Peter I. Juhn, M.D., M.P.H., Director of Special Studies, Kaiser Foundation Health Plan, Inc.

I am honored to speak here today.  David Lawrence, my boss, the CEO of
Kaiser Permanente sends his regrets for not being here today.  He is quite 
interested in our task over the next few days which is to explore usefulness 
of network health information.

I will try to present ideas on the roles of interactive technology
and the delivery of health care.  Let me acknowledge some ideas,
some of the best come from my colleagues who have been working over
the past few years -- John Dooley, Anna Listra Vester and Kate Shick
are here today.  Some of our past discussions were held at this
conference last year.

As far as the lapse of good ideas I will claim sole responsibility.
Here is an outline in 4 sections I will speak on today.

1 - I will give the history of Kaiser Permanente and emphasize the
key role of information technology.

2 - I will point out significant societal, economic and
technological changes that give an unprecedented opportunity to
expand.

3 - I will give my own visions of this new delivery paradigm.

4 - I will point out some serious challenges that must be overcome
-- through an effective coordination of goals and partnerships,
partnerships through members of this audience.

Let me give a brief description of Kaiser Permanente's history.
Fifty years ago Kaiser Permanente pioneered pre-paid health care
delivery.  What started as health care for industrial workers in
California and the Pacific Northwest now extends through six time
zones and is now managed through regional facilities which are non-
profit benefit operations facilities.  There are nearly 95,000
physicians at 30,000 medical centers for over 7 million Americans.
Kaiser Permanente provides superior care at low costs.  Our first
innovations started 50 years ago.  The increasing number and size of
our competitors shows our success.  But now where do we go,
especially when so few of our competitors pay so little respect to
our pioneering?

Innovations will launch us into a new era of defining and exceeding
consumer needs and expectations.  Crucial to this goal is the
integration of telecommunication technologies into our delivery
process.  We seek to empower our patients.  We hope to allow our
patients to truly become participants in health care.  We want to
provide easy and improved access to our members.

Key trends are creating the opportunity and need to change.  Health
care and wellness are important to Americans.  Two-thirds of
Americans see health care as very important.  Not a week goes by
without the TV highlighting stories on health care -- some good, and
some bad.  Health care facilities are spending up to a billion dollars a
year to provide a large dose of information to the public on health
care.

This demand for information is robust.  It is caused by
demographics, sustained cost pressure, consumer awareness, new
models of disease management, and accessible technology.  This
demand will grow when baby boomers will reach maturity.  More and
more Americans are facing health issues.  Family and child health
will become very important in the near future.  The number of
Americans between 50 and 64 will grow an astonishing 70 percent over
the next 10 years.  In other words, between 50 and 80 million people
will be in that group.  Moreover, this group is very selective in
the health care they demand and will look for better care.  This is
the most educated and active group.

In addition, we can't forget that there has been a trend over the
past 30 years towards a growing mistrust of government.  Many people
have strong attitudes that institutions created an unhealthy
environment.  U.S. history has contributed to that feeling with
events such as the Vietnam War, Watergate and others which have
pushed for more accountability.  Working in tandem with the growing
human rights trend is a trend that has rippled through travel and
financial services.  Consumers began to ask for better health
treatment and made more informed decisions.

During the 1980's, a new form of medical consumerism arose -- that
of disease management.  It was formed as HIV was discovered and
was spread.  Those infected and their friends helped activate a
search for a treatment for the disease.  Indeed patients have
redefined their role from being passively to actively involved in
their health care.  They exhibited increased self-esteem and control 
over their bodies.

As I am sure you are well aware, nearly a trillion dollars (16% of
the GNP) is invested in health care -- more than other
industrialized nations.  But we have nearly 40 million Americans
without health care.  Yet we have the most sophisticated health care
diagnostic treatment to offer.  To stem the cost of health care, in
the 1980's, "demand management" and cost sharing arose.  Employers
turned to demand management and wellness programs.  These have
increased the amount of information given to the consumer, and are
organizing to influence consumers' behavior.  Over 20 million books
on health care have been given out, including office triage services
to manage demand and improve customer satisfaction.

