Intermountain – Proof That U.S. Hospitals Can Improve

I urge everyone to read this story by David Leonhardt in this Sunday’s (November 8) New York Times. (Thanks to reader Lisa Lindel for spotting it. )

Leonhardt profiles Intermountain Healthcare, a network of hospitals and clinics in Utah and Idaho that President Obama and others have described as a model for health reform.

Leonhardt concludes:

“If you simply looked at Intermountain’s overall results — the good outcomes and low costs — you might be tempted to dismiss them as a product of the environment. Utah has the youngest population of any state, as well one of the lowest rates of alcohol and tobacco use. More than half of the state’s residents are Mormons. This homogeneity creates a noticeable sense of community, even a sense of mission, among many Intermountain doctors and nurses.

“The places that spend far more on medical care and get worse results — south Texas, south Florida, New York City and its suburbs — don’t have those advantages. They tend to have more diverse populations and a more diverse set of medical needs. None of these places is ever likely to reduce its costs, or raise its life expectancy, to Utah’s levels.

“But once you acknowledge all this, you are still left with some fairly striking facts. There is nothing inherently Mormon about waiting until the 39th week to deliver a baby. Nor is there something unique to Utah that allows doctors there to analyze their results and systematically try to improve them. There is no reason, really, that a hospital anywhere else cannot do the same. Maybe more hospitals will begin to do so on their own, pushed by the same internal forces that remade medicine a century ago. But maybe not. The economic incentives in health care are still pointing in the other direction. As long as doctors and hospitals are paid for each extra test and treatment, they will err on the side of more care and not always better care. No doctor or no single hospital can change that. It requires action by the government.”

Leonhardt then asks: “How much will health care reform do on this front?”

He suggests that we should not scoff the Medicare pilot programs that have made their way into the health-reform bills now being considered by Congress. During President Bush’s tenure, there was little chance that these projects would ever see the light of day. But, Leonhardt points out, under the Obama administration, if they work, it’s likely that they will become mandatory.

Leonhardt describes a few of the Medicare reforms that the legislation calls for: “One is a bundling program, in which Medicare would pay hospitals a set fee for certain operations or chronic illnesses, rather than paying piecemeal for every aspect of the treatment. Hospitals would then have an incentive to avoid complications and readmissions, because they would no longer be automatically reimbursed for them. The hospitals that did the best job of keeping their patients healthy would end up helping their bottom lines. The details are still being fleshed out, but Medicare or private hospital groups would most likely monitor outcomes to make sure the incentives didn’t lead hospitals to skimp on care or turn away the sickest patients.

“These pilot programs have been largely overlooked in the public discussion of health reform, because they start small. At first, they would be voluntary. Places like Intermountain would presumably sign up for them, and high-cost hospitals would not. But the Obama administration is hoping to make the pilot programs national — and mandatory — if they are successful. In that case, the program would suddenly not be so small. It would begin to attack medicine’s most upside-down incentives.”

Maggie Mahar is an award winning journalist and author. A frequent contributor to THCB, her work has appeared in the New York Times, Barron’s and Institutional Investor. She is the author of  “Money-Driven Medicine: The Real Reason Why Healthcare Costs So Much,” an examination of the economic forces driving the health care system. A fellow at the Century Foundation, Maggie is also the author the increasingly influential HealthBeat blog, one of our favorite health care reads, where this piece first appeared.

