Lawrence's attempt at shock therapy was an effort to put some action behind the big talk. His move, he says, triggered "a very serious conversation" within Kaiser over what the HMO's goals should beand how the organization should be governed.
To centralize and legitimize decision-making, he immediately set up a Kaiser-wide leadership committee, called KPPGwhich stands for Kaiser Permanente Partnership Groupwith membership drawn from administrators, doctors and IT staff within Kaiser's three central divisions. The group was given four broad initiatives: create a centralized digital medical records system; construct a single consumer Web site; build a system by which medical supplies, from bandages to heart monitors, could be purchased online; and consolidate back-office operationsthen more than 50 different payroll and HR systemsonto a single IT system.
Lawrence gave the group a budget, which at first, fell way short of the mark. ("We under-resourced this project in the early stages," he says now.) He also gave Sullivan and the KPPG team a deadline of 2003 to complete most of the changes (which Kaiser says it will miss by one to three years). And he told them the ultimate goal was to digitize patient records. "You can't cut costs and keep care from falling without effective use of IT and digital patient records," he says.
Automating the patient records system had been a goal of Lawrence's since 1984, when he cut short his tenure as a county public health official in Oregon to enroll in Harvard's MBA program. There, he heard some of the nation's most forward-thinking healthcare administrators of the day talk about the then-fledgling managed care movement and also about how automation could help the patient care industry save billions. The advent of the Internet nearly a decade later only stoked his zeal. Lawrence knew that the challenge could be overwhelming. "The digital patient record is extremely expensive and complex," he says. Problems with incompatible legacy systems, the sensitivity of medical data and other administrative headaches had also discouraged others from trying reforms. But Lawrence was convinced it was the only way to keep Kaiser in the game for decades to come. "It was a huge, bet-the-farm decision," he says.
To pull it off, though, would require not only technical integration, but management savvy. Shortly after issuing his IT ultimatum, Lawrence initiated his 80-20 Rule for managing changenamely, a strategy to identify the most important and useful features in an IT application and then drive their adoption while disregarding the less important ones. Says Lawrence: "Many IT strategies fail because they try to cast a net so wide, trying to get everyone's needs met, that it all gets way too expensive and slows down the process."
Case in point: Even the task of choosing which digital records system to start rolling out nationally brought major pain to Kaiser. The KPPG team first narrowed its choice to competing pilot projects from Kaiser's Colorado, Oregon and Southern California regions. But a heated debate ensued: Each region felt its solution was the best one, and each project had advantagesand allies on the KPPG teamthat the others did not.
After a two-year standoff, Lawrence once again had to play hardball. Colorado's project would get the nod, he decidedbut Kaiser lost two years of potential cost-savings in the process. "In retrospect, I should have moved faster," Lawrence says. The lesson? "Any major [technology] change has to be made by strong leaders, not by lower levels of the organization." And Lawrence says IT reforms in the healthcare industry can't wait for consensus.
Consider Kaiser's ex-CIO Sullivan. After two years, sources inside Kaiser say, the combination of cultural warfare and tight resources finally got to him. Sullivan resigned two years ago and declined to comment for this story. Quipped one source: "He thought the infighting was worse than in Congress."
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