Increased self-management has also become popular. It has lowered
patient use of facilities from 7 to 17%.  Cost sharing copayments
and deductibles have risen with the rising health care costs to the
employers.

A medical savings account idea has been popular as well.  Recent
research shows that employees will switch to a medical savings
account when informed.  Consumers can realize direct economic
benefit from an improved medical savings account idea.

The most promising development has been through the Internet.
The use of the Internet has become the de facto trend in
information exchange.  Email is traded daily by 60 million users
world wide.  It allows interaction because of its universal
accessibility.  The number of users of the Internet has increased
from three-quarters of million users in 1993, to 20 million users
this year, and 100 million worldwide before the year 2000.  The
number of host sites have increased at astonishing rates as well.
35% of the users have clustered in the "Generation-X" category --
those born after 1964.  This group will soon grow into its child-
bearing and health-consuming years. We must move now to meet their
needs and demands.

An example of transformative advances in technology that help us
daily is in financial institutions with the development of Automatic
Teller Machines (ATMs).  ATMs emerged with the goal of providing
more service at a lower cost.  The major period of transformation
occurred in the 1970's to provide more convenient services.  Since
the 1980's, the number of ATMs has tripled and the number of
transactions has increased to more than 10 billion.  Technological
advances have placed the decision making process on the consumers'
desk.

Will we be witnessing further transformation?  How will these trends
impact health care?  The availability of information and rising
consumer awareness presents an unprecedented challenge and
opportunity to us.  It will not be too bold to state that these
advances will revolutionize health care.  As patients become more
knowledgeable, providers and physicians need to respond with more
than just colorful pamphlets.  They will need to engage patients on
a deeper level.  Consumers need judgment and wisdom concerning what
they already know about health care.  The care process was seen as a
"black box" and the patient was seen as a helpless onlooker.  Now
the consumer must play an essential role.  Providers must clarify
and update  health instruction.  They must allow patients to
interact with their own health care, sometimes without notifying or
consulting the provider.  Health care emphasis is making a crucial
role-shift from the care provider to the care recipient.

As with other consumer industries, health care providers must
compete on quality and cost -- not just on the technical results,
but on the perception that consumers have of them.

The first change is about content.  Consumers are overwhelmed by the
quality and volume of disorganized information.  There are 6,100
international and national health associations.  There are 28,000
audio/visuals that discuss health care.  Doctors' offices and
pharmacies stock numerous colorful brochures.  There are over 10,000
Web sites -- with more to come.  Many sources of information lack
consistency, credibility, and currency.  Consumers are left to
conduct a time consuming search to understand their options and
ultimately to make decisions.  The information on health care is
poorly targeted and clearly difficult to navigate.  Therefore,
providers must update information on health care continually in
order to transform the industry.  Also, there is a need for some
type of reassurance for the consumer through brand names or some
other seal of approval in order to build confidence.

How do we reconcile the unlimited access to health care information
with the paralysis from having to sift through needless information?
How can we balance the need to protect the consumer with the need to
empower the consumer?  Lastly, what mechanisms with what partners
are needed for establishing effective quality?

The second challenge is with consumers.  What are they using the
information for?  How do we provide them with more reliable and
higher quality information?  How can we engage them more in the
development process, rather than building it as providers alone and
hoping what we have built will attract them?  Can we make the
information relevant and useful?  Providers drown out the voice of
consumers -- how do we make their voices heard?  How can we confront
the reality of the gap between the "haves" and the "have nots"?  The
informationally disadvantaged will suffer in this information age.

The last challenge I will offer is about moving forward, about
actually beginning to implement these ideas.  What do we need to
improve the nation's health and reduce our cost burden?  What
partnerships under what circumstances should be made?  Talk is good
if it leads to new ideas.  Talk is best if it implements these
ideas.  Think bold ideas, but plan linear steps.

Make the most of your two days here at Rancho Mirage.  The
participants list reads like a "Who's Who" list of the movers and
shakers in the industry, as well as in academia.  I encourage you to
exploit the 5 minute breaks to the fullest.  I wish you a most
productive conference.


Question and Answer Period


[First question not in the microphone and therefore unintelligible.]

