The following post originally appeared on the TIME Moneyland blog.
Kaiser Permanente’s stand-out performance in Consumer Reports’ national rankings of some 830 insurance plans raises an obvious question: What makes Kaiser so different? In a word: collaboration.
Kaiser is distinctive among the major health insurers in that it’s not just a health insurer. While the non-profit Kaiser Foundation Health Plans provides coverage for its 8.8 million patients, Kaiser also offers an integrated network of doctors and hospitals. The insurer and the providers share one goal: keeping patients healthy over the long term.
Because Kaiser is both the insurer and the provider, it has a larger incentive to invest in preventive care, wellness classes and free smoking clinics. Many other insurers and health systems avoid sinking money into such programs because patients switch insurers so frequently that such spending winds up benefiting another company. But as theConsumer Reports’ ratings show, Kaiser patient satisfaction is high and patient turnover low, so it makes more sense for the insurer to invest for the long haul.
Founded in 1945, the California-based plan was one of the earliest “health co-operatives” that, instead of charging fee-for-service, accepted a lump-sum payment of, say, 85 cents per patient per month. The American Medical Association objected; it insisted that doctors should be free to set prices for each procedure, thus leaving total health care costs open-ended. The AMA had great clout: By 1950, most states had passed laws that barred the co-ops. Kaiser was one of the few that survived.
Today, Kaiser’s physicians are still on salary, treating patients in nine states, plus D.C. Each year Kaiser Health Plan (the insurer) and the Kaiser Permanente Medical Group (the doctors) in each region negotiate and agree on a lump sum that the Health Plan will pay the Medical Group on a monthly basis for each patient. Rather than compensating doctors for volume (fee-for-service) the goal is to hold physicians “accountable” for keeping patients well. If they succeed, fewer patients will need to be hospitalized or undergo expensive procedures, and the payment will turn out to be greater than the actual cost of necessary medical care. When that happens, the Medical Group, as a whole, shares in some of the surplus. Thus, rather than having an incentive to “do more” tests and procedures, Kaiser’s doctors have an incentive to “do less, and do it right.”
Nationwide, many doctors prefer working fee for service, running their own business and competing for market share with an eye to increasing their income. But others compete for jobs at Kaiser: In California, Kaiser hires just 11 percent of the doctors who apply for positions. These tend to be physicians who don’t want the hassle of running a business.
Kaiser also makes very effective use of information technology in coordinating patient care. It maintains a single computerized record for each patient, so all physicians are looking at the same chart, where they can read their colleagues’ notes and know what they are thinking. In other healthcare “systems,” patients can often be seeing five doctors, none of whom have no idea what the others are planning or prescribing.
Perhaps just as important, Kaiser uses that electronic database of patients’ records to determine which treatments work best for which patients. By mining that medical evidence, it is able to create “guidelines” — they’re careful not to call them rules — for consistent standards of care. Without such guidelines, many experts agree, U.S. healthcare can be frighteningly idiosyncratic, particularly when doctors are working alone. It is impossible for any single physician to keep up on all of the newest research. But when doctors are working elbow to elbow in large multispecialty groups, they share their knowledge.
Over time, a combination of teamwork, guidelines and computerized records has helped Kaiser achieve remarkable results that go well beyond the Consumer Reports findings. For example, in Northern California, Kaiser has reduced death from heart disease among its 3 million members so significantly that it is no longer the leading cause of death. In fact, after adjusting for age and gender, death from heart disease is more than 30 percent lower among the Kaiser population than among Northern Californians who receive care through another insurer.