HealthCare’s recent multi-billion dollar deal has taken the industry by surprise, and medical professionals and hospital leaders are struggling to make sense of it.
In case you missed it, the California-based Kaiser Foundation Health Plan and Hospital, which makes up half of Kaiser Permanente’s insurance and facilities, was once declared by President Obama to “quality care”
Subject to regulatory approval, Geisinger will be the first organization to participate. Lysant Health, a new $5 billion subsidiary of the Kaiser Foundation. The aim, according to Kaiser, is to build a “portfolio of like-minded, non-profit, values-driven, community-based health systems rooted in their respective communities.”
Having spent 18 years as CEO of Permanente Medical Group, the healthcare delivery half of Kaiser Permanente, this announcement was of great interest to me. And I wasn’t alone. My phone has been ringing for weeks with calls from reporters, policy experts and medical executives.
After hundreds of conversations, here are the three most common questions I’ve received regarding this acquisition and its implications for doctors, insurance companies, healthcare system competitors and patients nationwide.
Question 1: Why did Kaiser acquire Geisinger?
Most of the callers wanted to know Kaiser’s motives and thought there must have been more to the acquisition than the press release indicated. I don’t have inside information, but I think they were right. Here’s why.
Kaiser Permanente has a long-standing reputation for providing nation-leading care. The organization consistently earns top quality and patient satisfaction rankings from the National Committee for Quality Assurance (NCQA), LeapFrog Group, JD Power and Medicare.
But despite its 78-year history, dozens of hospitals, and 13 million members in eight states, Kaiser Permanente is still considered a coastal rather than national healthcare system. Despite maintaining a huge market share in California and a strong presence in the mid-Atlantic states, the organization has repeatedly failed to replicate its success elsewhere.
Given this context, I think there are two compelling reasons why the Kaiser Foundation health plans and hospitals want to become national brands.
1. Influence. Elected officials and regulators often turn to the biggest players in the health care industry to set the legislative agenda and formulate national policy. That table has a limited number of seats. Kaiser was able to earn that reputation by ditching its reputation as a “local” healthcare system.
2. Survival. In recent years, companies such as Amazon, CVS, Walmart has examined organizations that provide primary care, telemedicine, home health care, and specialty care services. These “retail giants” are spending up to $13 billion per acquisition. And they’re consuming already successful healthcare companies like One Medical, Oak Street Health, Signify, and Pill Pack. Like an army gearing up for war, these giant corporations are accumulating the necessary ingredients to battle and eventually oust the traditional medical incumbents outright.
The agreement with Geisinger expands Kaiser’s footprint to 600,000 patients, 10 additional hospitals and 100 specialty and primary care clinics. These assets carry weight, even though his 2022 operating loss for Geisinger will be as high as his $239 million.
The lesson to be learned from this first question is clear. That said, size does matter. Gone are the days of single doctors and independent hospitals. Nostalgia for medicine’s civilian, homely past is understandable, but futile. To survive, medical personnel must either grow rapidly or team up with someone who can. That insight leads to the next question and lesson.
Question 2: How much does the Kaiser value Geisinger?
Almost everyone I’ve spoken to understands the Kaiser’s desire to expand its influence over the nation, but is less certain about how the deal will affect Geisinger Health. .
Geisinger’s hospital and clinic, based in Pennsylvania, have long been embroiled in turf wars with the surrounding health system. More recently, the pandemic, combined with staffing shortages and domestic inflation, has challenged Geisinger’s clinical performance and eroded revenue.
Assuming Kaiser invests about $1 billion in each of the four or five health systems it plans to acquire, that cash influx could provide Geisinger with temporary financial security. But the bigger question is how Kaiser will improve Geisinger’s value proposition enough to increase its market share.
In public comments, Kaiser leaders described the acquisition as something that Lysant would “do by increasing access to value-based care and coverage and raising the bar for a value-based approach that prioritizes quality patient outcomes. It is an opportunity to improve the health of millions of people,” he said. ”
Many of the professionals I have spoken with understand Kaiser’s values. But they wonder how the Kaiser will be able to keep that promise. Permanente Medical Group (TPMG) was not involved in the transaction.
Should the Kaiser and Permanente leaders strike an agreement to cooperate in the future, TPMG’s physician leaders could bring a vast amount of knowledge, experience and expertise to the table. Otherwise, I agree with those who have expressed doubts about whether Kaiser alone can significantly improve clinical performance of Geisinger.
Medical insurance and insurance companies play an important role in funding healthcare. They possess a wealth of data on performance and can provide incentives to facilitate access to better quality care. However, insurance companies do not work directly with individual physicians to coordinate care or drive clinical solutions on behalf of patients. And without strong physician leadership, the pace of positive change is greatly slowed. As an example, a study conducted within the Permanente Medical Group found that it takes just three years to transform a proven clinical advance into standard practice. That’s six times faster than the national average.