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  1. Here are some facts about Kaiser.
    First it is extremely successful Kasier has successfully put down roots in eight regions of the United States, and it is the largestnonprofit integrated health care delivery system in the United States.
    Kaiser has at minimum 36% of HMO market share in California where about 43% of the population are in an HMO. PacifiCare has 17% of the California market, Foundation Health Systems 15% and California Care has 6%. Kaiser’s market dominance is underscored by the fact that its total assets increased by
    about $4.3 billion (52%) in only four years.
    And people do trust Kaiser.
    (It is only in the Northeastern corridor between Boston and D.C. that you find a general distrust of integrated delivery systems. Docs prefer to work solo or in relatively small groups. Many don’t like the idea of someone looking over their shoulder (peer review). They prefer to be paid fee-for-service believing that if they work hard, they can make more money that way. And patients have become accustomed to this fragmented delivery system. Patients like what they are used to.)
    In California people trust Kaiser. Turnover among patients is very low. Often, more than one generation of a family stays with Kaiser for many years. Turnover among docs also is low. (4%–5% in thefirst three years after recruitment and less than 1.5% thereafter. In those early years, sometimes physicains are asked to leave if they don’t make the grade.) There is a waiting list of docs who would like to sign on with Kaiser.
    Why Kaiser provides better care: “In 2003, Kaiser Permanente launched a $4 billion health information system called HealthConnect that links its facilities nationwideand represents the largest civilian installation of EHRs in the United States.” As a result, fewer medication errors, redundant tests, etc.
    (The quote above and quotes that follow come from an excellent Commonwealth Fund case study of Kaiser–June 2009 —http://www.achp.org/library/download.asp?id=7921.
    Kaiser also has been very successful in reducing hospitalizations and reining in costs: “hospitalization rates (age/sex adjusted) declined•by 30 percent for coronary heart disease, by 56 percent for ST-elevated myocardial infarction(heart attack), and by 20 percent for strokesfrom 1998 to 2007.”
    Meanwhile, “The prevalence of adult smoking declined•from 12.2 percent to 9.2 percent of membersfrom 2002 to 2005, more than twice the rate ofimprovement in the California population as awhole
    The bottom line: “The heart disease mortality rate decreased by•26 percent from 1995 to 2004. As of 2004,Northern California Kaiser Permanente mem-bers had a 30 percent lower chance of dying from heart disease than other Californians.”
    Barry asked why people would pay more for Kaiser.
    While other insurers offer cut-rate Swiss cheese plans (filled with holes) at a lower cost, Kaiser sells comprehensive coveragge.
    At the same time, Kaiser has done a better job of containing costs than most for-profit insurers. Overall all, for-profit insurers have seen their reimbusements to doctors, hospitals and patients grow by 8 percent of a year, each year, for the past ten years.
    Kaiser’s spending on care has grown by “only” 6% a year, which is much better than average.
    The Commonwealth Fund Report explains: “The Northern California region has main-tained a consistent cost-growth trend of about 6 percentper year over the past 10 years, although premiumshave risen somewhat more to fund infrastructureimprovements that are expected to deliver increasingvalue over time. The health plan has made a capital investment of $4 billion for KP HealthConnect andspends about 3 percent of annual revenue on its infor-mation technology budget. The medical groups alsoinvest in training physicians, which entailed some tem-porary loss in productivity during EHR adoption”
    Meanwhile, if you read that Kaiser patients have a 30 percent lower chance of dying from heart disease, that’s certainly an argument to pay more for real insurance that emphasizes chronic disease management and preventive care.
    The California Office of the Patient Advocate’s2008 Healthcare Quality Report Card gave KaiserPermanente’s Northern and Southern Californiaregions the highest overall ratings among eight largehealth maintenance organizations in the state
    Becaue Kaiser doctors practice evidence-based medicine there is far less unwarranted regional variation:
    “An analysis of hospital use at the end of life among older Californians with chronic illness foundthat HMO (health maintenance organization) patientstreated in Kaiser Foundation Hospitals had similar overall use but much less regional variation in use thanHMO patients admitted to non-Kaiser hospitals in thestate. (HMO patients generally had lower hospital useand less regional variation in use than patients withfee-for-service coverage.)
    Kaiser hasn’t succeeded everywhere. It’s doing well in Georgia, but when it tried to put down roots in North Carolina, it didn’t take. The Commonwealth Fund report observes: “Researcherswho studied the North Carolina experience found that acombination of political, economic, and organizationalfactors contributed to the plan’s withdrawal from thatstate. They concluded that realizing the potential of thismodel in new markets requires a “conjuncture of sev-eral supportive conditions,” such as gaining a criticalmass of members to support the delivery of a full scopeof services that can be internalized within the multi-specialty group. Doing so may depend in large part onwhether purchasers offer and reward consumers forselecting better-value options.”
    The medical culture of North Carolina (which is more like the NorthEast than many other Southern states) didn’t accept Kaiser. And, as the report notes, employers in NC werent’ rewarding consumers for selecting insurance that offers a better value (by lowering what share of the premiums the employee must pay.)
    The Commonwealth report concludes: “Whether or not the Kaiser Permanente modelcan be replicated in its entirety, it offers a valuablesource of inspiration and experience as a “learninglaboratory” for the development of strategies, tech-niques, and innovations that may be transferable toother settings—not only other multispecialty groups,but also traditional practices.”
    For instance, the report notes, Kaiser patients can phone Kaiser or e-mail them. They don’t always have to come in. Doctors who work fee-for-service insist that patients come in because that is the only way they will be paid. But if more doctors begin to accept capitation (a lump sum per patient per year) then they might adopt
    Kaiser’s model of telephone and electronic patient encounters.
    Going forward, Medicare is going to be giving bonsues to doctor who join integrated multi-specialty groups.
    And I agree with jd that when the provider is also the insurer, patients often are better served. We’ve seen this at Geisinger (in Pennsylvania) as well.
    In many cities across the country, hospitals and doctors are getting together, learning to collaborate rather than compete, and in many cases doctors are going on salary or pooling fees. IHI has reported on this in its “How Did They Do That” study.
    Medical culture is changing, and govenrment will be pushing it along, using financial carrots (and sticks) to reward higher quality care at a lower cost while penalizing inefficiency.
    Both Medicare and the public plan are going to begin setting the bar higher. And, contrary to the conventional wisdom, the public plan will be strong enough to change the market. See my most recent post on HealthBeat (www.healthbeatblog.org) here
    Someone mentioned Cooper’s critique of the Dartmouth reserach. Let me just note that Cooper believes that what this country needs is more specialists–and more
    of the intensive, expensive care that specialists provide. This is a major reason why he doesn’t like hte Dartmouth research. It suggests that in areas of the country where patients receive more primary care, more chronic disease management and more preventive care, seeing fewer specialists, care is less expensive and outcomes are at least as good, sometimes better.

