3

The Fix

It’s helpful to think about Geisinger after the turn of the millennium in terms of three five-year plans. Our first five-year strategy (2001–05) centered on getting operations in order post-demerger, and we achieved this in about half the time. The accelerated success allowed us to start discussion early regarding the second five-year plan (2006–10), which focused on fundamentally changing care delivery and developing and implementing innovative approaches to providing additional quality and value for patients and insurance company members. After successful and sustainable innovation within our own system, we then began to concentrate on scaling and generalizing to other systems and markets in our third five-year plan (2011–15).

Laying the groundwork for our three plans started with systematic and extensive Geisinger-wide conversations with almost all employees. We talked about who we were and who we wanted to be. We discussed what was different and unique at Geisinger and what we could do that other well-meaning organizations would find difficult, even though they too had good people, strong commitment, and unique excellence.

OUR SINGLE MOST IMPORTANT DECISION

It emerged that the most obvious difference in our structure and a potential advantage was having both the provider and payer functions within one organization. Geisinger was one of the first to build out a payer from its provider structure, initially in partnership with Capital BlueCross in the 1970s and then solely as a stand-alone insurance company.

This vertically integrated payer/provider model had begun to be questioned in the 1990s. For nearly a decade, many respected, well-known consulting firms made the rounds to various provider-associated and provider-owned insurance companies recommending that the two businesses be disconnected. The stated rationale was that the business models in insurance and clinical caregiving were generally 180 degrees off cycle. If the insurance company was making money, the providers were not; if the providers were transacting a huge amount of healthcare and making money, the insurance companies were getting hurt financially. The unstated rationale was that provider-owned organizations just didn’t have the skills to run insurance companies.

No one had intuited the benefit of a functional payer/provider overlap in the reengineering of care or the possible synergies of payer and provider working together not only to align incentives, but to maximize data exchange pinpointing hospital-based and ambulatory patients most likely to benefit from care reengineering.

The concept of bilaterally attacking total cost of care by improving patient/member outcome was unheard of. Naturally, the financial benefit of any decrease in total cost of care would come to the insurance company. But since both payer and provider at Geisinger were in the same organization, it didn’t matter who won financially as long as patients benefited. We could get the financial affirmation back to whomever deserved it by internal transfer pricing, and if the total cost of care went down, we could remain insurance-market competitive by lowering prices of insurance premiums.

Many organizations structured like Geisinger, including Virginia Mason Health System in Seattle, were convinced to sell their insurance companies at the time, and we too took steps in that direction, upon the recommendation of a respected consulting firm.

However, after determining the value of our health plan for a possible sale, we decided to build the value of the insurance products ourselves before any subsequent reconsideration of selling. Additionally, we began to speculate that a fundamentally different payer/provider partnership might be the key to an unprecedented bilateral payer/provider approach to reengineering care for prevalent hospital-based and ambulatory diseases. Keeping the health plan was the single most important strategic decision we made.

MOVING THE CULTURE

Our conjoined payer/provider engine in time fundamentally changed how we produced value for all patients, but the evolution was not inevitable. Moving the culture from our polarized payer-versus-provider battle was the key. In 2001, there were basically only two health plan products at Geisinger, both classic HMOs: a commercial HMO and a Medicare Advantage Plan. There was no PPO product, despite almost all of our business clients and potential individual members being interested in something other than a classic restricted-provider HMO network. Our health plan basically was showing a profit only because it shifted most of the risk to our doctors and hospitals. The plan reimbursed both Geisinger and non-Geisinger providers as little as possible, despite the credibility of the Geisinger brand to patients and insurance company members. We were despised widely among both employed and nonemployed providers at the start of 2000, and we were undoubtedly the lowest-priced medical insurance product on the market. This was not a good place to be.

Upon changing the insurance company’s leadership and introducing a variety of new products and market pricing strategies, GHP actually made a profit. This improved the longstanding antagonistic relationship between the insurance company and both employed and nonemployed providers, since their reimbursement improved. Only after all of this occurred could we ask the essential question: What can Geisinger do because of our unique fiduciary structure, culture, demography, and informatics that other well-intentioned, committed health systems could never do?

Of course, Geisinger also benefited from the Medicare Advantage reimbursement increases that were built into the Medicare Modernization Act (MMA) in 2003 and the year-over-year risk severity increases built into something called Hierarchical Condition Categories (HCCs) that began even before the MMA. The HCCs singlehandedly changed the Medicare Advantage business model. It meant that instead of avoiding the sickest members, plans like the Geisinger Gold Medicare HMO could enroll high-severity and high-acuity members, take better care of them, and do well financially.

