Policy: The LA Times on Kaiser Permanente By John Irvine

The smoke appears to be clearing around Kaiser Permanente’s headquarters, where the management is no doubt wondering if the worst is over after this week’s decision
  to close the HMO’s Northern California kidney
  transplant center
. Patients enrolled in the program have been transferred
  to UCSF and to UC Davis. Embarrasingly for Kaiser, there were a few Medicare Part D style snafus with the transition (apparently nobody was picking up at the toll-free number set up for patients.) But all in all, the consensus
  seems to be that Kaiser did the right thing by moving quickly to shut down the
  operation once the extent of the problems became clear.

What happens next? The answer to that question is probably best known by the
  reporters at the Los Angeles Times, who may or may not have something else up
  their sleeves, after the first wave of stories uncovering the scandal. Historically,
  the Times has been tenacious when it comes to pieces like this (For a good example see: the transplant story at UCI
  Medical Center
). The paper won a Pulitzer for
  outstanding public service journalism in 2005 for its series on King/Drew and might well have won another last year if it hadn’t been
  for the Times-Picayune’s
  brilliant coverage of Hurricane Katrina.

The problem for Kaiser is that once a story like this one breaks, a chain reaction
  starts. People get mad. People come forward. E-mails start flying. For reporters,
  the threads begin to unravel. It should go without saying that for a large health
  management organization with a long and varied history, this is not exactly
  an ideal scenario …

The whole emerging Kaiser story of course, has been the topic of lively debate  in the THCB comments section, where the company is far from as unpopular as  one might assume. (Matthew, you’ll note from earlier posts in this thread, is
  a fairly sympathetic observer.) Up from the comments to make life more interesting
  comes a former Kaiser transplant patient who did not particularly care for the
  detached and academic tone of the discussion between some of the posters. Sarah 
  had this to say:

I hate 70% of you. You have no CLUE what you are saying. I am one of those
  patients in the Kaiser Nor/Cal Transplant Program, having had a kidney transplant
  17 years ago. What is coming out about this program is utterly horrifying, and
  how any of you can defend Kaiser or debate the merits of transplants makes me
  ILL. You should be ashamed of yourselves. And I know none of this is coming
  from UCSF or Davis. And I know Dr. Inokuchi personally (she was one of my docs
  at CPMC). And I know the program has been crap since it started (good luck getting
  a call back for a simple question about dental pre-meds).This scandal is far bigger than y’all seem to realize. A lot of people died 
for no reason.

And for my surgery, Kaiser saved a fortune. $40k a year for 17
  years plus health care costs related to dialysis would have been far more than
  the transplant cost plus rejection meds."

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13 replies »

  1. I can attest to the cost savings agenda that Kaiser continues to maintain! Having had major Cancer surgery in March of 2000, I was TOLD that there were NO openings in the surgical center at Panorama City until 12 weeks after I was diagnosed. What they did not ascertain at the time of diagnosis is that my Cancer was at a Stage 3 Level! Because Kaiser does not operate in the evening or early a.m. hours, I waited 12 weeks for sugery! In spite of it all, I was able to survive the Stage 3 degree that I had! It’s a sad commentary on Health Care when decisions to treat terminally ill individuals and families are based off of financial considerations……….but then again they are a Health Maintainece Organization!
    Which simply stated says that they do an excellent job of Maintaining their Bottom Line.

  2. I can also vouch that much of Kaiser’s inhouse discussion is about cutting costs and aggressive billing. The first module that was developed for HealthConnect was the billing system, and from the get-go the discussion was about how to repackage and resell the system.
    I’m so glad this discussion is no longer being suppressed. The people who tried to draw attention to these problems were marginalized by their status as “isolated victims”. It takes sympathetic journalists and policymakers to synthesize the complaints and demonstrate that these problems hurt everyone. I’m so glad that the issues are finally on the table.