  2. If they don’t lower their rates they won’t get the business. Further this whole argument about cost being unsustainable is based on the assumption premium needs to be lowered. If everyone is fine with today’s cost then we have no need for all this reform.
    Interesting lesson in HIT, after spending 4 billion besides some cute commercials what does Kaiser have to show? They haven’t gained any meaningful cost advantage over those companies that have not made the investment. As a collection of systems what can we expect from our 20 billion in tax payor dollars…..apparetnly some funny commercials, i.e. the kid on the ballfield and talking about life is adorable

  3. Why should Kaiser lower its rates if it doesn’t have to? All it has to do is meet the competition. As a non-profit, it has no incentive to expand in a rapid fashion, which it would have to do if it lowered rates and attracted more enrollees. State regulators dislike excessive reserves. Excess of revenue over costs from operations has been spent on infrastructure. How many other health care systems have been able to spend four billion dollars to install advanced HIT?

    Anyone with authentic experience in health care (not the janey-come-lately’s) knows that Intermountain, CleveClin, et al.) have VERY HIGH standards.
    High standards in union settings in the USA (and UK)?
    HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA, HA ..
    That’s as funny as Chicago politics being honest.
    Start over. Or face defeat.

  5. Nate – Good posts on Kaiser. Your comments about Kaiser generally mirror what I saw at least while I was living in Northern CA. Their costs were cheaper (usually a couple of percentage points) than other PPO competitors but it wasn’t nearly enough to really overcome the main issue of being in an HMO or not for almost all of their patients. Imagine Kaiser would be much more compelling if they really did have premium costs that were notably cheaper (say at least 10-15% to get HR personnel to really pay attention to them).
    Kaiser is also very close-fisted with most of their financial and clinical data too. They tout certain things that show them in a positive light (especially on the clinical side) but get a tight lid on the rest.