This was the perfect business model for us to begin our attack on the 30 to 40 percent of unnecessary costs routinely built into healthcare delivery and shown to be either unhelpful or even hurtful to patients. With both payer and provider in the same fiduciary assuming population risk sharing, this remarkable confluence of internal commitment to value reengineering and external good fortune proved a perfect time to test the concept of achieving better outcome at lower cost.

The insurance company baseline for developing our sweet spot was built on two fundamental concepts. The first was that every product developed by GHP needed to float on its own financial bottom. The second was that each of the products had to bring something special to the provider/payer joint commitment to reengineer care toward higher quality at lower cost.

We initially focused almost all of our care and payment innovations on the 50 percent of patients we treated as well as insured. This was the perfect pilot for subsequently changing all hospital-based and ambulatory care to increase quality while decreasing cost. The CEO of insurance operations at Geisinger was also an executive vice president of the overall Geisinger organization, including the provider side. This intentional overlap in titles and responsibility meant that this senior leader had two explicit obligations: one to the sustainability and dynamism of the insurance operations and the second to the holistic effects of the insurance operations plus the clinical enterprise on Geisinger’s overall strategic plan accomplishment.

HIGHER QUALITY AT LOWER COST

Our second five-year plan explicitly concentrated on fundamental care redesign based on the new payer/provider sweet spot concept. It must be emphasized that best practice reengineered care was provided to all patients regardless of whether they were insured by a Geisinger insurance product. This was consistent with our commitment to innovation no matter who insured our patients or whether they had insurance.

Within Geisinger’s fiduciary structure, it didn’t matter who made the profit as long as the patients and insurance members received higher quality at lower cost. Both payer and provider sides of the organization were committed to benefit our mutual constituency. The ability to perform internal transfer pricing if we achieved a significant decrease in total cost of care allowed us to move as much of the added value as needed to whatever provider component deserved it. This was a huge functional and structural advantage in the iterative processes of clinical innovation. We were not locked into long-term negotiated contracts between payer and provider in the usual way, where the big question always was which side could out-game the other side financially. And we were not worried about which part of the organization won and which lost financially in the reengineering process.

We were concerned only with giving better care at lower cost. The best way to make a systemwide profit was to decrease the total cost of care. The proximate benefit almost always went to the insurance company, but we could redistribute an appropriate part of this value creation back to the part of the system that actually created the value. In addition, a portion of the value was redistributed to the buyers of our clinical services by competitive market-based pricing of insurance premiums.

There were two other significant advantages in moving from conceptualization of the payer/provider sweet spot to its actual transaction. The first was the substantial strength Geisinger had on both the provider and payer sides. This was a function of the credibility of the holistic Geisinger brand. People we served believed in Geisinger and were willing recipients and participants in our care-delivery reengineering because they trusted us. A second significant advantage was Geisinger’s ability to feed almost real-time data from both the payer and provider sides back to the providers at the point of care. This was an extension of Geisinger’s long-term commitment to an electronic health record (EHR). Reengineering would have been impossible without near real-time data enabling provider behavior change.

Fundamental apps, data warehousing, data analytics, customization of payer/provider data for immediate and easy use by providers, and new evidence of interoperability between various information technology systems continue to be critical enablers to help us change the behaviors of both caregivers and patients. The ability to use predictive analytics from insurance company claims data and to customize and present utilization variance data to providers in a way that is not only timely but immediately usable has been key.

At the beginning of the new relationship between our payer and our providers, the doctors were surprised to learn that there was important information other than reimbursement to be obtained from the insurance company, including data regarding which patients were the highest utilizers during a given year or which physicians were using the most resources and not following protocols. What is now taken for granted, that the patients who were the highest utilizers in the past year likely would be the highest utilizers in the coming year, was a breakthrough thought at the time. Predictive analytics using insurance company claims data allowed us to target specific groups of neediest patient populations and calculate where we would have the highest probability of changing the worst outcomes. We used this information to stratify the most intense care for the highest utilizers. Our Geisinger version of advanced medical home care, ProvenHealth Navigator, focused first on the highest-utilizing, sickest members. We used a different ratio of nurse practitioners or care managers when caring for patients defined by insurance company claims analyses as being less sick. Real-time data from our EHR data warehouse ensured that providers were following best practice protocols every time. The design of that best practice approach and our assurance that it actually was being carried out was dependent on both insurance company and provider data availability. With Geisinger having payer and provider in the same organization, we were able to ensure that this process worked, a feat not easily accomplished in non-vertically integrated payer/provider relationships.