For decades, the secret of Kaiser Permanente has been the success of three parts: Kaiser Health Plans, Kaiser Foundation Hospitals, and Permanente Medical Group.
And the KP results speak for themselves.
- 90% hypertension control rate among members (60% in other regions of the country)
- 30% fewer deaths from heart attack and stroke (compared to the rest of the country)
- 20 percent fewer deaths from colon cancer
The big lesson: Insurance by itself does not significantly improve healthcare. It must be a joint effort between forward-looking insurers and innovative and talented clinicians.
But there is another lesson here for doctors around the world. Now is the time to join forces with other clinicians in the region. Together we can improve clinical quality. Enhance access and make care more affordable for patients. At the same time, it’s also a time for insurers and retail giants to see which medical groups offer the best care and can be the best partners. Neither side thrives alone. And this brings us to his third question and lesson.
Question 3: Will the transaction go well?
Almost all my conversations ended with this question. I think it’s too early to say that. But considering the years ahead, some parts of the contract in particular are questionable.
Geisinger now has a hybrid reimbursement model, combining ‘value-based’ care payments with traditional ‘pay-for-service’ insurance plans. In addition to providing our own coverage, we contract with various other insurance companies. I have seen very little success with this distributed approach.
Most medical observers understand that the flaws inherent in the “fee for service” (FFS) model are also the most attractive to healthcare providers. In other words, the more you do, the more you earn. FFS is how nearly all financial transactions are done in America (i.e., you provide services and earn fees). However, in healthcare, this financial model results in frequent over-testing and over-treatment, with minimal, if any, improvement in clinical outcomes. According to researchers.
“Value-based” alternatives to FFS include prepayment for medical expenses. This is a model often referred to as a “climax”. That is, capitation includes a single fee paid upfront for all medical care provided to a defined patient population for her one year, based on age and health status. The better an organization is at preventing disease and avoiding complications from chronic disease, the more successful it is in both clinical quality and affordability.
In the narrow world of declining medical bills, there is an important factor that is often overlooked. Who receives that lump sum makes a big difference.
For Kaiser Permanente, the cap payment is paid directly to the medical group and the physician responsible for providing care. In almost all other health care plans, insurance companies collect a down payment, but then pay providers on a fee-for-service basis. This arrangement is called capitated, but the incentives are overwhelmingly tied to the amount of care (not the value of care).
In a mixed payment model, doctors and hospitals always prioritize high-income FFS patients over reduced FFS patients. When I think of these conflicting incentives, I think of a prominent medical group in California. There was a main entrance for paying patients and a smaller entrance for decapitated patients on the side.
It is unlikely that the time spent with the patient or the overall care provided was comparable between the two groups. If income is based on quantity rather than quality of care, clinicians will be more focused on treating complications and malpractice of chronic diseases than on preventing them in the first place. Geisinger has walked this tightrope in the past, but as economic pressures mount, doctors fear the two sets of incentives are at odds and will find it difficult to steer. there is
The big lesson is that as financial pressures mount, the most effective approaches in the past are likely to fail in the future. All medical institutions must decide whether to continue to strive to increase sales volumes and prices through FFS, or move to head quotas. Being stuck in a dilemma is a recipe for failure.
Considering healthcare acquisitions by Amazon and CVS, these giants are aggressively moving to a model like Kaiser Permanente that combines insurance, pharmacies, doctors and advanced IT systems under one roof. It is clear that you have decided These companies, along with Walmart, are actively on the road to reducing capital. Focus on Medicare Advantage (values-based options for Americans 65 and older) as an entry point.
So far, Geisinger has avoided risk by maintaining a hybrid revenue stream. I doubt if they will be able to pull it off in the future. Now for the last question.
Biggest question left
Over the next decade, hospital systems, insurers and retailers will battle for healthcare supremacy. The latest agreement between Kaiser and Geisinger reflects an industry undergoing significant change as the healthcare system faces increasing pressure to maintain the status quo.
The most important question to resolve is whether these changes will ultimately help or harm patients. I am optimistic that we will get good results.
Whether retail giants displace incumbents or not, they will redefine what it takes to win. Companies like Amazon and Walmart, despite their many shortcomings, care very much about meeting their customers’ needs, a mindset that is rarely seen in today’s healthcare industry. As these companies grow larger, they will impose consumer-oriented demands on doctors and hospitals. This will require care providers to provide higher quality care at more affordable prices.
Retailers only do business with the best of the best. And they will put the underperformers in the corner. They use advanced IT systems to better coordinate and innovate medical care. Insurance companies, hospitals and doctors who failed to respond will be left behind.
Over time, patients will have far more choice and control than they currently have. And I am optimistic that it will be good for our country’s health.
Robert Pearl A plastic surgeon and author of the following books: Indifference: How Medical Culture Kills Doctors and Patients.You can contact him on Twitter @RobertPearl.