  6. The paradigm of theroy and reality which usually bites academics and politicians in the ass. While on paper Kaiser should blow everyone out of the water with low rates it never manifested. Kaiser appeals to a very small spectrum of people from my experience in open enrollments and quoting groups. People that like to be managed love Kaiser, those that are more independent or self reliant can’t stand it. Kaiser in many ways resembles a cult, I have seen people quit their job becuase they stopped offering kaiser in CA and others that leave if they are forced into it. In CA where I am familiar it is usually a dual option, you usually don’t see it offered alone and I seldom see groups that are all Kaiser.
    I think the type of people that gravitate to Kaiser exlains why they have had success where they have and struggled where they have. I don’t think more then 20-25% of the popultation would ever be content under an HMO of any sort.
    I think Kaiser gets more heavy utilizers, people with overwhelming medical conditions would be more inclined to look for someone to manage them then your average person.
    It would be interesting if someone studied the matter more and Kaiser opened up their data for such work. I have never seen anyone break down the consumer into groups and study what moivates them and how best to serve each group. Politicians in all their wisdom keep trying to stuff us into one size fits all solutions that at best serve a small minority of the population and at worst serve no one. This is one of the major problems with Medicare, for the most part its a political solution never designed to actually serve anyones needs. When it was passed 87% seniors needed catstrophic coverage and 13% needed assistance mainly for moderate to large claims. Congress managed to design and pass a plan that delivered none of that. 44 years of reform since has been pretty much the same, a plan that addresses no need and screws up the system in the process.

  7. Nate,
    Thanks for the clarification on Kaiser. What is the extra perceived value? Lower co-pays or none at all? I thought, as the thrust of the Intermountain article suggests, the sophisticated electronic records would eliminate or at least minimize duplicate testing and adverse drug interactions. They would also make the management of chronic disease easier, more consistent and more effective. The salaried doctors would not have any incentive to order redundant or unnecessary tests and procedures. With a large, well financed organization paying the doctors’ malpractice premiums as well, there should not be as much defensive CYA testing. In short, the system, the culture and the fact that the providers and the insurer are on the same team is supposed to produce more effective care for a LOWER COST. So, if that’s the case, why aren’t their premiums lower than their competitors’?

  8. “my understanding is that its health insurance premiums in CA are basically in line with its major competitors”
    From what I see they are higher but people pay a premium for the model and extra perceived value. They could not compete on price as their model cuts out the low cost crappy providers. From CA to OH I have never seen Kaiser purchased on price. They didn’t take well at all in Ohio and sold all their facilities to Cleveland Clinic, I beleive they are doing Ok in GA though.

  9. I.B.E.
    The guy that points out a design flaw in the Titanic before it’s all-aboard time is still rendering a positive service, whether or not that warning comes embedded in a comprehensive treatise about how to overhaul surface transport in the North Atlantic.

  10. jd,
    The appeal of integrated delivery systems is the alignment of interest between providers and insurers. The problem, at least in most markets, is that people don’t trust them. Rightly or wrongly, they think that any model based on a capitated payment, even with risk adjustment, creates an incentive to deny care or at least delay it even if that is often the most appropriate thing to do. The other issue, I think, is that even if people are satisfied with the system’s primary care and its management of chronic conditions like diabetes, heart disease and asthma, when they need what Don Berwick calls “rescue care” such as an organ transplant, big ticket surgical procedure like a hip replacement, heart bypass operation or neurosurgery or treatment for cancer, they want to have access to what they perceive are the top surgeons and medical centers for those procedures. They don’t want to be limited to the integrated system’s network. Kaiser’s bungled effort a couple of years ago to bring kidney transplants in house only reinforces this viewpoint.
    Separately, while Kaiser has built a good reputation in Northern CA, Hawaii and Oregon, it is not as well regarded elsewhere and it has not been able to expand its footprint beyond where it is already well established. Moreover, my understanding is that its health insurance premiums in CA are basically in line with its major competitors including Anthem, PacifiCare, Health Net and CA Blue Shield. If it were delivering better care for significantly less money, it should be able to grow its market share based on price alone.

  11. Yaj,
    Cooper’s got an interesting bug up his butt: it seems to cause him to be all criticism & no prescription. You’ve stepped forward as his champion – does he have, you know, any ideas for busting the poverty/poor health care link he acts like he discovered? All that his blog seems to contain is whining about the attention Wennberg has gotten. What does he offer?

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  13. 108DAYS,
    Still hawking your movie? Did you have any real medical consultants when you made it, or have you just made everything up?

