New York Times Examines Kaiser Permanente Business Model
The New York Times in two articles on Sunday examined the business model of California-based not-for-profit HMO Kaiser Permanente, which has become "a leader in the drive both to increase the quality of care and to spend health dollars more wisely, using technology and incentives tailored to those goals." Kaiser focuses on preventive care and disease management to help reduce costs because "healthier people require less costly care like hospitalization," according to the Times.
For example, in Northern California, the mortality rate from heart disease is 30% lower among Kaiser members than the general population, adjusted for age and gender. Kaiser officials attribute the difference to efforts to monitor and control the blood pressure and cholesterol levels of members, as well as the promotion of aspirin and beta blockers to reduce heart attack risk and statins to reduce cholesterol levels. In addition, Kaiser has a one-year heart disease education and treatment program managed by nurses in which members receive instruction on diet, exercise, cholesterol management and smoking cessation. Kaiser has made large investments in information technology, such as electronic health records that include patient histories, prescriptions and preventive care recommendations; systems that make X-rays and magnetic resonance images viewable on computers; and electronic prescriptions.
Kaiser also has begun to develop a $3 billion program, called KP HealthConnect, that will improve and integrate clinical and administrative systems and Internet-based member services. According to the Times, the program will allow Kaiser physicians to "tap into a vast but flexible storehouse of data that uses intelligent software to automatically flag potentially harmful drug combinations for a patient or to suggest what treatments have been most effective for other people who are of the same sex, age group and -- eventually -- genetic profile" (Lohr , New York Times, 10/31).
Kaiser also promotes more efficient health care spending. According to the Times, because Kaiser serves as both health insurer and health care provider, members "go to Kaiser doctors in Kaiser clinics," and physicians "are not fighting with insurance companies for payment." Kaiser has no formal "rationing" policies, such as limits on the number of tests and procedures that physicians can order for members (Lohr , New York Times, 10/31).
However, costs for Kaiser remain lower than those of health insurers that use the "dominant" fee-for-service model, which is "often an invitation to do more of everything -- more visits, more tests, more surgery" because reimbursements are based on the number of visits, tests and procedures, the Times reports (Lohr , New York Times, 10/31). Kaiser physicians receive salaries based on national physician compensation surveys, peer reviews and patient surveys (Lohr , New York Times, 10/31).