Healthcare costs have been on the rise and hundreds of digital health startups seeking a solution to lower costs. $3.9B was invested during the first half of 2016 in seed and Series A deals looking to shake up the heavily regulated and antiquated system.[i] Of that funding, there were a record-breaking 151 companies that raised more than $2M.[ii]
While there has been a huge influx of new companies into the healthcare space, Kaiser Permanente, one of the largest and oldest (since 1945) U.S. players has also been heavily investing in health tech and leading the charge on implementation.[iii]
Kaiser has had the same business model for years: they are both the insurer and provider, from primary care to hospitals. This model incentivizes them to lower the total cost of care and hence focus on preventative health and lower cost settings. Kaiser’s business model has been quite successful; in 2015, Kaiser generated about $60B[iv] in operating revenue while caring for 10.6M members.[v]
Despite their success, Kaiser is not resting on their laurels. Over the past several years, Kaiser has been upgrading their operating model, shifting to more technological solutions. Last year, Kaiser had more tele-visits than in-person encounters, 59M vs. 50M respectively.[vi]
While there are many telemedicine startups, Kaiser’s competitive advantage comes from their HMO model where members must see a Kaiser physician, resulting in the consolidation of their records in a single Electronic Medical Record. Kaiser patients receive (arguably) better care because those physicians have access to the patients’ complete record.
Kaiser recently opened several “health hubs” seeking to improve the experience of going to the doctor with online check in and co-pays, text alerts when the Dr. is ready.[vii] If a patient needs to see a specialist that isn’t at their site, they are able to do a video visit on the large screen in the exam room. These new exam rooms are expected to increase the number of visits by 20%-40% and to save 10% via space-conscious floor plans, and technologies and workflows.[viii]
Kaiser is also investing in longer term transformational research at their 37,000 square foot test warehouse in northern CA.[ix]
Some of the pilots include:
- Monitoring and tracking a patients’ living space for falls, sleep, diet, etc.
- Driverless car that can be dispatched out to the patient to determine if they need to go to the hospital.
While some ideas could seem far flung or questionable in efficacy, I applaud Kaiser for the focus on innovation and experimentation to question the status quo. Kaiser even started a venture capital arm to invest in digital health and quickly incorporate new technology.[x]
While Kaiser has had success in implementing and shifting toward digital solutions relatively quickly, it hasn’t been without issues. One IT upgrade cost $1 billion rather than the budgeted $500 million.[xi] Kaiser also faced some push back from the nurses in their Oakland hospital opening that
incorporated digital monitoring. The nurses were concerned about the reliability of the machines and some technicians were afraid of losing their jobs to these new machines. As a result, the local paper ran an article where some nurses claimed the heart monitoring machines had failed and the nurses had no way to know.[xii]
Kaiser should implement a change management program to help the techs, nurses, administrators, and physicians along the transformation journey as new technology impacts their role in delivering care. The negative reaction and press from the Oakland hospital could have significantly impacted the trust of the community. Some of the investments Kaiser is exploring could be incredibly beneficial and transformational changes for healthcare, but if they employees are not brought along and shown why they should trust the new way, Kaiser’s membership and employee morale could suffer.
[i] Susan Hall, “Health IT investments: Proven winners or scrappy startups,” Fierce Healthcare, November 16, 2016, http://www.fiercehealthcare.com/it/who-will-bring-health-it-transformation-and-how-soon?utm_medium=nl&utm_source=internal&mrkid=38888469&mkt_tok=eyJpIjoiWVRZME0yTmtObVJoTlRCbCIsInQiOiJ3ZDA2RFNcL2lLdXQ2VWRYUHRYSFpKN3FtejY4RlBIMW1jTHFsYnhiOFwvZyt6b0h1Zm1sdWJJdHNXcDV5bm40R05uc1wvdXhlNk9MSkM5dlUxVXhyWTl6YlJRQm1RdUdWaGFQNWZzMGVWcjBGaz0ifQ, accessed November 2016.
[ii] Mitchell Mom, Ashlee Adams, Digital Health Funding 2016 Midyear Review, Rock Health, https://rockhealth.com/reports/digital-health-funding-2016-midyear-review/, accessed November 2016.
[iii] “Kaiser Permanente’s ‘Health Hub’ Design Named a Finalist in Fast Company’s 2016 Innovation Awards,” Kaiser Permanente press release (Pasadena, CA, September 19, 2016) https://share.kaiserpermanente.org/article/kaiser-permanentes-health-hub-design-named-finalist-fast-companys-2016-innovation-awards/
[iv] Melanie Evans, Modern Healthcare, February 12, 2016, “Kaiser Permanente reports growth in membership, revenue in 2015” http://www.modernhealthcare.com/article/20160212/NEWS/160219960, accessed November 2016.
[v] Caroline Chen, “Taking Bids on the Hospital of the Future,” Bloomberg Businessweek, July 22, 2016, http://www.bloomberg.com/news/articles/2016-07-22/taking-bids-on-the-hospital-of-the-future, accessed November 2016.
[vii] Jeff Ferenc, “Kaiser Permanente opens first of community health hubs,” May 18, 2016, http://www.hfmmagazine.com/articles/2197-kaiser-permanente-opens-first-of-community-health-hubs, accessed November 2016.
[viii] Adam Bluestein, “Kaiser Permanente Designed a Health Center that Puts Patients First,” Fast Company, March 22, 2016, https://www.fastcoexist.com/3057404/world-changing-ideas/kaiser-permanente-designed-a-health-center-that-puts-patients-first, accessed November 2016.
[x] Robert Siegel, “What If Healthcare Could Start With Technology? — Bernard Tyson, CEO Kaiser Permanente”, The Industrialists Dilemma, February 12, 2016 https://medium.com/the-industrialist-s-dilemma/what-if-healthcare-could-start-with-technology-bernard-tyson-ceo-kaiser-permanente-5052658a6212#.2gm3yfyms, accessed November 2016.
[xii] Sam Levin, “The Trouble with Kaiser’s Technology,” East Bay Express, September 10, 2014, http://www.eastbayexpress.com/oakland/the-trouble-with-kaisers-technology/Content?oid=4067393