  14. As some know, I’m a fan of integrated delivery systems for multiple reasons and have some personal history with them. But it doesn’t take a fan of these systems to see that what Intermountain and Leonhart are groping for is a fully integrated delivery system, in which the system as a whole is at risk for the cost of care and succeeds when the cost of care goes down (or at least, does not go up).
    All this talk of bundling and being at risk for procedures or conditions…how much easier to be at risk for a population. Those calculations are far simpler than the calculations that try to break out this complexity and deal with each component part separately.
    Here is what I would like to see: visionary institutions seeing the writing on the wall and electing to merge with their “foes” across the divide that separates provider from insurer. It will be very difficult both for cultural/institutional reasons and because when the business model is being created there are lots of messy repurcussions in terms of competitor reactions, but there are places across the country where it is possible for them to succeed, if government helps it along.

  15. Pie in the mountain sky. There must be an equation for each variable in order to solve all of the variables. Of course diverse ppulations will have fewer logical solutions. Too many variables.
    Only the patient can appropriately weight each variable for themselves. Only the patient can choose appropriate care for themselves. It must be that the patient pays for all the care for themselves. No one is entitled to limitless healthcare spending. No one. Everyone is not entitled to a liver transplant. If they are entitled, then someone will eventually be forced to part with their liver. Part of spreading the health?

  16. While I applaud Intermountain for its use of electronic records and paying its doctors a salary instead of fee for service, its experience is probably not easy to replicate. Many of the well known academic medical centers in the country have very aggressive and high cost treatment patterns despite paying many of their doctors a salary instead of fee for service. I think the key difference between them and Intermountain is the culture – that’s the way we do it here. At the same time, the large centers like UCLA need the revenue from their aggressive treatment patterns to service the debt they took on to expand their facilities.
    While I’m a fan of bundled payments, especially for expensive surgical procedures like hip replacement and CABG, there are huge chunks of the hospital revenue base for which bundling will probably not work well. According to HCA, which accounts for about 5% of U.S. hospital beds, 37% of their revenue is for outpatient procedures. This includes everything from same day surgery to sophisticated diagnostic imaging to ER care that does not result in an inpatient admission. Within the 63% of revenue from inpatient care, fully 69% of that is medical and only 31% is surgical. Moreover, hospitals are already paid by Medicare based on the DRG system while private insurers pay similarly though they call it a case rate. For situations that don’t lend themselves well to case rates, they pay on a per diem basis. Moving to a bundled payment that would include doctors’ fees, rehabilitation, drugs, home visits and all other appropriate care is probably easier said than done beyond the surgical cases where it’s clear from the start what needs to be done.
    There has been talk about paying doctors a capitated fee to take care of patients with diabetes or heart disease or asthma. However, the experts tell us that we don’t know how to structure these payments yet which is why we need to try pilot projects first. Doctors are generally not enthusiastic about taking on the actuarial risk inherent in a capitated payment because they cannot estimate their costs with sufficient accuracy. At the same time, the risk adjustment state of the art for patients with multiple chronic conditions is not yet where it needs to be. Even if some of the pilot programs work, the history of getting them incorporated broadly into Medicare is not very good because of powerful interests that would do better with the status quo and will defend it vigorously.

  17. Those interested in Leonhardt’s excellent article might also like to read my new article in Managed Healthcare Executive looking at efforts by Geisinger Health System and Virginia Mason Medical Center to re-engineer care to reduce costs and improve quality. So far payers have not been interested in contracting with them on a pay-for-outcomes basis, and Jeff Goldsmith has some strong words for payers.
    –Harris Meyer

  18. Clearly the answer is to adopt whatever medical delivery system that the 7th Day Adventists are using.
    Just look at their costs and their outcomes! Amazing. Nevermind the massive differences that differentiate their demographic cohort from the occupants of, say, Roxbury, MA.
    Here’s an open plea for all of the retards jumping up and down about this study and the entire mass of data generated by the Dartmouth Atlas to spend the afternoon perusing the glaring inadequacies of their methodology that Buzz Cooper, M.D. has laid out on his website, before commenting here.

  19. Nate, Nate, Nate.
    I mean, really, Nate.
    Jon Stewart did that great “Glenn Beck on health care” parody last week.
    & now you’re trying to top it?

  20. Which is the better healthcare system;
    Utah is as good or better then anyone of those, yet the left wants to scrap what Utah is doing and force it into a system we know leads to failure. America does not have a healthcare crisis liberals do, take away NY, MA, and two of the three pillars of liberalism and we are doing quit fine