LINKING INCENTIVES AND FUNDAMENTAL CHANGE

Our ongoing systematic strategic prioritization process was linked early on to an evolving approach to compensation for providers as well as clinical and administrative leadership. Initially, we felt the need to change incentives to address the post-demerger operational malaise and get Geisinger’s three major businesses (hospitals, clinics, and insurance company) financially viable and sustainable. When the operating trends became extraordinarily positive, the strategic focus turned to quality and innovation as an added and important part of affirmation and compensation.

Innovation was defined at Geisinger as fundamentally changing how we cared for patients with prevalent diseases, not simply checking off quality metrics boxes on the margin. Quality was defined as fundamental change in morbidity and mortality, cost, and patient and professional satisfaction outcomes. Our assumption was that fundamentally changing much of what we did in our routine clinical caregiving would improve process metrics. But being subservient to metrics was not the intention. We were not “teaching to the test.” Rather, the intention was to fundamentally change how care was given to the benefit of patients with acute and chronic diseases. We were striving to create Geisinger as its own new model of a continuous innovation machine, not simply attempting to be a mediocre version of an academic medical center or a larger version of a good community hospital.

A new compensation plan was designed so that all physicians and leaders within the organization understood they would do better if they achieved their part of the overall system’s strategic aims. Accomplishments and rewards were linked directly to innovation. The choice of specific innovation or quality projects for each of the service lines, hospital platforms, discipline-based entities, or insurance company components was a discussion that began with the frontline caregiver or insurance leader. Some 20 percent of total compensation was linked to achieving specific strategic goals, as opposed to simply seeing more patients, having a bigger panel of patients, or performing services with higher relative value units. More than 20 percent of total compensation for leadership was based on whether various strategic aims were achieved.

How we paid our employees was the engine ensuring that the strategic plan would be aligned and affirmed throughout the organization. We believed it was critical that everyone felt evaluated in the same way, achieving not only standardized productivity benchmarks but also the strategic innovations that would make the Geisinger brand well known and perhaps unique over time.

ROLLOUT OF THE STRATEGIC VISION

To obtain employee buy-in, Dr. Steele made it a personal priority to deliver the strategic vision by interacting with as many members of the organization as possible. This led to between 55 and 65 annual town hall meetings with every conceivable component of both the provider and payer sides of Geisinger. We regularly communicated with support services, patients, insurance company members, and local community leaders in each major market. It was important for the CEO to be seen and to have the opportunity to tell employees and others why we needed to innovate, why Geisinger was the perfect place to innovate, and why really good people at other good organizations might not be able to do what we were doing.

Our first strategic vision presentations began by referring to our touchstone, founder Abigail Geisinger. Geisinger’s “heal, teach, discover, serve” mission was applied as the core of our new endeavors. Discussions with various operating and support units started with where we were at the time of demerger, a summary of the unique demographics in our distinct market areas, what was special about Geisinger, and how we might build a strategy and program portfolio that would utilize our special structure and culture to differentiate us from other great organizations.

Our thought here was that success was most likely if expectations were tailored to specific strengths and structural/cultural aspects of Geisinger. Although fundamental change would be required, we wanted the process to honor the heritage of our founder, who a century ago demanded, “Make my hospital right, make it the best.”

The development of our strategic vision began with a repetition of a completely unaltered Geisinger mission: “to enhance the quality of life through an integrated health services organization based on a balanced program of patient care, education, research, and community service.” We then linked the mission to four golden rules: quality, value, partnerships, and advocacy. With a minimum of top-down manipulation and a huge amount of bottom-up socialization, our first four strategic aims became:

•   Grow the clinical enterprise

•   Innovate healthcare delivery

•   Expand and focus research and education

•   Provide a national voice for rural healthcare

These aims were contextualized as what Mrs. Geisinger would want us to do. They were connected to significant resources already committed in our expanding utilization of the EHR, and they publicly acknowledged an immediate need for developing innovative ways to reengineer care.

