Kaiser Permanente began humbly with a single good intentioned surgeon who aspired to provide medical care for a population of the working class. The reality of economics quickly augmented the plan of practicing medicine when debts were not covered by the doctor due to lack of insurance by his patients. The creativity of developing a prepaid healthcare plan foreshadowed the future of today’s HMO’s. Kaiser is the leading service provider in the country for healthcare coverage with nearly nine million subscribers. Political reform and patient outcry of unfair coverage practices have transforming the operations of HMO’s today from their origins.
Electronic commerce has integrated into the business world and must be embraced to survive competitive external forces. Kaiser was successful in their EC implementation through interfacing with their consumers regarding healthcare coverage information. Technological advances were embraced through strategic planning and integrated into the business model to advocate customer satisfaction and retention. Physician interaction with new EC technology has been successful within the Kaiser group where resistance has surfaced in other organizations.
HISTORY OF HEALTH MAINTIENCE ORGANIZATIONS AND KAISER PERMANENTE
Kaiser Permanente’s origin was during the great depression when Dr. Sidney Garfield established a prepaid health plan for construction workers assembling the Los Angeles aqueduct in the Mojave dessert. Dr. Garfield built Contractors General Hospital near Desert Center, California where he was oriented to patients without insurance and those with insurance had lengthy reimbursement periods. Since many patients were being treated without payments to the hospital, a program was devised for insurance companies to pay the doctor a fixed amount for each worker per day in advance. This prepayment coverage enrolled many workers and brought salvation to the hospital financial concerns. The project was completed and another construction site was identified as having the same problem by Henry Kaiser at the Grand Coulee Dam. Dr. Garfield recruited a team of physicians and solved this problem with the first prepaid group practice for over 7000 people. This project led into the next challenge which was the influx of shipyard workers into Richmond, California for World War II ship production. The number of people to be covered with this plan would be approximately 30,000. In 1945, the end of the war brought the current phase of prepaid healthcare we are familiar with today, the publicly available Permanente Health Plan. Kaiser Permanente is America's largest not-for-profit health care organization which maintains a membership of 8.1 million members in 9 states. “An integrated health delivery system, Kaiser Permanente organizes and provides or coordinates members' care, including preventive care such as well-baby and prenatal care, immunizations, and screening diagnostics; hospital and medical services; and pharmacy services. Social benefit activities include assistance to the uninsured and special populations; training new health professionals; introducing new delivery and financing methods into the health care arena at large; and through our clinical research efforts, developing and sharing better ways to care for patients.” (www.kaiserpermanente.org).
Patient demands and political pressures on HMO’s Government regulations in the health care industry and the emergence of the HMO (Health Maintenance Organization) were precursors in the Kaiser’s decision to implement changes in their organization. In 1998, a total of $288 million in lost revenue also fueled the changes to a new platform. Kaiser moved away from the traditional method of business communications via paper, telephones, and faxes. The new web based systems that would be implemented would require a $2 billion dollar investment to commit to the EC platform (Turban, 2002).
With escalating costs in the Medicaid and Medicare programs, Congress looked to HMO’s for assistance in 1973 when the HMO Act which offered government subsidies to HMO’s and gave nonlicensed HMO executives the power to challenge the medical judgment of licensed physicians. The Act also mandated that all businesses with more than 25 employees offer HMO’s as a health care option which employers had previously avoided because of increased operation costs. Congress began allowing states to filter Medicaid recipients into managed care programs whether they wanted to or not through Medicaid Section 1115 waivers in the early 1980’s. The Department of Health and Human Services points out that this violates federal Medicaid law which prohibits limits on treatment or choice of doctor. Congress repealed the employer mandate in 1995 but the HMO’s had established their positions by that time in the market. Health Resources and Services Administration reports that working Americans enrolled with managed care insurance increased from 1988 with 29% to 1997 with 50%. Citizens’ Council on Health Care states that “By mandating managed care for some patient groups, and by passing legislation allowing HMOs to deny care, the government has assured maximum profit for HMOs, with little risk. Public officials profit politically by promising "free" health care. Managed care allows politicians to promise health care without actually guaranteeing access to it.” (Intellectual Ammunition, 1998).
Patient’s voices regarding HMO’s were heard by the government in the late 1990’s. Patients were often being denied coverage after their HMO has approved the costly medical procedure. New regulations designed to prevent HMOs from backing out at the last minute and leave consumers to pay the bill were enacted. If a case arose where a HMO would refuse to offer medical coverage, the new rules give the insurance department the power to order the HMO to provide the care, after reviewing the patient's case (Patel, 1997).