  3. > When I had a small finger OP the
    > start and end times were logged.
    Most hospitals try to charge for time in an OR — usually in fifteen-minute increments, but the first fifteen minutes are very expensive because they include the clean-up time in that. Whether this actually matters depends on the reimbursement scheme for that particular patient.
    > It seems that doctors could simplify their
    > lives [snip] if they moved to time based billing
    A doc can bill on a HCFA 1500 form no matter what payer is paying. That was the promise of HIPAA — I know deadlines have been extended several times but I think this has mostly been for the benefit of docs, not claim processors. So they do bill more or less on a time and material basis through the CPT4 codes, which link up to RVUs, which represent Time and Materials, more or less. It has its problems, but…
    The problem with Time & Material billing is that it represents an open-ended liability for the payer and offers little opportunity to hold providers accountable to a (knowledgable) purchaser. This was seriously abused for a hundred years. And so now we have the Prospective Payment System (PPS) at least from CMS. From the providers’ point of view, the PPS exposes them to risk of a train-wreck of a case that consumes far more resources than they will be paid for. CMS tries to mitigate this with “Outlier Payments” but we have seen this seriously (even criminally) abused too.
    One big frustration for docs and hospitals is that a bill Medicare will accept, a commercial insurer might not. A bill the commercial insurer accepted last week they might not accept this week, and for no apparent reason. This is the source of the complaint they never know what or whether they will be paid. And then there are some who simply don’t want to understand it, and some who don’t want the accountability to the insurer that proper coding represents.
    > is [financial distress] happening in counties that
    > have government run systems?
    Yes. Check the UK, Germany, France, and Canada. These systems are facing the same strains the US market is facing.
    > Increased medical testing has [snip] everything
    > to do with legal liability.
    Mr. Daniels might want to research wholesale agreements for lab services between FPs and companies like Quest Diagnostics, and about non-pecuniary rewards for referrals before he pops-off about “everything”. Yes there is defensive medicine. There is also pandering to patients who want the doc to “do something”. There are varying levels of diagnostic skill, which leads to over-ordering or mis-ordering. Tests today can be so specific and sensitive it may make sense to order one in the face of equivocal (but real) Signs and Symptoms where it might not’ve ten years ago. Many factors figure into ordering behavior, and it is not so clear what dominates.
    > Nibbling around the edges of the U.S. model is not
    > going to solve anything for the majority of users.
    You sell us short. PPS is not “nibbling around the edges” — it is a sea change that has not yet been adjusted-to by the industry. The move by employers to treat medical services for their employees the same way they treat anything else in their production supply chain is another sea-change. This idea is echoed in the “consumerism” movement. These trends are blowing through the industry like squalls.
    Access for the uninsured and other very serious public policy problems are not directly addressed by these things, but I am confident they will be addressed in a way that comports with our culture. And when they are addressed, it will be done in the context of a market that is adjusting to the new demands for quality and efficiency.

  4. Peter, I never suggested unlimited co-pays either. In fact, I really don’t think co-pays are very effective in controlling utilization. Deductibles are, however. I believe a deductible of $1,000 for an individual or $2,000 for a family is reasonable. After the deductible is reached, insurance should pay 100% for covered services.
    In most large groups, 4%-5% of the policyholders account for 50% of the medical costs. They will not be very cost sensitive once their deductible is reached, but that should be where case management comes in. For the vast majority of people who have comparatively low medical costs in any given year, a deductible in my suggested range should be adequate to make them at least somewhat cost and utilization sensitive whether they are seeing a GP or a specialist or contemplating a trip to the ER.

  5. Barry, I have said that using co-pays is an important issue to hold down system use, but only for regular doctor visits, if I didn’t make myself clear. Co-pays and deductibles for necessary medical procedures (diagnosed by a physician) is not what I would call good or fair healthcare policy. A high co-pay doesn’t make the cancer less of a threat. What we found in Canada was that most of the overuse was in GP physician access and misuse of the ER. I’m not including doctor FFS abuse which is also part of the equation. The “Gee I have a headache” reason for going to your GP when a little wait time would clear it up, or going to the ER for a sprained ankle rather than wait for a day to see your GP. Tom’s comment on Medicare’s actions at reducing costs is another example of a government agency tackling the cost issue when private providers seem to focus on the their income issues. Nibbling around the edges of the U.S. model is not going to solve anything for the majority of users. The discussions on this blog are great and interesting but I see no real push for significant change using the present private sector. No, I don’t think this culture is ready yet for real change, but given the rapid increase in costs for users we will get to a point where there is a majority who will demand change. Frankly from a personal point of view, I’m covered either way, so my opinions don’t have an agenda behind them.

