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Patricia A. Liebman
Chief Executive Officer
UPMC Health Plan
Reports on 2002

Change is a fact of business life. Change helps businesses grow, sometimes level off, and then grow again.

For UPMC Health Plan, 2002 was a year of change. In 2002, our total expenses exceeded our total revenue by $5.7 million. However, our membership continued to increase and, most important, we learned valuable lessons about what we need to do in 2003 and beyond.

Change in 2002 gave us the opportunity to control costs without sacrificing quality, and also to meet the challenge of growing membership
in a sluggish economy.

The challenges of 2002 confirmed something we already knew: The interdependence of all of our partners makes us stronger as a company, while it also strengthens our community.

Our top priority continues to be managing
these relationships to provide unparalleled health benefits in western Pennsylvania.

Throughout this annual report we declare our
interdependence with our members, doctors, hospital administrators, employers, and people
in the community. And we show how this
interaction can lead to successful outcomes.

Like consumers in any marketplace, our members look for value. For some of our members, “value” means more medications, technologies, and tests. Unlimited access to familiar physicians. A hospital in every neighborhood. Copayments lower than the cost of a fast-food dinner.

But delivering value in the real world demands more practical approaches. The health care dollar
is limited, and business and government payers
want high-quality health benefits at a reasonable price and with reasonable contributions from consumers. Consumers must also have a stake in maintaining costs at reasonable levels. That’s what interdependence means.

One way UPMC Health Plan has brought value to its members is through health management programs that help them follow their physicians’ plans to maintain their health, better understand and manage their medical conditions, and reduce or prevent complications.

We call the 6,300 doctors and 78 hospitals in our network “accountable providers.” What that means is that we provide them with the information and support they need to practice the best possible medicine. In return, we ask them to be medically and financially accountable for the decisions they make every day.

Quality of care is our first concern, and we work with our providers in their quest for greater efficiency. We believe that reducing the variation in medical treatment provided by doctors and hospitals can improve quality of care and lower costs.

Here’s one example of how we help reduce
variation in medical care. During 2002 we
reviewed charts of patients who visited the emergency room for abdominal pain. We found that similar cases were often handled differently, resulting in different medical outcomes—some better than others. Our goal is to work with our providers to make sure that they consistently use only methods that result in the best outcomes.
This consistency greatly improves care and, by reducing complications, controls cost. We work daily with our providers to develop these best practices in every facet of care and treatment.

Our efforts to improve medical outcomes will intensify in 2003. We’ll share more peer data with our providers, and we’ll concentrate in areas such as diabetes, asthma, congestive heart failure, lower back pain, cardiac catheterizations, MRI/CT procedures, and pharmacy. We’ve identified these areas because of the higher costs associated with them, the benefits of standardizing care, and, in the case of cardiac catheterizations and MRI/CT procedures, the opportunity to reduce, where appropriate, higher than normal utilization.

Other initiatives we are aggressively pursuing:

  • Encouraging members to request—and doctors to prescribe—generic medications that have the same effectiveness as more expensive brand-name medicines.
  • Working with doctors to provide same-day appointments for urgent care. This can help
    avoid costly emergency room visits while giving patients faster treatment in a more comfortable setting.
  • Advising our doctors and hospitals about
    opportunities to weigh alternatives to hospital admissions, such as hospital-based observations that provide the same level of care at lower cost.

Knowledge of patient needs and cost-effective alternatives can conserve limited resources, maintain high-quality care, and reduce cost.
We think this is knowledge that doctors want, and we will continue to provide it.

Our 2002 experiences also spotlighted high interdependence among hospitals and other partners in the health care system. The news was positive: For the fourth year in a row, U.S. News & World Report included our partners at UPMC in its “Best of the Best” honor roll of hospital systems. UPMC was one of only 17 systems in the nation so recognized, and the only one in western Pennsylvania. UPMC is in good company—the list includes such systems as Johns Hopkins, the Mayo Clinic, and UCLA Medical Center.

