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In the recent book, Epidemic of Care, Kaiser Permanente (KP) CEO George Halvorson and coauthor George Isham show how the use of health care resources is distributed among a health plan’s members. They present an illustration (adapted here as Figure 1) from which can be estimated that in a given year, • the least expensive 70% of patients account for 10% of the expenditures; and • the most expensive 1% of patients account for 30% of expenditures. Clearly, two different approaches are needed for managing the care of these two groups of patients. For the 70% of patients in the least expensive group, the health care system must deliver rapid and convenient access to care whenever and wherever it is wanted. Convenient access to doctors and medical services is what this group wants, and the high satisfaction of these healthy patients is extremely important: Health plans must retain these members as well as their membership dues so that resources are available to pay for the care of less healthy patients. For the 1% of patients in the most expensive category, the health care system must efficiently deliver the care that is predictably needed and must successfully coordinate care when the unpredictable occurs. This approach to care may be described as a disease management process, in which case management plays an important role. The impact of disease management on the health care system should be to use medical resources more efficiently and to eliminate expenses that do not produce positive clinical results. For the KP medical care system to survive and succeed financially, we must optimally manage both ends of the patient health spectrum: We must preserve the inflow of dues income into the system by satisfying healthy patients and at the same time eliminate excess spending on high-cost, high-risk patients—spending that does not contribute to the desired clinical outcomes. Patients with end-stage renal disease (ESRD) constitute a major portion of the most expensive 1% of health plan patients. For these patients in the Kaiser Permanente Southern California Region (KPSC), outside medical costs alone (payments for dialysis treatments plus outside hospital days) averaged $32,430 per patient in 2002. To this cost must be added the cost of a mean 9.0 KPSC hospital days, one or more vascular access surgeries, emergency department visits, multiple

Managing High-Risk, High-Cost Patients: The Southern California Kaiser Permanente Experience in the Medicare ESRD Demonstration Project