Healthcare Data Analytics Organizations Strategy Policy May 1, 2015

Col­lab­o­rat­ing to Save Lives

For an inte­grat­ed health­care orga­ni­za­tion, cul­ture is the key to oper­a­tional efficiency.

Yevgenia Nayberg

Based on insights from

Leemore S. Dafny

William Ocasio

Kaiser Per­ma­nente con­sid­ers itself the future of U.S. health­care: patient-focused, data-rich, and afford­able. Com­bin­ing a non­prof­it insur­ance plan with its own hos­pi­tals and part­ner­ships with spe­cial­ist med­ical groups, it hopes to set the stan­dard for the indus­try at large.

Our hos­pi­tals oper­ate on reverse eco­nom­ics,” says Mur­ray Ross, Vice Pres­i­dent of Kaiser Foun­da­tion Health Plan and Direc­tor of the Kaiser Per­ma­nente Insti­tute for Health Pol­i­cy. More patient days means high­er costs, not high­er rev­enues. So we work hard to keep peo­ple healthy and out of the hospital.”

Indus­try experts such as Leemore Dafny, a pro­fes­sor of strat­e­gy at the Kel­logg School, refer to Kaiser Per­ma­nente as an inte­grat­ed health deliv­ery sys­tem” — a health­care group that aligns the roles of insur­er and provider, and one that chal­lenges the pre­vail­ing busi­ness mod­el of fee-for-ser­vice. In some ways, it is the kind of health­care sys­tem the Afford­able Care Act had in mind,” Dafny says, where a high degree of coor­di­na­tion among doc­tors, nurs­es, admin­is­tra­tors, and ana­lysts can pro­vide patients with an end-to-end expe­ri­ence at a sin­gle facility.

This focus on patient out­comes requires a unique style of orga­ni­za­tion­al man­age­ment. How does Kaiser Per­ma­nente accom­plish this? For William Oca­sio, a pro­fes­sor of man­age­ment and orga­ni­za­tions at the Kel­logg School, the group owes its suc­cess to its cul­ture. It’s not often that you can walk into an orga­ni­za­tion and breathe the cul­ture as much as you can at a place like Kaiser,” he says. It’s not just about the soft parts of the cul­ture — it also per­me­ates how they do their oper­a­tions man­age­ment.” From sched­ul­ing appoint­ments to mea­sur­ing out­comes, the inte­grat­ed mod­el works best when col­lab­o­ra­tion is built into the organization’s dai­ly practice.

The Ben­e­fits of Integration

Premised on the align­ment of clin­i­cal and finan­cial incen­tives, Kaiser Per­ma­nente sees itself as lead­ing the way when it comes to max­i­miz­ing val­ue and keep­ing med­ical bills low — for this, the inte­grat­ed mod­el is key. In its home state of Cal­i­for­nia, where the group enrolls 7.5 mil­lion mem­bers and oper­ates 35 hos­pi­tals, Kaiser Per­ma­nente com­pris­es both the Kaiser Foun­da­tion Hos­pi­tals, which are not-for-prof­it, and the Per­ma­nente Med­ical Groups, which are for-prof­it. This mod­el bucked the industry’s trends toward broad provider net­works and loos­er physi­cian inte­gra­tion over the last two decades.

From an orga­ni­za­tion­al man­age­ment point of view, at least, the ben­e­fits of an inte­grat­ed sys­tem are clear. Kaiser Per­ma­nente physi­cians are salaried employ­ees of the med­ical group, which means they are expect­ed to take into account the total impact of any treat­ment, includ­ing effec­tive­ness and cost. As indi­vid­ual doc­tors, they are respon­si­ble for the patient in front of them, Ross says. As own­ers of a med­ical group, they are respon­si­ble for mak­ing the best use of avail­able resources for all of the group’s membership.”

With­out a cul­ture of account­abil­i­ty and resource stew­ard­ship, all the new tech­nolo­gies in the world aren’t going to get you where you want to be.” – Mur­ray Ross

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Among the resources avail­able to staff is a huge amount of data. Kaiser Per­ma­nente has the nation’s largest elec­tron­ic med­ical record (EMR) sys­tem, which allows physi­cians, hos­pi­tals, and patients to mon­i­tor treat­ment and progress. For Leemore Dafny, this is a sys­tem with great poten­tial to improve ser­vice deliv­ery. What Kaiser has done is demon­strat­ed through some mas­sive IT invest­ments in recent years that they can pro­vide excel­lent care across a range of services.”

Hav­ing this data also allows the group to make bet­ter cov­er­age deci­sions, since doc­tors, nurs­es, and insur­ance rep­re­sen­ta­tives are con­sult­ing the same data­base. I think a real gap for our coun­try and our health care sys­tem is a lack of broad­er shar­ing of the data that you would need to com­pare the effec­tive­ness of alter­na­tive treat­ments,” Dafny says. For Mur­ray Ross, inte­gra­tion is the best way to close this gap. Med­i­cine is too com­pli­cat­ed to be played solo,” he says.