On February 8, 2000, HMO executives met in Dallas, Texas to discuss possible methods of improving their image with the public. “United Health Group, Kaiser Foundation Health Plan, and Humana, pushed for industry wide structural changes that would restore to physicians the power to make treatment decisions without being second-guessed by managed-care administrators. Such a move would require a radical shift in the business practice of most HMO’s. It would also confer industry leadership to United Health and Kaiser, which already give doctors exclusive authority to make treatment decisions for patients covered by their plans. The HMO industry has been assaulted on all fronts by lawsuits over treatment decisions, criticism of their business practices, and investor discontent. An HMO reform bill with a limited right to sue that was stalled in Congress for three years had passed both the House and Senate and was in a conference committee awaiting final congressional approval. But the sharpest spur to action for the HMO’s is their languishing stock values, which continue to droop despite double-digit increases in the insurance premiums many HMO’s charge their customers.” (Eliopoulos, 2000). Numerous companies invested countless dollars into campaigning for the public’s approval. This would not become a reality for the HMO’s as they were under fire from consumers, healthcare workers and the government.
According to a news report in September of 2000, the 104,000 workers of the Marriott hotel chain have paid 12% premium rate increases for the last two years without any change in the services provided. Brendan Keegan, Marriot's vice president of Human Resources stated "In the last couple of years they (HMO premiums) have risen quite dramatically compared to the previous years.” Marriott’s employees are currently switching their coverage from a HMO to a PPO (Preferred Provider Organization) which is also a network of physicians who offer discounted rates without second-guessing of the physician by the insurance clerks. Keegan also states that "Right now we believe that the PPO provides a better, greater cost effectiveness and higher quality.” (Andrews, 2000). This was the emergence of the PPO’s which would compete with the established HMO’s.
Kaiser Permanente implements EC
Kaiser utilized an electronic commerce platform to set up a comprehensive web site designed to facilitate information between consumers and their organization. Information included on the site is related to individual and group healthcare coverage quotes, benefits, co-pays, enrollment, qualification, locating facilities and physicians, and contact numbers. Kaiser was recognized for achieving the top producing broker status of small business group plans in California in 2000, 2001, and 2002. The shift from utilizing staff to answer phone call banks concerning coverage to the web based quote and service format has increased productivity and revenue for the organization (www.kaiserpermanente.org, 2003).
CHALLENGES WORKING WITH PHYSICIANS
Kaiser Permanente actively recruits and caters to physician needs and professional standards. There are over 11,000 members on staff which operate in multi-specialty teams to deliver quality care (http://physiciancareers.kp.org/aboutpf.htm, 2003). This tailoring to the physicians yields higher job satisfaction rates and cooperation with industry trends and organizational goals.
Physicians, as with most people, are not receptive to being dictated or coerced. The favored method of having someone conform to a change within an organization is to have them “buy into” the changes. An example of this could be demonstrating the benefits or reduced work load by utilizing the proposed operational changes. One form of streamlining business is computerized applications such as accessing medical related data through handheld computers. The Handspring Visor has the capability to run software from Franklin Electronic Publishers, Inc. such as The Physicians' Desk Reference, The Medical Letter's Handbook of Adverse Drug Interactions, McGraw-Hill's Harrison's Principles of Internal Medicine Companion Handbook, and The Washington Manual of Medical Therapeutics (Winsky, 2001). In addition to referencing text style information, the physicians could also participate in development of a computer based medical record retrieval system such as the Meditech Physician Website which is maintained specifically for physicians using their Health Care Information System. The site was designed to disperse knowledge of clinical systems, facilitate dialogue regarding clinical systems use and development, and promote physician involvement with clinical systems application within an institution. (www.meditech.com, 2003). Another computerized medical record system has been designed by Clinicare. Their computerized medical record application allows a physician to quickly access a patient’s record and view data related to each encounter. The record can be simultaneously accessed from any number of terminals which is more fluid than the previous SQL data base software that locked out the record when it was accessed at a single point. This feature allows multiple healthcare staff members to view information in real time. The software has several valuable functions such as user definable encounter forms, search & select capabilities, editing of records, audit controls, patient profiling, detailed or summary listings, scheduling capabilities, report generators, and tracking for lab results (www.clinicare.com, 2003). These capabilities are not merely a matter of convenience for physicians; these functions can increase productivity and save revenue and valuable time.