The progress report in our annual strategic vision presentations became the backbone of our communication strategy. We wanted everyone at Geisinger to know what the mission and strategic aims were, and how each individual’s work connected to our overall successes and challenges. It didn’t matter if we were talking with heart surgeons, neuroscientists, food service employees, or members of our security team. Everyone was included, and everyone was part of the Geisinger story. We would succeed or fail together.

We could not start the fundamental care innovation without changing our operational trajectory. As we grew our way out of the postmerger malaise, we began the second systematic strategy discussions in anticipation of new operational health.

The ultimate goal was to provide significant and increasing benefit to those we served from the clinical enterprise as well as from the payer side of the organization, our patients and insurance members. Expanding into ever-greater operational strength and higher operating margins, although an exciting change for us, was not our primary purpose. It was the new operational strength that enabled us to finance our risk-taking care reengineering and innovation.

The second five-year strategic aim set, again evolving from an extensive and systematic discussion with as many Geisinger employees as possible, coalesced as:

•   Strive for perfection in quality

•   Expand the clinical market

•   Sustain innovation

•   Secure the legacy

All of these were direct extensions or modifications of our first five-year goal set, and all were predicated on continuing operational success. We insisted on aggressive growth and adequate performance to budget. A fundamental change from the first to the second strategic vision set, however, was growing recognition that Geisinger quality targets, and in particular our nascent national reputation for innovating how we provided care, were rapidly improving our brand. This allowed us to more aggressively recruit and retain employees, since we were now recruiting from a national market. The people we recruited and retained were key to building our conventional as well as our more innovative programs.

Finally, our third five-year strategic aim set was a direct extension of our previous four strategic aims. We already had achieved major national recognition. We already had built ProvenCare Acute and ProvenHealth Navigator, as well as the bundled best practice ProvenCare Chronic innovation portfolios. We combined quality and innovation into a single top strategic aim. Market growth was modified into something more nuanced, and we thought more sophisticated, called market leadership. Plus, a substantive component of that market leadership aim now committed us to scaling and generalizing the Geisinger innovations outside Pennsylvania.

Without a doubt, scaling and generalizing was the biggest aspiration. Many organizations and individuals visiting Geisinger over the past decade had seen progressive credibility and sustainability in the value reengineering accomplished in our traditional service area. But they almost always ended their stay in Geisinger Shangri-La by claiming that nothing they saw could ever be accomplished in their particular market with their particular fiduciary structure or culture.

We became progressively more frustrated with the skepticism, especially given that Geisinger was being touted as a model for healthcare reform in the great Obamacare debates. We almost felt compelled to include scaling and generalizing as a logical next specific aim under our market leadership strategy. This led to the question of how to transact scaling and generalizing, which in turn led to three separate scaling and generalizing operational engines at Geisinger.

The first was our merger and acquisition activity. Could we do in Wilkes-Barre/Scranton and eventually Harrisburg, Pennsylvania, and in Atlantic City, New Jersey, what we had done in the Danville, Pennsylvania, Central Susquehanna region of the Geisinger payer/provider sweet spot? A second scaling and generalizing engine was our insurance operations moving beyond Pennsylvania and attempting to do with non-Geisinger providers and in non-Geisinger markets what we had accomplished with our value reengineering in our traditional service area. Finally, the third engine was the establishment of xG Health Solutions, a for-profit Geisinger spin-off joint venture committed to spreading our intellectual property in population health, value reengineering of acute and chronic care, and reformulation of the payer/provider relationship.

LESSONS LEARNED

We can’t overemphasize the importance of communication in achieving our goals. Communication was repetitive and progressively simplified, delivered to a larger and increasingly complex organization. Approaches have evolved: for example, Geisinger grew from approximately 7,000 to about 30,000 employees during the past 15 years, making town hall meetings more challenging and time-consuming. However, CEO visibility is essential to demonstrating the importance of targets and operational successes that enable achievement of long-term strategy. The concrete link between strategic goal accomplishment and payment incentives throughout the organization is equally important.

In summary:

•   Good operational performance is a necessary foundation for innovation.

•   Know your special culture, structure, market demography, and pedigree.

•   Build from what is special (and felt to be special).

•   Capturing attention and establishing a strategy in a large, complex organization is easier after an institutional near-death experience.

•   CEO communication is imperative.

•   As the organization becomes larger and more complex, the strategy aim set must become more repetitive and simpler.

•   All organizational members need to be aligned in achieving individual and group success.