Sent on behalf of Ron Vance, president, Kaiser Foundation Health Plan and Hospitals, Hawaii Region

All Hawaii Region employees,

It’s time for an honest discussion about our organization. As you know, I’ve spent the past several weeks touring facilities,
listening to you, and getting to know this organization and this region. While my information gathering continues, I would like to
share what I’ve learned so far. We have a great team of people who care about this organization and consistently deliver high-
quality medical care and service to our members throughout the state. But there are many things we can—and need—to do
better. Let me explain.

For more than 60 years, Kaiser Permanente has been at the forefront of patient-led care in Hawaii, but changes in the market
have challenged the way we operate and conduct business. As a result, our finances have been trending in the wrong direction
for some time. What’s more, we have no plan to achieve sustainable growth, and we continue to fall behind our competition on
affordability, access, convenience and member experience. Incremental change and a laundry list of cost-saving initiatives
aren’t enough to secure our future. Doing what we’ve always done isn’t enough.

Let’s get into this a little deeper, starting with our finances. Despite what you may have heard, the reality is that the Health Plan
loses substantial amounts of money every year. Our third quarter filing with the Hawaii Department of Insurance showed an $88
million loss. For 2020, we’re projecting a loss that could be substantially higher. This is unsustainable—especially when you
consider that the Program Office has had to lend us almost $400 million in the past several years. We have no clear path to a
positive balance sheet—and without this, we won’t be able to continue delivering the kind of care and service our patients and
members expect and deserve.

In light of this, I think it’s important to repeat what I’ve said before: We cannot cut our way to success. It’s not that simple. In our
attempt to achieve some measure of financial sustainability over the past several years, we’ve delayed about $370 million of
maintenance and capital projects. (I’m sure you see this every day.) Dealing with this backlog—and building for our future—
could cost more than $2 billion. That’s a staggering number. But we must find a way to address it given that our competitors are
making significant investments of their own to try to emulate what we do best.

Investing in infrastructure is only one piece of the puzzle. We need to fundamentally rethink how we deliver medical care. Our
members are asking for easier access—on their terms. They want the care they need when they need it. They want to be able
to call or video chat with a doctor after hours or, if needed, receive urgent care in person. Today it can take too long to schedule
an appointment by phone, the online process often isn’t smooth and getting in to see a preferred practitioner can be difficult.
Frankly, we are way behind our competitors in this area. (For example, all of our competitors offer patient portals, video visits
and access to more convenient urgent care.) We have to innovate and reestablish ourselves as a leader in health care delivery
or we’ll simply be left behind.

At the same time, we need to become more affordable. It costs more to purchase health care policies from us compared with
our competitors. And the difference can be significant. This is not how we want to serve our community. We need to reduce our
costs and improve our margins so that we can fulfill our mission of offering high quality care at an affordable, market-
competitive price. To do this, we will need to invest in systems that support our staff, measure our progress and allow us to
make data-driven decisions for our future.

But let’s make one thing perfectly clear: No matter what we do to become more cost competitive, our top priority as an
organization will not change. The high-quality care and service we provide our members will always come first.

We also have to address our relationship with the Medical Group. As I think many of you would agree, the Health Plan and the
Medical Group do not work together as well as we could. This is important. We are all part of the same ohana and we both
have kuleana for the health and well-being of our members. We can do a better job of clearly defining our respective roles and
aligning our priorities so we can focus on what each of us needs to deliver—and what we need to deliver together. Culture
matters and we need to find ways to break down the barriers that prevent us from working at our best.

This is going to be a lot of work and it will take time. We don’t have all the answers today, but I’m optimistic about the future.
After meeting many of you, I know you want what’s best for this organization and our members. We’re in this together, and with
your participation and personal investment, we will develop our strategic plan, drive it and make it work.

I want to wish you all a safe and happy Thanksgiving. Rest, recharge and enjoy your time with family and friends over the
holiday – it is well earned. And thank you for everything you do for our members and this organization.

Mahalo,
Ron Vance