••Fall 1997 / Vol 1, No 2

The world of medicine is changing around us. Some say it is falling apart. Our profession, having lost the economic reins of medicine, is in chaos. Most of us joined Kaiser Permanente because we thought it offered something different. For many it was safety, stability and the freedom to practice our profession free from the business concerns of medicine. Some feel that those qualities have been lost in Permanente at present. Some is perception, some is fact.

How should we view the future then, for Permanente physicians? Should we push to expand Kaiser Permanente geographically or should we circle our wagons around our existing Medical Groups, work hard, and hope for the best? What, of value, actually have we built all these years? Are group practices outmoded? Are networks the future recipe for success? Does Kaiser Permanente stand for anything special? Should we continue to strengthen our partnership with Kaiser Foundation Health Plan or build a future based on a friendly but merely contractual relationship with them? Does anyone outside of our organization care any more what we do or don't do in Kaiser Permanente?

The creation of the Federation and PermCo, and the National Partnership Agreement with Health Plan are first steps along the way to answering these questions and creating a strategic plan. The plan will determine the degree of success of Kaiser Permanente and the nature of our professional lives in our Medical Groups.

Let's examine some of the business and professional issues that will need to go into making up that strategic plan.

Geographic Expansion
The case for expansion seems simple. We have always expanded Kaiser Permanente. We believe we offer something of value to people. As many people as possible ought to have access to us. Furthermore, growth keeps us vibrant. It provides an appropriate mix of members and allows us to hire new physicians and employees with important skills. It provides for economies of scale that improve our efficiency.

Also, as the argument goes, the best defense is a good offense. We are facing ever larger competitors. If we fail to grow sufficiently, we may be disadvantaged in the future in many ways that we cannot predict now. In addition, some regional and national employers are asking us to provide broader geographic coverage or lose contracts for their members.

It is not so simple. Expansion costs money which could be used to run ongoing operations. It also requires a lot of management time and attention, which is currently in short supply. In addition, in parts of the country, successful growth is seen to be related to the "choice" issue. We know we need to excel in price, access, service and quality to succeed. In some places, however, the perception that our group model does not allow members sufficient choice of physicians has hindered our growth. The "network" model of care has seemed more attractive because, in addition to greater perceived choice, it comes with lower development costs.

But if Kaiser Permanente evolves by network development, will it still be Kaiser Permanente or something else? What characteristics does a Permanente delivery system have to have to retain the essence of the special value that Permanente physicians bring to Kaiser Permanente and its members?

Permanente Practice
Despite our flaws, we have gotten it right for years. Permanente Medical Groups have shown that physicians can successfully manage the quality and costs of health care and do so on a sustained basis. We do this by creating an environment in which physicians can coordinate member care without undue interference. This is not an accident. It happens because we have built the solid foundation that allows it to happen, one doctor, one patient at a time. Our strength is appropriate Coordination of Care.

The base of the foundation of that strength is the principle of Group Responsibility. A group of physicians share responsibility for a group of members. This responsibility includes the quality of care, the quality of service and the cost of care, because ultimately the costs are borne by the members. As individual physicians, then we have to worry not only about what we do for each member but also how we organize ourselves to care for everyone who is a Kaiser Permanente member. We work together for the good of these people. We don't compete with each other. We don't seek advantage over each other specialty by specialty.

In order to manage our responsibilities, we have created Self-Governance. Group decisions are made by representative processes. All of our physicians have the right to a voice in Group affairs and to economic and professional due process. This is the second foundation building block.

Only a self-governing group of physicians is capable of Self-Management. Self-management means that Permanente physicians decide the basis for the care of each patient, together with that patient and usually on the spot. There are no insurance clerks to call for permission to hospitalize our patients in Permanente practice. In fact, no insurance company at all stands between the doctor and the member. We create our own drug formularies and our own guidelines based upon what is scientifically correct and up to date.

If you believe that this model of Permanente Practice is correct, and is what separates us from our competitors, then we should not lose this foundation. It means that as we redesign ourselves and design the future expansion of Kaiser Permanente, we must continue to organize our delivery system according to these principles. Does that imply only a closed panel group model? Not at all. But it does mean that group practice should remain the core of Permanente Practice. Network arrangements should be concentrated and focused on physicians willing to develop long-lasting, significant and special relationships with us and our patients. Several of our Medical Groups are currently developing just such network modelsones that incorporate the elements of Group Responsibility, Self-Governance, Self-Management and Coordination of Care. We are still learning how this will really work outside of the pure group setting. But I believe that there are many physicians in new areas of the country, aghast at the nature of the worst of managed care, who would love to ally with the physicians of Permanente. We could help our profession by demonstrating that ethical physician-led delivery models can be successful enterprises. We may only need to lead the way.

The Value of Kaiser Permanente
For fifty years we have had a partnership with a not-for-profit organization called Kaiser Foundation Health Plan. It has not always been an easy relationship. Recently the partnership has been quite strained by the economic pressures on the health care industry. Is this relationship worth preserving or is it an anachronism in the world of health care high finance? Some medical groups such as Mullikin have turned to Wall Street and investors for the resources to expand and improve. Should Permanente do so also?

Health care is different from other businesses. It affects everyone in the society and in a deeply personal way. The country is just now coming to realize its discomfort with the real mix of medicine and profits, Wall Street style. Columbia HCA, once the miracle of business discipline, is now a public spectacle of greed and malfeasance. Physician-led, investor-owned, national corporations may be next.

The partnership of strong Medical Groups and socially conscious not-for-profit Health Plan has been a winning combination in the past. It has provided good care for the members, stable and satisfying professional careers for the doctors and return of excess revenue to those members either in better facilities and equipment or reduced rates. Both the Health Plan and The Permanente Federation need to remember the moral strength we derive from this commitment to the not-for-profit principle, both internally in how we conduct ourselves and externally in how we are viewed by society. Ours may not be the only good model but it is an ethically sound one that many will wish to be associated with now and in the future.

Developing Our Strategic Plan
One result of the National Partnership Agreement (see accompanying article) was the creation of the Kaiser Permanente Partnership Group (KPPG). The KPPG consists of the senior national leaders of both Kaiser Foundation Health Plan and The Permanente Federation. Its primary job is strategy development. The KPPG is chaired by Dr. Oliver Goldsmith, a gastroenterologist, and Executive Medical Director of the Southern California Permanente Medical Group. Dr. Allan Weiland, an obstetrician-gynecologist and Executive Medical Director of the Northwest Permanente Medical Group and Mr. Robert Crane, Vice President of Kaiser Foundation Health Plan have created an intensive work process designed to resolve the issues discussed above as well as others. The work is well underway.

What can each of us do when we realize the organization is faced with such critical and difficult issues to resolve? The most important quality for all of us to have right now is self-confidence. We are a great and noble organization. What we have created is special and good. We cannot let our flaws and mistakes and the criticism of others weaken our convictions about the basic value of Kaiser Permanente and Permanente Practice. With self-confidence and hard work we will not fail.