Tyson opened the KP presentation with basic details about the big health care company.  He said that the not-for-profit HMO is in nine states and has 37 hospitals.  Its facilities occupy some six million square feet.  He said that the firm generated about $50 billion in revenues in 2012.  The firm has 17,300 doctors.  Their mission is to provide the highest quality care to the most patients possible.  Bernard said “This is the same mission created by Henry J. Kaiser when KP was founded.”  KP is active in prepaid care, is technology enabled and stands for “Total Health.”  He said that the future of it care focus has three parts: Quality, Accessibility, and Affordability.  Referring to J.D. Power member quality studies, Bernard said “Quality is rated as #1 with 5 stars.  Seven out of eight regions are rated at 5-stars.  Northern Calif. is rated at 5-stars.”

Tyson went on to say that they have made improvements in care delivery.   KP uses the EPIC information technology system that helps KP deliver healthcare.  He said that quality is an increasing trend and that variation in practices is going down, which is a good thing. With its race-based data system, KP doctors can to look at all ethnicities, which helps to build good data.

Tyson said going forward KP would mainly focus on:

1. Staffed beds (in-hospitals)

2. Face to face meetings (in doctor’s offices)

3. In-home care (in patient’s home)

4. Technology/ virtual care.  (email and mobile apps)

Bernard said that in 2012 KP had 20 million e-visits to doctors and expects the see this activity grow to 25.3 million in the next few years.  He said that in 2012, KP had about 40 million face-to-face visits to doctors.  He is excited about the future.

He introduced Kathy Lancaster, Executive VP and CFO.  Kathy provided some color on the financial details.  She said that quality drives affordability, so investments help the KP regions to achieve NCQA (National Committee for Quality Assurance) goals that ultimately drive better financials. She mentioned that KP received the J.D. Power quality award (2012 national member health plan quality survey).  She said that the investment in quality dramatically drives down affordability costs. The “over-65” (population) group is growing at 3X the rate of the “under-65” group.

She spoke of EBITA data and said that cash is at 3.3X of debt. Managing cash internal to its business is the reason for KP to come to the capital markets.  KP supports about nine million members. Twenty percent of KP’s capital investment goes into IT.  KP developed a $38 billion capital plan.  She said that KP rebuilt 15 of its hospitals in California for seismic repair, etc.  She said that KP is getting ready for Obama Care and its new patients.

Kathy wrapped up her remarks by saying that “Total Health” is staying healthy, returning to health, and healthy aging.  The “80/20 rule” says that patients with most illness cost 80% of the overall healthcare expense.  The “over-65” group is the fastest growing group.