Our interdependence with our hospital
partners stimulates such initiatives as placing
our staff members in emergency department offices at UPMC Presbyterian and UPMC Shadyside. Seven days a week, our on-site
nurses manage inpatient admissions, coordinate treatment, and recommend appropriate levels
of care for our members.

We also stay in touch when our members leave the hospital. To identify barriers to recovery, and to help our members understand instructions and prescriptions, we now assign nurses to make regular calls to members who are discharged from the emergency department after treatment for congestive heart failure, diabetes, or asthma.

We added congestive heart failure to our
health management program in 2002, and
early indications show strong benefits for our members (healthier lives) and our business
clients (reasonable costs).

Similar to our diabetes and asthma programs,
the one-on-one congestive heart failure program helps members follow treatment regimens prescribed by their physicians and also helps them understand and manage their disease. We are developing a pilot program that offers home health care visits, after discharge, to members who are admitted to UPMC-owned hospitals.

These threads of interdependence not only connect our members, providers, and business clients, but also extend to the communities we serve. Our commitment to the community includes a product portfolio of commercial benefit plans for employee groups and a variety of Medicare insurance options.

In 2002 we expanded our Medicare HMO service area and increased our UPMC for Life HMO membership from 2,369 to 8,717.

To offer additional choices to Medicare-eligible consumers, we introduced a preferred provider organization (PPO) Medicare plan that offers members the highest level of benefits for network care while also giving them the choice of using out-of-network providers.

UPMC for Life PPO was established after the U.S. Centers for Medicare & Medicaid Services selected UPMC Health Plan as one of only 33 health plans in the nation to help demonstrate how this product can work for Medicare beneficiaries.

In 2002, our group plan participation in
UPMC for Life increased. More than 25 western Pennsylvania companies now offer UPMC for Life HMO or PPO plans to eligible retirees.

Meanwhile, the Health Plan’s Medicaid
partnership with the Commonwealth
of Pennsylvania also continues to grow.
We renamed this product UPMC for You
in 2002 to better reflect our affiliation
with the world-class facilities of UPMC.

The needs of the Medicaid population differ from those of the members that our commercial and Medicare products serve. We’ve developed programs and protocols that recognize these differences by collaborating with key community organizations to tailor programs that match
these needs.

The interdependence among the Health Plan, employers, doctors and hospitals, labor and community groups, members, and others continues to challenge us to seek innovative solutions to daunting health care cost increases. As both an insurer and a provider, UPMC can play an invaluable role in addressing the problem of delivering world-class health care services without losing sight of the need to manage costs.

Out of this recognition of our interdependence was born an idea that we think shows exceptional promise for private and government employers and the people who work for them. During 2002 we developed a test model for a new kind of plan called UPMC Advantage and began offering it to the 35,000 employees of the University of Pittsburgh Medical Center.

Now UPMC offers these employees the highest benefit level when they use hospitals and other medical facilities that UPMC owns.

Our close collaboration with UPMC-owned facilities will enable us to share information about performance with hospitals and physicians. This dialogue, in turn, will identify opportunities for controlling medical costs while improving patient care and creating healthier communities.

Healthy communities will allow our region to survive and prosper. That’s why we’re committed to improving the health of our communities through medical education, community sponsorship, public outreach, and products that are leaders in both quality and cost-effectiveness.

By working with business clients, physicians, hospitals, and community and labor leaders,
we hope to change behavior. Just one example: Giving both educational and financial incentives to patients to seek preventive services can reduce—and even prevent—catastrophic medical incidents. That will result in healthier and happier people, fewer sick days, and reduced medical expenses.

We cannot achieve such goals working alone. It’s only by embracing our interdependence that we’ll succeed, getting people to lead healthier lives, helping people who are ill to manage their illnesses, reducing costly variations in medical care, and providing health insurance to underserved populations.

We need to fix the problems, not fix the blame.
I personally assure you that UPMC Health Plan will continue to be part of the solution. We remain committed to western Pennsylvania for the long term.

Sincerely,


Patricia A. Liebman
Chief Executive Officer
UPMC Health Plan

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