Establishing physician patient relationships are critical to ensuring an ongoing quality healthcare continuum for the patient’s well being. Studies by Beth Israel Hospital in Boston have shown that patient’s desire an understanding of their condition, ongoing personal relationships with their physician, and knowledge of the effects of the disease on their lives (Mgebroff, 1998). This fiduciary relationship evolved from the patient’s dependence on the physician and his or her medical knowledge. There is currently a shift from this model towards a sharing of responsibility for decision making with the patient (www.medceu.com, 2003). Patients are increasingly becoming involved with weighing the risks of treatments and alternative modalities through internet education and informed consent. Some patients are even meeting with their physicians in cyberspace for their appointments where they can discuss treatments, review test results, and receive commentary from their personal physicians (Monnich, 2001). It is estimated that 70 million Americans have used the internet to acquire health-related information (Anderson, 2003). With the face of patient physician interaction constantly changing due to the adaptation of internet information technology; there are problems associated with professional resistance to the potential of the internet. Having a computer screen in an examination room may increase a physician’s productivity and improve patient interaction in two methods. The first benefit is the demonstration of the physician’s ongoing knowledge of current technology through the presence of the computer screen. The second benefit realized by the physician is the utilization of computerized technology for patient information and teaching. This technology yields increased confidence by the patient in their physician and a better grasp of concepts concerning their disease process and prognosis.
ELECTRONIC COMMERCE APPLICATIONS
Kaiser implemented Business to Business (B2B), Business to Consumer (B2C), and Consumer to Business (C2B) applications within their electronic commerce platform. B2B was utilized in setting up web sites for each organization that Kaiser held a contract with and the origination of an expedited shipping service to reduce inventory and storage costs. B2C functions were formatted to allow consumers to receive real time pricing quotes and scheduling of their physician appointments. The intranet functions serviced the internal employees efficiently by allowing them to expedite their workload. Examples of this are ordering supplies, equipment and services and accessing pricing options for customers seeking healthcare coverage. Digitized versions of patient medical records and lab reports are accessible easily and accurately to practitioners and clinicians. One of the most important applications within the intranet is the ability to check for possible drug interactions and to suggest cost sensitive alternative medications is applicable. An example of C2B could be considered within the nature of physician-hospital relationships. Since physicians are customers to hospitals they practice for, their utilization of hospital based computerized systems for medical records or pharmacy related issues would fall under the C2B category. Supply chain management integrates the business processes from the suppliers to the end users of a system. Kaiser implemented a platform of allowing the customers, or end users, to access and manipulate data concerning their healthcare policies through EC venues. By placing an interface between the customer and Kaiser, a streamlined effect of delivering services and information occurred. Actual manning of the phones could be decreased by Kaiser due to the efficiency of the EC system for handling customer interaction.
Other EC applications that reduce costs and unnecessary steps are in the pharmacy and medical records departments. Meditech is a forerunner in Health Care Information Systems (HCIS). Their systems operate on a Windows based client server platform and also have the option of running on their own developed MAGIC Operating System. These software applications offer numerous services such as patient registration and appointment scheduling, authorization and referral management, billing and accounts receivable, revenue management, patient care management, computerized medical records, order entry systems, medication verification for pharmacy services, patient education, imaging, laboratory, data archiving, and staff intranet communication systems (www.meditech.com, 2003). The ability to rapidly access patient medical records and identify potential harmful drug interactions is two areas that can increase consumer satisfaction for the healthcare industry. Utilizing EC tools which allow the medical record and pharmacy departments to interact with the staff will not only expedite customer services but also relieve staff of a portion of their workload.
Kaiser utilized an electronic commerce platform to set up a comprehensive web site designed to facilitate information between consumers and their organization. Information included on the site is related to individual and group healthcare coverage quotes, benefits, co-pays, enrollment, qualification, locating facilities and physicians, and contact numbers. The shift from utilizing staff to answer phone call banks concerning coverage to the web based quote and service format has increased productivity and revenue for the organization creating a competitive edge over competing industry participants. Kaiser also implemented Business to Business (B2B), Business to Consumer (B2C), and Consumer to Business (C2B) applications within their electronic commerce platform. Creation of B2B web sites for each organization that Kaiser held a contract with and the origination of an expedited shipping service reduced inventory and storage costs. B2C functions were formatted to allow consumers to receive real time pricing quotes and scheduling of their physician appointments. This supply chain management platform allowed the customers, or end users, to access and manipulate data concerning their healthcare policies through EC venues. By placing an interface between the customer and Kaiser, a streamlined effect of delivering services and information occurred. Actual manning of the phones could be decreased by Kaiser due to the efficiency of the EC system for handling customer interaction. The intranet functions serviced the internal employees, including physicians, efficiently by allowing them to expedite their workload. These EC implementations by Kaiser aids in maintaining their leadership position within the healthcare industry as the number one HMO provider in America.
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