Competition is rising, and that's not a bad thing

Bernard Tyson, chairman and CEO of Oakland, Calif.-based Kaiser Permanente, has led the healthcare giant since 2013. Before his current role, he was president and chief operating officer for the integrated system that now has more than 10 million members in eight states and the District of Columbia. Kaiser, which generates more than $56 billion in annual operating revenue, includes 38 hospitals and about 17,400 physicians. Modern Healthcare Editor Merrill Goozner recently spoke with Tyson about value-based reimbursement, the importance of comprehensive electronic health records with information-technology interoperability and challenges from insurance expansion under the Affordable Care Act. This is an edited transcript.

Modern Healthcare: The federal government is pushing for more value-based reimbursement. Do you think it's moving too fast or do you think the government should be moving faster in that direction?

Bernard Tyson: I think we are moving in the right direction. I hope we move faster, but we can only go so fast and so far. If this is successful—and I expect it will be over time—it will change the economics of the value chain, how we think about healthcare and the financing of healthcare. Starting to pay for outcomes, to pay for the continuum of care, is going to be of greater benefit to the economics of healthcare.

MH: Kaiser is the model for integrated systems. Do you see competition rising, replicating your kind of value-based care delivery?

Tyson: Yes, there is no question that we see competition rising. That's not a bad thing. The entire health system must improve. The competition helps us to get better, so we certainly embrace that. We have improvement agendas in all parts of our organization to provide higher-quality, more-accessible, better service, and more affordable service.

MH: Increased competition means that a patient might want to be able to walk across the street and go to a different system from one year to the next. Will patients be able to take their electronic health records with them? Where are we on interoperability?

Tyson: It's really a matter of when. The healthcare industry needs to have interoperability, just like we have in the banking industry. How do we make that fluid enough where I can take my information wherever I happen to be in the health ecosystem? In some cases part of the challenge is that the EHR is not available as the basic building block of what becomes interoperable inside of the health ecosystem. We have a ways to go to bring the healthcare industry up to this new standard of having an electronic record for everybody we take care of inside the industry.

I am pleased to say that all 10 million members in Kaiser Permanente are on the EHR, to make sure all known and relevant information was available to our physicians and care teams at the time it was needed.

MH: The National Coordinator for Health IT recently came out with a report that said many providers are engaged in data blocking. They also looked at vendors and the lack of interoperability between different systems. When somebody comes to Kaiser, do you have problems getting their records?

Tyson: We have some problems getting records from other organizations, but I wouldn't go as far to say it's blocking. There are just legitimate logistical issues that we work through. We try to make sure the information is available when (patients) need to go someplace else. It is not completely interoperable, although we have experiments with other healthcare systems. At Kaiser, with everything organized in one EHR, when we need to send information out, we can make that happen very quickly.

We also try to get longitudinal (patient) data. It gives a more complete picture of their care history. This also helps with the economics of the healthcare system. If we don't have to keep repeating the same tests because we don't have the results, that helps drive efficiency up and healthcare costs down.

MH: You have seen some episodic nursing union walk-outs and are in some protracted negotiations. What's driving that conflict?

Tyson: We settled recently with the biggest nursing union in Kaiser Permanente, the California Nurses Association. Everyone expected we were going to have major problems and a massive prolonged strike. We came to the table with transparency and a willingness to work to the right conclusion that would show our nurses how much we respect them, that we need them and that they have a voice. And we obviously want to continue to pay a competitive pay package.

I applaud the leadership of the CNA and (Executive Director) RoseAnn DeMoro and others who came to the table and were realistic and clear about their expectations. A big part of their agenda is to make sure that management hears that nurses want a greater voice in the future of where healthcare is going.

MH: Kaiser has always had an employed physician model. What are those doctors inside Kaiser feeling today, in terms of their relationship to the organization and the added pressures on them, and also the pressures that are coming from the outside?

Tyson: This too, is where we see the impact of a transforming industry. Our physicians are independent of the health plan, in the Permanente Medical Group, and self-govern inside of those models. We have seen a big shift in primary-care physicians being in greater demand in the entire industry, and as a result, (we see) different approaches to attract more primary-care physicians into different groups around the country.

I think that will continue. There are a lot of perks now—probably more for primary-care physicians at this point than for specialists.

At a lot of systems outside of the Kaiser Permanente model, physicians need to get approval from the insurance side for every procedure they want to do. We would never do that.

MH: On the insurance side of Kaiser, you are competing intensely on the exchanges in the states where you operate. You also offer high-deductible plans like other insurers. What new challenges does this pose for Kaiser?

Tyson: There is a certain segment of the new members from the Affordable Care Act who have never had insurance and don't know how to work the healthcare system. Some in this population have only used the emergency department for care, so educating them and making sure they understand the total benefit of what they have signed up for is a big priority for us. It also will help to make their care more effective and efficient because they are not showing up in the ED. We offer high-deductible plans within Kaiser Permanente, and people have told me they don't like it. People ask, “Why am I paying you $50 or $100 bucks every month for care and then you charge me another 50 bucks when I come in? I don't have that kind of money.” We're hearing that frustration. High deductibles are a concern because you end up with patients dragging out care that really needs to be provided, and their condition gets more and more serious.