Matthew Holt

Sleepless in Seattle

In a 36 hour span I left the mountains of Copa Ruinas in Western Honduras, had dinner in South Beach, Miami and after stopping off to see that Health 2.0 central in SF hadn’t collapsed, ended up in Seattle. I woke up early (had to get that in there to match the title) and hustled off to the main symphony hall because it’s the 25th anniversary of the Group Health Center for Health Studies. (The research arm of Group Health Cooperative of Puget Sound)

There the question of the day is, why haven’t integrated group practices (like Group Health & Kaiser) spread across the nation? And is there something that the new Administration can do to help make it so?

Bob Berenson from the Urban Institute started with
the suggestion that politicians are now seriously looking at the
problems of the delivery system as well as that of uninsurance. Part of
the problem for the Group Health and integrated systems generally is
that there are no good examples on the east coast of a big group
practice that works, and none that staffers on the Hill would go
to—they’re still calling Bob for a referral to a “good doctor.”

The problematic issue has been the impression that those systems have “poor
access” (otherwise known as shitty customer service and rationing). But
Berenson pointed out that life is different in much of the FFS world
now too—most docs don’t take call, and many don’t follow their patients
into the hospital. So the patient/physician relationship is different
in many places.

And then there’s the downside of the current system.
One fact from Berenson: 20% of Medicare discharges result in a 30 day
re-admission—and for those 50% of the time the patient had NO encounter
with another provider in the interim. And the re-admission LOS was
longer than the original. And of course the hospital gets paid again.

But no one is out there helping the patient. Berenson
says, if ever there was a case for an integrated model, that would be
it. (This data, Berenson told me, has been in the MedPAc report for the
last couple of years, and he also told me something I didn’t know which
is that re-admissions less than 30 days post discharge still get paid
by Medicare). His view is that payment policy can change this, and take
the lead and he thinks it’s time—and that people in the new
Administration are listening.

Patricia Smith is a long time lobbyist (spent time in
CMS running Part D and also was at AHIP, so caveat emptor) who now runs
the Alliance of Community Health Plans—the trade group of Kaiser/Group
Health and about 15 other smaller integrated non-profit health plans.
Smith said two important things. One for integrated care to win on a
policy basis, the public must want to buy into the care system that
integrated systems are selling. Second, are these integrated systems
actually able to show that they’re better, cheaper, faster (especially
cheaper)? At the moment it’s tough for these plans to show that. What
she thinks that they could do is to deliver a better patient experience. But that of course is the challenge.

Scott Armstrong, Pres & CEO of Group Health
Cooperative says that although he’s excited, he’s scared. First, he
mentioned the Washington Mutual building across the street that just
laid off 3400 people. And then there’s the Medicare system. There are
plans including Group Health that would be devastated by changing
Medicare Advantage to paying the same as 100% of Fee for Service.

Sidebar: Matthew editorial coming up— So Group Health can’t provide care for Medicare more cost effectively than the Medicare FFS system? So why are we bothering?

I had a rather lengthy conversation with Scott inviting him to defend himself. His point is not
that Group Health is not more efficient than the comparative private
sector. It is and regularly undercuts comparable private plans. But
that in the Seattle area Medicare FFS rates are so low (around 50% of
commercial rates) that providing for 100% of Medicare can’t be done,
and that Medicare in Seattle is a disaster, no doctors will take
Medicare patients, etc, etc. He wants to have 75% of New York City’s
rates prevailing equivalent FFS rates. Of course as I said to him, that
answer may work for him but it cant work nationally…because nationally
Medicare FFS costs are of course average Medicare FFS costs. So the
excuse that Medicare FFS doesn’t pay enough can’t wash everywhere.

Back from sidebar: Lewis Sandy from United
HealthGroup is like me, a Vic Fuchs & Alain Enthoven (Stanford)
disciple who believes in integrated care and chronic care models (which
he supported at RWJ). But it didn’t take over the world. Why not? It
doesn’t scale, it’s hard to manage, it’s an industrial age
model and it’s overly bureaucratic.

The network models were more nimble, as
they were easy to develop and scale. But they also had a culture that
was more innovative. They were less hidebound by the research
based cultures of the Group Health’s of the world. Policy model doesn’t
help as it pays for the wrong thing. But—and he makes a good point
here—if you were starting today, would you put an integrated system
together the way a Group Health is organized?

John Tooker from American College of Physicians says
the the key is to change the culture so that every realizes that health
care is a shared and common good.

In response to a question from Aaron Katz “what
should we tell policymakers to do in terms of payment?” Bob Berenson
suggests that Medicare should be able to administer multiple payment
systems to different types of providers within Medicare.

