By Jack Cumming

I love learning. Life is an ever-learning adventure. I also love business and its potential for improving how we live. For medical care, I love Kaiser Permanente’s staff model approach to health care.

This article is about a learning experience with Kaiser when I put Kaiser to the test. Much as I love Kaiser (I’m a member in the Southern California region), it falls short as much as it excels. Here’s the tale.

A Missed Opportunity

What I learned about Kaiser can be instructive for all nonprofits, especially those that claim they are more economical because of their nonprofit status. Some of Kaiser’s corporate proclivities seem unnecessarily wasteful or contrary to what one might expect.

Thus it was that recently, when I needed new prescription glasses, I decided to compare what Kaiser provides and what I could find elsewhere. My eyes were blurring up when I read, so I made an appointment with a Kaiser optometrist. She made a slight adjustment to my prescription.

Since the optometrists are colocated with Vision Essentials, Kaiser’s eyeglasses sales business, before leaving the premises I sat down with an optician and ordered glasses. I wanted a titanium frame, and Kaiser’s selection is very limited. Still, I took what they had, ordered top-of-the-line lens features, and prepaid the $429 net price, after Kaiser’s “benefit” and discount. The optician explained that the glasses would be there for pickup in about a week.

Conceiving the Test

Two days later I conceived of how to put Kaiser to the test. A Google search for the gold titanium frames I preferred quickly showed me what I sought. I entered my new prescription and the pupillary distance measured by Kaiser. Presto, my order info was entered. The price with the frame I preferred and the same lens features was $142.40. Moreover, the mail-order glasses arrived a day before Kaiser’s.

A quick calculation shows that this is almost exactly one-third Kaiser’s price. Thus, Kaiser could buy its glasses at full retail from the mail-order vendor, mark them up 100%, i.e., double Kaiser’s cost, and could still give its “members” a better deal than now.

Big Money

The outcome from this “experiment” reveals the contradictions inherent in the huge Kaiser Permanente consortium. Over the past decade, Kaiser’s revenues have nearly doubled from a bit over $50 billion a year (yes, that’s billion with a “b”) to close to $100 billion. During the same time, Kaiser Foundation Health Plans CEO’s comp has varied between $10 million a year and $18 million a year.

Although Kaiser appears to be nonprofit, and much of it is nonprofit organizationally, it has a unique contractual arrangement with its physicians in Permanente Medical Group partnerships. The medical group allows profit sharing among the physicians, and that arrangement may affect how Kaiser responds to social challenges and geographic opportunities.

Assessing Innovation

What’s Kaiser good at? Kaiser is integrated. If a doctor orders a lab, it’s a seamless step from the doctor’s office to the lab to the assessment of the lab result. If a specialist referral is needed, though, it becomes more complicated. Why? Here we get into the slow-paced administrative corporate culture.

Despite digitalization as the hallmark of a forward-leaning enterprise, Kaiser still relies heavily on call centers and telephone communications. That’s costly, time-consuming for customers, and highly error prone. Why, one wonders, doesn’t Kaiser make computerization more of a priority?

EHR Challenge

This observation brings us to where Kaiser might become more effective. We can start with electronic health records, since that is central to an integrated health system. If Kaiser had hired a computerization brain trust — like that which Jeff Bezos recruited in the early days of Amazon — the company might now have a model system for the coming age of national health care. Amazon is known for its advanced systems. Kaiser is not.

The cost for a small developer dream team might have been within the bounds of what Kaiser pays its CEO. Instead, Kaiser contracted the EHR opportunity out to Epic Systems Corporation. The result is less than the full gamut EHR system that is needed. With a genius team, Kaiser could have led with a comprehensive system from prenatal to long-term care and hospice. Kaiser could be the model for universal care, but it’s not.

Our Geriatric Age 

Our nation is aging, and the need for medical advice escalates exponentially with age. To an outsider, Kaiser appears to have done little to respond to this challenge. There is an assumption that all Kaiser customers drive. Kaiser has done little to integrate health care delivery more intrinsically into the way people live.

Kaiser’s approach contrasts, say, with an innovative program like PACE (Program of All-Inclusive Care for the Elderly), which embraces the larger community with all-inclusive services. Although PACE is a limited statutory program, it is also a concept that could improve the wellness of all Americans at lower cost.

A Missed Vision

The intriguing experiment with which we began shows that Kaiser could be more solidly committed to its mission “to provide … affordable health care ….” That is often true not only of gigantic nonprofits like Kaiser but also of many nonprofits who rest on their laurels for being above profit. Great leaders have a passion to meet human needs and wishes with zeal and an innovative will. Click here for an example of a Permanente Medical Group Partnership Agreement: Rules and Regulations.