Response:  We are looking at this in two ways: one is with an effort
what we have given the code name Kaiser Direct, trying to establish
a strategic framework for seeing how these technologies deliver, and
another layer of the effort is to demonstrate these technologies in
our medical centers.  We are attempting to merge strategy and
demonstration, and we hope to unify them.

Q:  I have a question.  Could you be more specific?  (Laughter in
audience)

Response:  Specific, Boy, that's always the question that gets me.
(Chuckles)  What we are doing is creating knowledge repositories,
creating Internet sites to be used by providers to share
information, creating home pages on the Web that are generally
accessible, but will become increasingly restricted to our members,
but we are increasingly sharing our knowledge.  It takes re-
engineering efforts, which go by different names -- one of which is
Health Care Planning.  It also requires looking at this dimension
from the provider's eye and the varying information systems changes
that the operations of the clinics must undertake that will enable
consumers to use health care.  Is that more specific?

Q: Yes, I guess so...

Moderator:  Next question.

Q: You mentioned the challenge to define partnerships.  Are there
any models Kaiser Permanente uses on what constitutes the
appropriate partnerships which will change the present paradigms?

Response:  That's a tricky one, because any partnerships involve
contracts.  One of the fears we have is, "What have we locked
ourselves into?  Will we have access to the technology we need to
make this new system work?"  That's why I'm talking about a need for
boldness and partnerships between very different fields in the
health care industry.  Sometimes they don't work, as some in the
audience have seen from experience.  However, the best approach is
that if we don't give it a chance, we won't find out whether some of
these partnerships will work.

Moderator:  Next question

Q:  I'm from the National Consumers League.  It would be wonderful
if managed care systems provide computers for consumers to help them
get on board the computer system network.  Have you considered
offering your members computers?

Response:  We were looking at providing these supplies to patients,
specifically those with chronic illnesses.  If you have a $500 box
with a $10 access fee, saving one hospital day could very much
balance out spending this amount of money for this technology.  We
are definitely investigating providing this service.  One of the
issues is, for example in the case of diabetics, that it is not
clear whether all 10,000 should get the equipment because not all
will be with Kaiser Permanente next year.

Moderator:  Next question

Q:  In relation to the health care industry, how do you see media
companies fitting into the new system you are proposing?

Response:  How to create a filtering mechanism is the issue here.
Health care knowledge is evolving.  Health information can be used
to overwhelm but also inform.  So we are trying to balance all of
these concerns and we are really trying to see the appropriate role
of media outreach in health care.

Q:  What percent of your subscribers are online?  What are you doing
to make sure they have access?  That's the first part of the
question.  The second part is, is the computer too elitist to
meet the needs of your patients? Is the telephone a better
vehicle to meet their needs?

Response: Yes I think it is rather elitist.  Communication methods
including the traditional one of face-to-face to our members is
crucial to keeping our members.

Q: And the question about the percentage of subscribers on line...

Response:  It varies.  In places like Fairfax, Virginia and in parts
of California, just under one-third are connected.  But in places
like Ohio much fewer are connected.  But what matters is who are
these people who are not connected?  It's important to note that
many are healthy.  We try to select those who need health care.
They are the targets for the technological upgrades.

Moderator:  Next question.

Q:  Health care information needs to be consistent.  I was wondering
if you could elaborate on the strategies Kaiser Permanente uses to
evaluate information.

Response: Very good question. Tim Keishnick, [a colleague], where are
you?

Keishnick:  That's a very difficult question because information is
constantly expanding.  It makes us fall further behind the current
information.  Another area I have discussed is whether this is an
area of true partnership where we can create an information clearing
house, because we are all running into the same problems.

Moderator:  Next question.

Q:  You mentioned that the role of the consumer will change and that
of the provider will be a support role.  How will that translate
into the constant accountability of the expenditures of health care
systems?

Response:  Very good question.  It's a general trend to increase the
focus on the consumer.  Also, in health care, new reform ideas in
the medical savings account, if they come to pass, will shift the
product and cost onto the consumer, and by doing that there will be
some accountability in some decision making onto the consumer.

Moderator:  Now we will move onto the first panel.