A Q&A with the Kaiser Permanente CEO on Accountable Care, Marketing Challenges, and More

by Jason Skinner, Chief Marketing Officer - 03/24/14


Who better to reflect on the changes sweeping health care than the head of one of America’s largest and leading providers, responsible for ensuring 3.4 million people receive the medical services they need?

Robert M. Pearl, MD, is executive director and CEO of Permanente Medical Group, the largest medical group in the United States and an entity of Kaiser Permanente that serves members in northern California. Pearl is also president and CEO of the Mid-Atlantic Permanente Medical Group, which includes Kaiser Permanente members in Maryland, Virginia, and the District of Columbia. Pearl recently spoke with Insight about the topics on every healthcare executive and marketer’s mind, including the future of accountable care organizations (ACOs), the marriage of organizational and marketing goals, and the impact of health insurance exchanges.

Insight: A common refrain among healthcare CEOs is that the ACO model is unsustainable in its current form. What do you feel the future holds for the ACO model and other value-based approaches?

Blog-QA-RobertPearlMD-PhotoDr. Pearl: The ACO model is a transition step to a fully integrated, prepaid system of care. The Medicare Stars model is an excellent approach that rewards organizations with the highest quality and greatest patient satisfaction—the five-star programs. It is exactly what our nation needs and leads to higher quality and performance. Why should people get care that is lower in quality and provides less patient satisfaction? The challenge is how to get from the dysfunctional, fragmented fee-for-service model to the highest-performing model. The first step is the medical home, which includes excellence in primary care. The second step is the ACO, but the final step is implementing a fully integrated horizontal and vertical system with strong and effective physician leadership.

The federal ACO model has shortcomings that Kaiser Permanente and others have met by building the necessary infrastructure to manage care, accepting a measure of financial risk for the cost of care, and assembling a provider network capable of providing exceptional medical care. Probably the biggest challenge for the groups participating in a federal ACO is identifying the population served and the patients who are included.

Insight: Many hospital executives feel there’s a disconnect between their leadership/strategy and marketing teams. What could marketers do to better align with organizational goals, such as leveraging patient data or demonstrating return on marketing investments?

Dr. Pearl: The disconnect between hospital leadership and marketing teams stems, in part, from the incoherence of their strategy, which tries to pursue volume and value with different sets of patients simultaneously. Being part of an ACO or being capitated by a health maintenance organization and, at the same time, trying to drive hospital census up with a different set of fee-for-service patients, confuses everyone and leads to unintended consequences. Even when many hospitals want to provide value, the dominant fee-for-service reimbursement mechanism requires them to drive volume. When a hospital is paid twice (outside of Medicare) to care for a complication or medical error it created, the system is broken.

Asking marketing staff to tell the public a coherent story that includes driving higher volume and appropriately managing a population can’t be done. Unfortunately, executives of many community hospitals continue to try to have it both ways.

At Kaiser Permanente, our marketing approach is aligned with our approach to clinical care. We focus our care delivery on high-quality, rapid treatment, and getting everything right the first time. That gives our marketing teams a much easier story to tell. Making the right diagnosis and providing immediate treatment is completely congruent with our business strategy, and benefits both patients and our organization. The same is not true in a fee-for-service model.

Insight: As a leader in implementing advanced health information technology (IT) systems at Kaiser Permanente, do you feel your marketing team is fully leveraging this technology to plan and measure their efforts?

Dr. Pearl: As a national leader in health IT, mobile technology, and use of the Internet, we are watching our market share rise year over year and our patient satisfaction climb. For example, in the latest J.D. Power patient satisfaction survey, we were not only No. 1 in our area once again, but the gap to the next competitor was huge. Our patients can make appointments online, send secure e-mails to their physicians, reorder their medications and have them delivered to their homes, and identify gaps in preventive screenings and schedule the studies needed to address them. All of that is provided at no additional cost. As a result, patients can obtain all the care they need for many problems without having to miss work.

Both employers and patients value those services, and our marketing teams communicate that information in powerful and effective ways, such as our Thrive campaign. Our marketing efforts are very closely monitored—using quantitative measures—for their effectiveness in attracting and retaining members. We continue to work on using what we know about what employers and members value to better target our message while respecting patient privacy.

Insight: With so much attention being focused on meaningful use, how is your marketing team helping support that effort?

Dr. Pearl: Meaningful use is another way of thinking about how IT can help physicians provide patients higher quality care and offer a more satisfying experience. We have been working hard to maximize both quality and service for more than a decade, and today, we’re leading the nation in each. We use our comprehensive electronic health record to personalize care and make it incredibly convenient for our members to access the services they desire. In addition, members can use the same applications to communicate through secure e-mail with their physicians. Our mobile and Internet solutions allow patients to obtain care how they want it, wherever they are, and whenever it is most convenient. Patients love those alternatives to having to travel to the physician’s office. While the number of office visits has been flat during the past five years, the use of those 21st-century technologies is increasing 10 to 20 percent a year in our program. Once again, our marketing team has done an excellent job of explaining the value of those technologies to employers and patients. The result is continued growth in membership and market share.

Insight: You have said health insurance exchanges will fundamentally change the healthcare business. When do you think hospitals will experience the full impact of these exchanges?

Dr. Pearl: Health insurance exchanges, both public and private, lower the barriers to switching and make data on quality, service, and cost readily available. Those insurance options and delivery systems that provide superior value—i.e. higher quality at more affordable prices—will win and those that fail to do so will suffer. Hospitals and physicians are already feeling the pinch as insurance companies try to compete in this new arena.

Insurance companies that are simply narrowing their networks and omitting the best physicians and hospitals will fail as patients become disappointed with that “bait and switch” approach. It is interesting that people think of Kaiser Permanente as having relatively restricted choice when we have more than 8,000 physicians in northern California alone. The key to superior quality and greater affordability is coordination and integration of care, not reduced numbers of physicians. In the future, consumers will be able to see the differences in the choices they have and will pick the best. That is what has happened in every industry that moved to an Internet platform. All in all, the days of being successful by “slicing and dicing” the risk pool or pretending your quality is excellent when the data fail to confirm it are gone. Giving patients the information they need and broad choice will lead them to select organizations with the highest quality, most convenient service, and most coordinated, technology-supported approaches to health care. I predict that as patients see and react to the information, Kaiser Permanente will do extremely well.

I think it will take five or six annual cycles of consumer choice for the full impact of the health insurance exchanges to be experienced at the hospital level. Right now, many of the competitors are still on the sidelines. Risk adjustment is uncertain, first-year prices were based on too many unknowns, and the first wave of consumers purchasing from the exchanges may be atypical. Five years from now, people will use the exchanges to purchase health care, just as they use them to buy airline tickets or book hotels.

The changes in health care during the next five years will be dramatic, and the biggest winner will be the patient.

Look for more thought leader perspective in upcoming issue of Healthcare Insight. Not a subscriber? Click here to sign up for a subscription — FREE for qualified healthcare professionals.

Topics: Healthcare Insight Magazine

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