  6. Peter, OR’s may already bill on a time basis, though doctors, labs, imaging centers, etc. generally do not. The personal experience you cited may well have been yet another example of defensive / CYA medicine at work. As for other countries providing care for less without going bankrupt, I’ll defer to your knowledge of the Canadian system, but all of these other systems have developed non-price rationing approaches (like long lead times to get an appointment with a specialist and waiting lists for operations) to hold down demand for more expensive, non-life threatening procedures. Moreover, I think even you have pointed out in the past that co-pays and meaningful deductibles are necessary to avoid gross overuse of the system.

  7. Tom, I think the CMS approach is in the right direction and was gratified to hear of their improving sophistication with respect to matching signs and symptoms with appropriate diagnostic tests.
    It seems that doctors could simplify their lives (and perhaps reduce office expenses) if they moved to time based billing for their privately insured and self-pay patients. I presume they would need to convince the insurers to allow this, at least as an alternative to the current system. Perhaps you could provide some insight as to which approach would leave them better off finacially.
    Time based billing is, more accurately, time and materials billing with “materials” including such things as lab tests and imaging which the doctor probably has to refer out to an independent provider and receives no financial benefit from. The labs and imaging centers that perform those services, however, could probably develop a rational and objective time based billing system as well if they wanted to and if insurers encouraged them to do so.

  8. Barry, don’t we have time based billing now, at least for OR time. When I had a small finger OP the start and end times were logged. I heard them called out by the OR nurse. I’m assuming then that the bill to the insurance company would be time based?? It was also intersting that I had requested a local only. When I got to the pre-op the anesthesiologist made every attempt to get me put under, who’s costs was she trying to control?. In fact the operation was so small I didn’t think it even needed an OP room, but I and the insurance company ended paying for it. As for the country going bankrupt, is that happening in counties that have government run systems? Surely the U.S. spends twice as much now on healthcare with 50% of all personal bankruptcies because of healthcare.

  9. Increased medical testing has little to do with increasing reimbursements and everything to do with legal liability.
    When you go to your FP and he orders blood tests and imaging, the FP doesnt get paid for it, the radiologist and the chemistry lab gets paid for those. The FP is not running those tests, he is delegating them to someone else. So the FP has no reason to do these tests simply to increase his revenue, because he wont see any money from those tests.

  10. Barry writes:
    > If virtually all medical services that lend
    > themselves to time based billing adopted that
    > approach, pricing transparency should be a simple
    > matter, and auditing providers should also be much
    > easier as well.
    Its getting there Barry. Medicare is leading the way on this. It isn’t quite time-based billing. Rather it is service based — but the prospective payment amount is strongly influenced by staff time and labor rates in different geographical areas. It also assumes reasonable management of practice overheads.
    You can think of this as DRGs for ambulatory care in hospitals.
    But, this is a FFS system and has all the problems associated with FFS. One thing CMS has gotten good at however is matching patient diagnoses with services to be provided, and matching Signs and Symptoms with diagnostic tests ordered. One doc I know considers this system something like “continuing education” in diagnosis: he has found it eminently reasonable. So now it is hard(er) now to game this particular FFS system — a doc probably has to explicitly lie to order inappropriate services anymore. I am sure that there are times where he wants to order appropriate services, but the system rejects the claim and that this causes no end of frustration. I don’t quite know what to do about it.

