Kaiser CEO: Our model works
‘ We sell care by the package, not by the piece’
George Halvorson built Kaiser Permanente into the nation’s largest managed care company and hospital system over 10 years as its chief executive. In an interview with USA TODAY reporter Jayne O’Donnell, Halvorson talked about the wisdom of empowering doctors to make health care decisions, why the rest of the health care industry is not making the best medical choices and why he has the best job in health care but plans to retire next year anyway. (Excerpts were edited for clarity and space.)
Q: Explain how your business model works and how it differs from your competitors.
A: Kaiser Permanente is a vertically integrated care system. We insure care and deliver care. We sell care by the package, not by the piece. We have 180,000 employees, 9 million members and over 500 care sites, and own our laboratories, pharmacies and imaging centers.
We take care of the entire patient and can focus on things like preventing broken bones. We have one of the lowest stroke rates. We focus on early detection and best care, and we do the right followup care. We have the lowest sepsis death rate. Sepsis kills more patients than cancer, stroke or heart disease. Pressure ulcers generate a lot of revenue in a lot of care settings. We make sure people don’t get pressure ulcers. Because we are prepaid, we don’t make our money by having care go wrong.
We need to stop rewarding the infrastructure of American health care for making mistakes. Most of (our competitors) ... don’t get paid for prevention. Their financial model penalizes them if they prevent someone from breaking a bone. Thanks to aggressive early detection, we have fewer cases of late-stage cancer. That’s one of our goals: having fewer cancers get to stage four. Many people are alive today who would be dead if they were getting care from any other care system.
Q: So how do your competitors react when you say they’re rewarded for not preventing injury and disease?
A: Many of the care systems want to become accountable care organizations so they could become more Kaiser-like. Some of them would do it extremely well.
Fee-for-service is a dangerous financial model for many people. If you re-engineer care delivery to make it better and eliminate the billable pieces, every billable piece you eliminate cuts revenue. One of the great health care institutions on the West Coast figured out which patients should get imaging — CT scans, MRI scans — and did a quality-based assessment. They did a great job figuring out which patients needed that care and dropped their revenue by 25% to 30%.
It’s so important to have medical homes (where physicians work closely with nurses, pharmacists, therapists, imaging technicians and other caregivers under the same roof ) and accountable care organizations
(ACOs) that are focused on the total package of care.
Q: As states move toward health exchanges, they’re using places like Kaiser as a model. Are others consulting with you these days?
A: We are giving a lot of advice these days. People particularly that are trying to set up ACOs are looking at us as a model. People who are looking at doing medical homes are looking at us for how medical homes can be part of an overall care system if the Affordable Care Act is implemented in 2014 on schedule.
Q: Kaiser Permanente is notfor-profit, but some says Kaiser’s rates are not significantly below what others charge.
A: In all markets, we average 10% or
more less expensive than the competition. Hewitt just did a national survey of all the care systems and concluded we are 10% more cost-effective than the average HMO and 16% more cost-effective than all plans in the markets we serve.
Q: Is there a consumer perception issue for Kaiser that low cost equals low quality?
A: That perception was true more so 10 years ago. We’ve won so many quality standards. If you look at the Centers for Medicare and Medicaid Services’ ratings of 563 Medicare Advantage plans, only 11 got five stars based on 53 measures of quality and service. We only had one that didn’t. People in the care-delivery world know that. We have 10 applicants for every opening. We pay primary care
(doctors) over community standards in private practice.
Q: Can you really deliver the best for everyone in your system? What if someone has a rare form of cancer? Is there any procedure you don’t do at Kaiser?
A: We have 6,000 patients in cancer clinical trials and cancer outcomes that are better than the national average. We have half of the radiologists that graduate from Harvard Medical School.
Surgical specialists love working for Kaiser Permanente because they get great facilities and are not driven in any way to do a surgery to make money.
We buy our surgeons by the month, not by the cut, which is a different way. If you think about it, why wouldn’t you want to work for KP?
We don’t do heart transplants internally. We do wonderful heart surgery, but we send our transplants elsewhere.
Q: Some suggest your success rates have a lot to do with the fact you cover more younger and healthier people. What do you say to that?
A: We have the highest loyalty level. People stay with us longer than any other health plan. Our average population is slightly older. About 1.1 million of our 9 million members are 65 and up.
Q: You are scheduled to step down at the end of 2013 and Kaiser is searching for a new CEO now. What capabilities do you think your successor should have and what challenges will he or she face?
A: Whoever succeeds me should really enjoy the full potential of working with a vertically integrated care system. I don’t think there’s a better job in health care. When I joined KP, I had a sense we needed to do a few things, like computerize the medical records. We did that work. It’s doing exactly what I hoped it would do. I’m feeling like I accomplished what I came to do.
“We focus on early detection and best care, and we do the right followup care.”
George Halvorson, CEO of Kaiser Permanente