In one of the most talked about healthcare books of the year, journalist Steven Brill's "America's Bitter Pill," makes the case for integrated managed care. Through the lens of Pittsburgh-based UPMC and its CEO Jeffrey Romoff — who has led the health system to rapidly acquire an expansive provider network and launch its own insurance plan — Mr. Brill extols the virtues of prepaid, physician-led, integrated healthcare delivery.
In the book, Mr. Brill gives a detailed diagnosis of the exorbitant spending and inefficiencies that plague American healthcare and prescribes a simple plan: Health insurance coupled with physician-led integrated delivery, much like UPMC.
The interesting thing is Mr. Brill's solution already exists outside of Pittsburgh, and has since the late 1930s. In his book, he briefly mentions an existing solution not unlike his own: Oakland, Calif.-based Kaiser Permanente, the more than $50 billion nonprofit integrated health plan, which provides 9.6 million Americans with insurance through Kaiser Health Plan and Hospitals, in addition to comprehensive medical care through the physician-led Permanente Medical Group.
"I think the biggest thing is, directionally, Brill is right about combining the insurance function and the hospital function. I just think he hasn't fully expounded on what exists already," says Robert Pearl, MD, CEO of The Permanente Medical Group and chairman of the Council of Accountable Physician Practices. CAPP, an affiliate of the American Medical Group Association, is a coalition of medical groups and health system leaders who believe in patient-focused, physician-led care.
In fact, Kaiser and UPMC are not alone. Salt Lake City-based Intermountain Healthcare and Madison, Wis.-based Dean Clinic, both of which are members of CAPP, are fully integrated systems. Last September, Anthem Blue Cross announced a joint venture with seven hospital groups to launch Vivity, a health plan and provider network that could rival Kaiser's, according to the LA Times. Cleveland Clinic, also a member of CAPP, was recently reported to be examining its options and considering applying for an insurance license in Ohio, while many others in California seem to be following suit. San Francisco-based Dignity Health and the Bay Area Accountable Care Network, an affiliation between UCSF Medical Center in San Francisco and Walnut Creek, Calif.-based John Muir Health, both announced plans in March to set out for insurance licenses in California. According to McKinsey research, a total of 107 health systems in 39 states offered health plans that covered approximately 8 percent of insured lives in 2014, with 10 more provider-led plans expected to be offered in 2015.
So if this model of prepaid, physician-led, integrated care is the answer to America's healthcare woes as Mr. Brill suggests — and it's been around for so long — why does it account for just 8 percent of Americans' healthcare?
"Every one of those things is in favor of the patient, the physician and the hospital. The challenge is it is very difficult to get there," says Dr. Pearl.
According to Dr. Pearl, there are four specific aspects of this kind of model that are critical to make it effective. "The power of Kaiser Permanente is a result of integration, prepayment, advanced IT systems and physician leadership. When each is not present, we are not very different from the rest of healthcare."
Dr. Pearl highlighted the following four characteristics of Kaiser Permanente's model of care.
1. Integrated structure. Kaiser Permanente is both horizontally integrated within departments and vertically integrated across its health plan, hospital and medical group. It is also integrated across primary care, specialty care, outpatient care and inpatient care.
2. Prepayment. Ninety percent of Kaiser Permanente's revenue is prepaid, which allows Kaiser the system to align incentives with patients, according to Dr. Pearl. Without having to worry about reimbursement, prepayment also allows for greater use of mobile technology.
3. Advanced IT systems. Patient information is accessible through a comprehensive EHR at every point of contact with the patient, which reduces redundancies in testing and care and helps physicians communicate.
4. Culture of physician leadership. Kaiser Permanente is built on physician leadership. The Permanente Medical Group's Leadership Institute has had more than 2,500 out of 8,000 of its physicians participate, according to Dr. Pearl.
Yet there is no one silver bullet. Kaiser Permanente's model — which now operates in eight states and Washington, D.C. — has not thrived in every market. Divisions in North Carolina, Texas, Ohio and the Northeast were shut down after losing too much money. Even its now-successful Mid-Atlantic division got off to a rocky start.
This suggests it is possible the model is not applicable in every market. When the Northeast division shut down in 1999, former Kaiser spokeswoman Beverly Hayon told The New York Times, "We do best in urban, densely populated areas." This is likely because a health system would need a sizeable population to fully support the risk associated with an insurance plan.
"The failures in other geographies resulted not from limitations of the model, but because we failed to implement each of these four foundational elements," Dr. Pearl says. "In some geographies, we did not choose to make the investments in people and facilities required, and instead, tried duplicating the fee-for-service community model of contracting with large numbers of physicians and paying on a per visit, per procedure basis."
For example, the Mid-Atlantic division, he said, was losing members, struggling financially and unable to effectively recruit physicians due to increasing reliance on broad networks and contracted services. To turn it around, the Mid-Atlantic branch appointed physicians from The Permanente Medical Group to leadership positions so it more closely resembled the model that was successful in California. True partnership relationships were developed with hospitals, the division became a national leader in quality outcomes and the applicant pool for physician openings increased to 10 applicants for every opening. The region continues to grow membership and is financially able to invest in new outpatient facilities, technology and people, according to Dr. Pearl.
As Kaiser's past endeavors have shown, it isn't simple to implement prepaid integrated care delivery, which may be one reason why more systems are not already emulating this model of care.
"It is difficult to move from fee-for-service to prepayment, from independent practices to integration and from paper-based operational approaches to comprehensive health records," says Dr. Pearl. "And maybe most importantly, our nation has not trained physicians adequately to lead this process."
To make this model feasible, hospitals and health systems need to establish "true partnerships" with a group of independent physicians, Dr. Pearl says. "I say 'true partnership' to differentiate it from the hospital and its leadership team wanting to run the organization and simply hiring a CMO or maybe buying some practices. It requires equal decision making and leadership."
A multi-year game plan is also needed to make the model work. Defined goals must be set to continue to move organizations toward integrated, prepaid, technology-enabled healthcare delivery. Part of this is moving increasingly toward paying for value and outcomes, rather than volume and RVUs, Dr. Pearl says.
The final challenge in establishing an integrated managed delivery system? "Shifting the culture and maximizing the degree of collaboration and cooperation," he says.
"It is difficult to do with the fragmentation we see in today's healthcare system. Integration requires that physicians come together in ways that they never have," Dr. Pearl says. "Having said that, everyone I talk to understands that this change has to happen. That's where Brill is right."
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