The Kaiser Permanente IT transformation: the vision of transforming business processes by using technology to connect medical records with revenue cycle operations is becoming a reality

Healthcare Financial Management, Jan, 2005 by Brian Raymond

Imagine connecting medical records for millions of patients to billing, registration, and scheduling areas for a truly connected health information system. Imagine the efficiencies to be gained in patient care. Imagine the savings in operating costs and capital expenditures plus increased revenue due to improved efficiency. Although the magnitude of this vision may be daunting, it's becoming a reality.

Kaiser Permanente, the nation's largest not-for-profit integrated delivery system with more than 8 million members in nine states and the District of Columbia, is uniquely positioned to undertake the major clinical information system transformation now under way to improve healthcare quality, enhance the patient experience, and transform business processes. Kaiser Permanente's health IT initiative is destined to become one of the nation's largest private-sector clinical IT systems. Known as KP HealthConnect, the large scale effort will integrate all patient information in a single system linking medical information with billing, scheduling, and registration data. The size of the initiative is such that caregivers will be able to refer patients to specialists on the spot, send prescriptions to pharmacies electronically, and share information in real time with other physicians treating the same patient from different locations. It is a major undertaking. The IDS will invest more than $3 billion, including one-time investment and ongoing support, over an 11-year investment horizon.

Kaiser Permanente is one of a growing number of health systems implementing large-scale health IT initiatives. However, tight budgets and increasing scrutiny continue to challenge the organization and other adapters of health IT to justify costs and understand the ROI for such initiatives. Through it all, "benefits realization" is the mantra. To demonstrate and document the value of its technology, Kaiser Permanente has developed strategies, methodologies, and models to improve the deployment and financial management of its technology investments. Health IT implementation projects require a level of project and financial management on a par with a major industrial engineering or construction undertaking. Complex clinical IT projects can be risky propositions that can fail to deliver on their promise. The risks include technical failure, system obsolescence due to insufficient maintenance, and workforce or customer resistance.

As an early adopter of health IT, Kaiser Permanente has learned many lessons from its experience with large- scale clinical IT initiatives. To put the organization's current health IT initiative properly in perspective, it's important to look at Kaiser Permanente's previous experience.

Lessons Learned

In 1991, Kaiser Permanente contracted to develop one of its first clinical information systems, from scratch, in its Colorado region. The organization's Northwest region embarked on an electronic health record initiative in 1993, and by 1997, the ambulatory module was in use in every medical facility in that region. Both the Colorado and Northwest systems proved to be highly successful initiatives that improved and enhanced business operations and care delivery. Both regions experienced measurable benefits, including a reduction of outpatient office visits within the first two years after implementation. Total office visit rates also decreased about 7 percent (on an age-adjusted basis) in both regions, while key measures of quality improved or remained stable.

In 1999, Kaiser Permanente launched an initiarive to roll out a national clinical information system to all of its regions based on an enhanced version of the system in Colorado. The systems marketed at that time by software vendors could not handle Kaiser Permanente's size and scope; with more than 8 million members and about 12,000 physicians, the transaction volume was considerable. The national endeavor involved developing a proprietary system capable of supporting thousands of physicians and clinicians in all eight of the organization's regions. Kaiser Permanente invested significant resources toward this end. Throughout the system-development period, Kaiser Permanente continued to reassess the initiative's technology pathway, the cost structure, and new technology developments in the marketplace.

Various factors led the organization to rethink its initial strategy for enterprise clinical IT. Kaiser Permanente's homegrown system was not able to keep pace with changing technology and innovation in health IT. The system then under development included an electronic health record and supported ambulatory care functions, but it became increasingly clear that inpatient care functionality was also critical. In addition, it became evident that consumer cost sharing products were going to be part of the new price-sensitive healthcare market reality, and that would require the support of administrative and financial systems to keep track of unit costs at the patient level.