Making IT and Business

By Jeffrey Rothfeder  |  Posted 10-15-2005 Print Email
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More important, Dodd announced that this new initiative would be managed entirely out of his office. "That was the only way to link the use of technology with the strategic direction of the company," he says. "What we were doing before was operating in the dark. Now, the CEO is just as involved in the project as the CIO is. George [Halvorson] is a tech bigot, if you will. He believes, as I do, that technology-enabled reengineering in healthcare is the way to go."
Kaiser Permanente
CEO George Halvorson
CIO Clifford Dodd
Revenues $28 billion (fiscal 2004)
3-year revenue growth
3-year net income growth
Approx. 32.9%
IT Budget 1.2 billion
Discretionary IT Spending n/a
Total Employees 154,000
IT Staff 4,700
Growth Strategy Kaiser wants to lower the cost of providing healthcare, minimize patient errors and implement electronic record-keeping in order to raise its profit margins and physician productivity and increase its subscriber base.
The Bottom Line Kaiser’s HealthConnect networkwide electronic medical records system is the most ambitious computerization project ever attempted in the healthcare industry.

Kaiser dubbed the project HealthConnect. Its centerpiece is a systemwide electronic medical-records system that will be accessible to authorized clinicians in all Kaiser hospitals, doctor's offices, emergency rooms and pharmacies, as well as to patients over the Internet. Besides patient information, the system will also handle billing and scheduling.

When HealthConnect is completed, any current Kaiser patient will be able to travel among Kaiser's many medical facilities and his or her entire patient history will be available, via terminals, to Kaiser healthcare professionals. Other healthcare companies are computerizing patient records, but because of Kaiser's breadth, no similarly sweeping IT initiative is underway, healthcare analysts say.

Although HealthConnect won't be fully operational until 2007, it is already installed in portions of California, Oregon and Washington, and initial results are promising. For the first six months of 2005, Kaiser's net profit margin reached about 6 percent, as operating revenues year-over-year increased to $15.5 billion from $13.9 billion, and net income grew to $915 million from $839 million.

It's impossible to tell how much of this improvement is due to the few sites that are using the first iterations of HealthConnect, but Dodd says that company executives have observed quicker turnaround in patient care at doctor's offices and hospitals that have access to the system.

Kaiser, however, is banking on HealthConnect to make a big difference in its long-term performance. Company executives forecast that operating costs will drop by at least 10 percent when the system is completed, while expenditures on medical-record supplies alone will drop by as much as 50 percent.

Moreover, substantial revenue increases are projected both because doctors are expected to see as many as 10 percent more patients in a day, which would greatly increase the capacity of the HMO, and because more precise and timely bills could improve the amount that Kaiser collects for its services by as much as 15 percent.

Computerized records are more legible and more accurate, so there should be far fewer hospital, pharmacy and physician errors at Kaiser. This is expected to cut down on the number of so-called injury-producing adverse drug events, each of which results in an estimated 2.2 extra patient days, and it should also limit malpractice litigation and hold down malpractice insurance premiums. Plus, the prospect of fewer medical errors, which are estimated to kill upward of 300 people a day nationwide, gives Kaiser a powerful message to entice subscribers into its network.

"In each attribute of the system the key objective was to verify that the functions it offered was in strategic alignment with the organization's mission and vision, which is to provide market flexibility and, regulatory compliance, deliver excellent healthcare and manage the cost structure," says Brian Raymond, Kaiser's senior policy consultant.


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