In an op-ed for Forbes, Robert Pearl, MD, former longtime CEO of California-based Permanente Medical Group–the part of Kaiser Permanente responsible for health care delivery–shares his views on Kaiser Permanente’s recent purchase of Geisinger, a Pennsylvania-based health care system. What are the implications for patients, their doctors and the health insurers? Both Kaiser and Geisinger are non-profit corporations, which once meant that they likely provided better care than the for-profits. Does it still?
Pearl notes that Kaiser Foundation Health Plan and Hospitals, the insurance side of Kaiser Permanente, acquired Geisinger. Kaiser Permanente is calling its new acquisition, Risant Health. And, Kaiser claims it bought Geisinger because it is focused on growing larger through acquisitions of other nonprofit health systems that have been prized for their good health care. Interestingly, Kaiser paid more than $1 billion for Geisinger, even though Geisinger lost more than $200 million in 2022.
While there is no good data confirming which health plans offer the highest quality care, it has long been assumed that Kaiser is one of them. The National Committee for Quality Assurance (NCQA), Leapfrog Group JD Power and Medicare all claim that Kaiser gets high patient satisfaction ratings.
Now, Kaiser wants to be known nationally. Kaiser operates in eight states and has 13 million enrollees. But, Kaiser has never been able to spread its wings beyond California and the mid-Atlantic to all parts of the US in a major way, as has UnitedHealth and Humana, for example.
By growing larger, says Pearl, Kaiser will have greater influence with lawmakers. Moreover, it has a far better chance of survival if it’s larger. The biggest insurers continue to grow larger.
With the purchase of Geisinger, Kaiser will have 600,000 more patients, as well as ten more hospitals and 100 additional health clinics. In Pearl’s words, when it comes to healthcare “size matters.”
What will become of Geisinger? Kaiser says it plans to put $5 billion into the Geisinger health systems, which will help Geisinger’s financial health. But, can Kaiser improve Geisinger’s value-proposition? Kaiser talks the talk of improving care. And, Kaiser focuses on the delivery of “value-based” care, an Orwellian term that has no clear relationship to cost or quality, the two components of value.
Here’s where the explanation gets technical and questionable. The Permanente Medical Group, which is responsible for care delivery had no involvement in the acquisition. Unless that group is brought in, Pearl does not see how health outcomes improve. But, even if they are brought in, why are they better than the clinical team at Geisinger?
It’s the insurance arm of Kaiser that bought Geisinger, and insurers are not known for their strength in care coordination or quality improvement. The Kaiser acquisition does not involve the Kaiser doctors. Pearl argues that physician leadership is needed to create better health outcomes, for example, getting doctors to adopt better ways of practicing medicine.
So, what’s the odds that Kaiser will do better for its patients with this acquisition of Geisinger? Pearl argues, along with many others, that the fee-for-service model for paying physicians and other health care providers leads to overtreatment, in many instances, with no better clinical outcomes. But, Pearl fails to acknowledge the inherent flaw in the capitated payment model. Paying health care providers and insurers a fixed rate too often leads to undertreatment, with worse health outcomes. The less care they deliver the more money they earn.
In theory, if provider groups manage care well, they bring down costs. But, in practice, it often doesn’t work that way. Rather, the provider groups steer away from people with costly and complex conditions in order to spend less on care and profit more. And, since patients can change health plans from year to year, they have little incentive to manage care for the long-term.
Pearl acknowledges that insurers that are paid a fixed fee upfront to cover care for their enrollees have an incentive to reduce volume of care rather than improve value. He believes that providers do not have that same incentive, that providers do not face financial pressures to delay and deny needed care.
The most important issue to resolve is whether these shifts will ultimately help or harm patients.Pearl is optimistic that, in the long-run, the system will help patients. He foolishly believes that the big behemoth insurers will want to provide great care and the losers will die out. Their IT will make the difference.
Yes, the big insurers will want to keep their members who are relatively healthy and cost little to treat happy. They represent the majority of enrollees at any given time. But, that’s the easy piece. What Pearl fails to acknowledge is the 10 percent of people who are responsible for about 70 percent of costs and for whom the system is designed to fail. And, when people fall into that 10 percent cohort, which we all will do at some point, we are likely to lose big time.
Here’s more from Just Care:
- Ten ways to improve Medicare Advantage
- Four things to think about when choosing between traditional Medicare and Medicare Advantage plans
- Government watchdog agencies tell Congress Medicare Advantage inappropriately restricts access to care and needs fixing
- No data, no value in fixed upfront payments for care
- Will the DOJ let UnitedHealth control more of the US health care system
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