  11. Marc, while I understand that if everyone had insurance, there would be no uncompensated care, we would still have doctors and other providers complaining that reimbursement rates are inadequate, especially in the case of Medicare and Medicaid. Furthermore, unless deductibles were reasonably meaningful (say, $1,000 per person / $2,000 per family) and perhaps capped at 5% of income for non-Medicaid eligible low income people, there is a risk that overuse would bankrupt the country.
    Related to the reimbursement issue, I also think it would be more efficient if providers could be paid based on time spent with the patient. If I see my cardiologist, for example, on two occasions each lasting 30 minutes — once for a consult and once for a stress test and follow-up recommendations, wouldn’t it be better to just pay him for the 30 minutes instead of by the procedure?
    If I need an MRI, and that takes 20 minutes including setup time, why can’t I just pay for 20 minutes of machine time? The machine doesn’t care if it is taking a picture of a brain, a chest or a stomach.
    Same for a hospital operating room. If I’m there for an operation that should take one hour, bill me for one hour of OR time. Same for the surgeon — bill for one hour of operating time. Obviously, given the differences in skills and risk, not to mention the cost of malpractice insurance, the surgeon might have to bill at $1,500 per hour or so to cover his practice expenses and make a living while a rate of $200 an hour might be more reasonable for a PCP. If virtually all medical services that lend themselves to time based billing adopted that approach, pricing transparency should be a simple matter, and auditing providers should also be much easier as well.

  12. I agree with you again Barry. The reason Kaiser attempted this was to reduce costs.
    This is the inevitable consequence of trying to equate health care to buying a car or a computer, and placing all the onus on healthcare providers to reduce costs.
    As long as reimbursement rates for health care continue to decline from health insurers as well as the government, and the government mandates that everyone be entitled to health care regardless of their ability to pay, without mandating that everyone purchase health insurance, health care providers will be forced to seek other ways to recoup their losses.
    Fraud and corruption, as Matthew pointed out in his previous article Policy: Do No Evil, Part II is one way. Ordering unnecessary procedures/operations, or unnecessary tests, as pointed out by Kevin MD in his post Why doctors order unnecessary tests” is another.
    But the possibility that I fear the most is a reduction in the quality of healthcare, in the US, that such a policy will foment.
    My wife and I have been members of Kaiser for 4 years now, and I have nothing but praise for their service. The professionalism I have seen displayed, during my numerous encounters there, has always been top notch.
    I don’t fault Kaiser for attempting to bring the transplant operation in house. I understand why they did it. I just think they were a little premature, and had done a better job of planning.
    They say we learn from our mistakes, I hope they did. I hope we all will.

  13. In the course of reading about Kaiser’s kidney transplant program troubles and other comments about the organization’s reputation in some quarters as an unresponsive bureaucracy, it got me to thinking about the HMO model generally.
    While a fixed amount of money to take care of a patient population should provide incentives to keep them well (through routine physicals and other screening tests to catch problems early before they become serious and expensive to treat), there are negative incentives as well.
    If I am one of the executives running an organization like this, I perceive that my income for the year will be maximized if nobody comes in seeking care. Every time someone seeks services, Kaiser’s income potential for the year goes down. In order words, every patient is a cost. Consciously or unconsciously, this could create incentives to create roadblocks to actually getting expensive care. The longer we can make people wait for an MRI or surgery or whatever, the fewer we will have to perform. By contrast, under a fee for service model, every patient is a revenue opportunity where the incentives are, if anything, to over treat, which requires a different sort of oversight to prevent. Whatever the healthcare model, it also illustrates the benefits of making sure there is sufficient competition to allow patients to eventually take their business elsewhere if they are not satisfied with both the care and the service.
    Kidney transplants are different in that the cost of doing one is only equivalent to about a year of dialysis, so they should be money savers for the system. Of course, the supply is constrained, so the larger system cannot satisfy all of the people who could benefit from a kidney in any given year. I can only conclude, however, that the only reason Kaiser wanted to bring this program in house was to save money vs outsourcing, not to improve quality. The management of the program sounds like it could not have been worse, and there was probably no alternative but to shut it down.