The Val­ue of Small Data

Effec­tive as it is, big data alone can­not account for Kaiser Permanente’s suc­cess. Long before EMR, our physi­cians shared med­ical records and held them­selves account­able for the qual­i­ty and cost of the care they pro­vid­ed,” Ross says. It’s worth rec­og­niz­ing how much can be accom­plished with small data.” Elec­tron­ic records show, for exam­ple, whether patients are up to date on their pre­ven­tive screen­ings; but it takes respon­sive front-line staff — not an algo­rithm — to make same-day appoint­ments for the patients who are over­due. And for those with chron­ic con­di­tions, Kaiser Per­ma­nente uses a pan­el sup­port tool,” a rel­a­tive­ly low-tech way to con­firm that patients have com­plet­ed rou­tine exams. Scan­ning the elec­tron­ic med­ical record helps the group iden­ti­fy care gaps, but the record alone is not enough. With­out a cul­ture of account­abil­i­ty and resource stew­ard­ship,” Ross says, all the new tech­nolo­gies in the world aren’t going to get you where you want to be.”

Oca­sio agrees that data is only use­ful if you know what to mea­sure. In their analy­sis, they found that sched­ul­ing appoint­ments was a huge pain point,” Oca­sio says, so that became their met­ric: How easy is it to get a same-day appoint­ment? Data can help, but only when the staff know how to use it effec­tive­ly, and this depends on the cul­ture factor.”

As Oca­sio defines it, cul­ture is not an abstract val­ue. It’s about val­ues being man­i­fest­ed in clear met­rics that peo­ple know and live by on a day-to-day basis. For too many com­pa­nies, cul­ture is a series of vapid pro­nounce­ments that real­ly have lit­tle to do with day-to-day oper­a­tions. I think that’s what’s dis­tinc­tive about Kaiser — the fact that a com­mon­al­i­ty of focus as a cul­tur­al phe­nom­e­non leads to oper­a­tional excellence.”

Orga­ni­za­tion­al Hurdles

Of course, there are chal­lenges to the inte­grat­ed mod­el, in large part due to con­flicts with­in the health­care indus­try itself. Doc­tors, patients, and hos­pi­tal admin­is­tra­tors each have dif­fer­ent goals and incen­tives, which makes it dif­fi­cult to man­age such a large and diverse orga­ni­za­tion. For exam­ple, physi­cians who work for Kaiser Per­ma­nente may earn less than spe­cial­ists at a non­in­te­grat­ed health­care provider, which can be lim­it­ing for sur­geons or oth­ers who pre­fer a sys­tem that depends on a fee-for-ser­vice model.

There is also the fact that Amer­i­cans tend to be skep­ti­cal of insur­ers, and some might not be com­fort­able with the inte­grat­ed sys­tem. The insur­ance indus­try was the fall guy of the Afford­able Care Act,” says Leemore Dafny. If you inte­grate the insur­er and provider, there can still be a taint asso­ci­at­ed with that. Con­sumers might wor­ry: Will my doc­tors real­ly act in my best inter­est when they’re aligned with an enti­ty whose bot­tom line is enriched by reject­ing the bills?” Cus­tomers also like to have options — or, at the very least, sec­ond opinions.

Although Kaiser Per­ma­nente has come to define itself as a patient-focused cul­ture, many pre­fer to have broad­er physi­cian net­works — even if it costs them more — and to have the abil­i­ty to shop around when it comes to cer­tain pro­ce­dures or treat­ment. This became appar­ent in the 1990s, with the rise of health­care main­te­nance orga­ni­za­tions, or HMOs. Dafny says that this skep­ti­cism towards inte­gra­tion is one rea­son the health­care indus­try has not wide­ly emu­lat­ed the Kaiser Per­ma­nente model.

That is, at least not yet. The med­ical group is well posi­tioned to be a leader in afford­able care. As Mur­ray Ross sees it, the inte­grat­ed mod­el is in favor again, and it has the best chance of deliv­er­ing high-qual­i­ty care at low cost. Hos­pi­tals across the coun­try are part­ner­ing with doc­tors and health insur­ance com­pa­nies to form account­able care orga­ni­za­tions” to bet­ter coor­di­nate patient care.

For Oca­sio, whether the com­pa­ny will grow depends, at least in part, on effec­tive orga­ni­za­tion­al man­age­ment. In many ways, it’s about the inter­play of eco­nom­ics and soci­ol­o­gy,” he says. Obvi­ous­ly health­care orga­ni­za­tions need to under­stand the eco­nom­ics, includ­ing the size of the mar­ket, the cost struc­ture, and the com­pet­i­tive land­scape. But when it comes to exe­cut­ing its strat­e­gy on a dai­ly basis, he says, that’s where hav­ing a strong cul­ture gives them an advantage.”

Featured Faculty

Leemore S. Dafny

Member of the Department of Strategy from 2002-2016

William Ocasio

John L. and Helen Kellogg Professor of Management & Organizations

About the Writer

Drew Calvert is a freelance writer based in Chicago.

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