John Tooker
says, until we change the disparity between primary & specialty
care we’ll never get this done. He hopes that there will be new
investments in primary care (not a zero sum game….). Lewis Sandy asks
the elephant in the room question: What do we do about South Florida?
(code for high cost high utilization regions) No one wants to ask the

But in the end we need to do that. If we’re going to
change the entire system of care, even if we get more money, what
happens to the high cost areas and the high cost procedures? If we
don’t remove them from the system then it’s just going to cost more.
And if it looks like we are going to remove them, then be prepared for
a hell of a fight. Just as described by Bob L yesterday

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Coach Sale

Hands down, Apple’s app store wins by a mile. It’s a huge selection of all sorts of apps vs a rather sad selection of a handful for Zune. Microsoft has plans, especially in the realm of games, but I’m not sure I’d want to bet on the future if this aspect is important to you. The iPod is a much better choice in that case.


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Ruth Given
Ruth Given

As a former Kaiser empoloyee working during the period of Kaiser’s major national retrenchment, it was obvious how difficult spreading this model beyond Kaiser’s historic (west coast base) was. Perhaps conditions will improve in the future but I’m skeptical, esp. if the business cycle gyrations don’t level out. Intergrated health plans (and esp. Kaiser, with huge fixed costs, even without the current HIT expenditures) are very vulnable to recessions, and the current one is likely to particulary long and grim. On the evening of election day, Kaiser announced their 3rd Q financial results – a $399 million loss (compared to… Read more »


I’ve been a patient at both Mayo Rochester and Mayo Jacksonville and had superb clinical experiences both places. Jacksonville strained to replicate Rochester’s culture (which took seventy years to build), but had really strong clinical leadership and largely succeeded. Cannot comment on Scottsdale. The problem w/ the Kaiser/Group Health model was its paternalism, terrible logistics, and a mediocre patient experience. It isn’t merely that physicians had to accept working together as a group; they also had to be intolerant of poorly co-ordinated care and patient unfriendly systems and services. The physician leadership of these organizations were and are impressive people… Read more »


To follow up on Greg’s comment, I had heard someone presenting data at a national meeting speaking on Mayo’s satellite campus’s (FL, AZ) They were not all able to replicate the success of the mother ship–apparently the one with folks relocated to help start up ‘a’ had greater success than ‘b,’with mostly local hires. I think this speaks beautifully to his point, especially in light of the Mayo brand and what they bring to the table resource and experience wise. If any one out there could elaborate, would be interested.

Deron S.

Great post, but I need to make one very important correction: Possibly the BEST example of an integrated group practice is on the east coast: Geisinger Health System. There isn’t nearly enough attention being given to some of the great things they’re doing. With that said, I don’t think the big group practice is necessarily the ideal model. I worked for a big integrated group practice and now I work for a single-specialty practice. Having seen both sides, I can say that the smaller setting allows for far more flexibility and is more nimble in terms of decision-making. The issue… Read more »

Gregg Masters

Can you say the “C” Word aka culture? The absence of group culture is why the group model, the cornerstone of any integrated delivery strategy, has not migrated into mainstream medicine. When Fred and Pam Wasserman tried to leverage the HMO world beyond the non Kaiser group practice that primarily serviced this niche but growing HMO population, he peppered the private (mostly solo) medical world with IPAs, and their infamous withhold on fee for services rendered via the “Window Project”. All of the “me too” types then followed most notably HealthNet and Pacificare, but also HealthcareUSA and Health Plan of… Read more »


Not clear how involved the medical home person will be in hospital admissions decisions or managing care inside the hospital (which is an increasingly specialized business handled by hospitalists). May help a lot w/ post hospital management of clinical risk, but not with the consult festival that goes on during a lot of hospital stays.

Brian Klepper

Terrific, informative post (and not bad right out of the box from vacation). I agree with tcoyote that bundling the fees and discontinuing coverage of the readmits (unless certain criteria are met) would address some of it. 3M has new IT tools to help identify preventable readmits, and I imagine other vendors have developed or are developing similar approaches. On the issue of medical homes – properly empowered primary care physicians – I disagree. Much of the excess we see today has occurred because, once the patient is referred, the PCP becomes disengaged from the care process. In the medical… Read more »


Great ending question, only it isn’t just “what do we do about South Florida”. There’s Louisiana, Southern California and, oh yeah, New York and Boston- markets dominated by big teaching hospitals and characterized by the same type of “consult happy/no-one’s really in charge” high cost medicine as you find in the medical swamp lands everyone denigrates. Remember where Don Berwick’s crusade started- in a Harvard teaching hospital that mangled his wife. Bundling Part B physician fees into the DRG and refusing to pay for the re-admits w/in 30 days that Berenson talked about would stamp some of it out. It… Read more »