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Kaiser Permanente
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Kaiser Permanente
Kaiser Permanente is a 75-year-old consortium that includes both for-profit and notfor-profit entities for integrated managed care. The consortium is comprised of 3
interdependent but distinct groups of entities, including the Kaiser Foundation Hospitals, the
Kaiser Foundation Health Plan and its subsidiaries, and the Permanente Medical Groups. Its
operations can be found across eight states in the United States, including Georgia, Virginia,
Maryland, Colorado, California, Oregon, Washington, and Hawaii, as well as the District of
Columbia. As one of the largest providers of nonprofit healthcare plans in the country, Kaiser
Permanente has more than 21 million members. In addition, it has at least 700 medical
offices, 39 hospitals, and more than 300,000personel who include at least 80,000 nurses and
physicians (Kaiser Permanente, 2020). Each medical group works as a separate professional
corporation or for-profit partnership in its territory, but none of them report their financial
results. Funding for each of these groups comes from the reimbursements received from
respective Kaiser Foundation Health Plan entities.
The consortium has been rated highly for quality of care and has an excellent
approach to preventive care. In addition, the organization’s doctors are salaried instead of
taking a fee for service approach that may affect the quality of service delivery. Kaiser
Permanente also has an excellent strategy for minimizing patient stays in high-cost
institutions through careful planning of their stay in hospitals. With these positive elements,
Kaiser Permanente is excellently prepared to deal with the existing and future healthcare
needs of patients. The high rating of its quality of care indicates that Kaiser Permanente has
invested its resources into ensuring that its customers get their value for money to the extent
that most people are satisfied with its services. The focus on preventive care is an excellent
tool for future preparedness because prevention is usually cheaper and more effective than
treatment. As such, the network will be instrumental in preventing the spread of diseases to
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keep costs low for itself and clients, but even if they are infected, the network still has its
high-quality service delivery.
With its experience working in 8 states and the DC, Kaiser Permanente has
considerable potential for growing its market reach to other states across the country.
Currently, its more than 304,874 employees, who include 23,271 physicians and 63,306
nurses, seem to be sufficient for its current performance. Since the network already has cash
reserves that run into nearly 30 billion, it has the resources it needs to expand its operations
(Kaiser Permanente, 2020). Instead of starting operations from scratch in other states, it can
either acquire other managed care organizations or even partner with dominant ones. By
acquiring other organizations and networks, Kaiser Permanente will not need to incur the
hiring expenses at a time when healthcare professionals are in high demand due to the current
COVID-19 pandemic. The reduced expansion strategies will make it possible for the
organization to train its new employees and improve patient satisfaction for the clients of its
new subsidiaries and partners. If the partner organizations do not meet the staffing and
quality expectations, Kaiser Permanente can use its vast resources to expand its operations.
Although Kaiser Permanente has been criticized by state regulators and activists for
its large size of cash reserves that are about 1,600% and 1,300% of expected amounts in
California and Colorado, respectively, these resources can be used for expanding its
operations. Kaiser Permanente agreed to use part of these reserves in building clinics in
underserved areas and allocating credits to its clients, but it still holds enough funds to
support its expansion and quality of service improvement (Booth, 2016; Seipel, 2015).
Another issue at Kaiser Permanente is its opposition to unionization of its workers, and while
it is working to improve labor-management partnerships, it still has a long way to go in
improving outcomes for its employees (Chuang, 2014). Instead of allowing plan-holders to
take any approach, they would want in their malpractice claims, the network requires
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arbitration instead of litigation, which can limit the extent to which patients can get justice
(Rauber, 1998). Since Kaiser Permanente has been working with authorities and regulators to
reform these shortcomings, it is possible that they will not be as limiting in the long-term.
A model that can be applied in implementing the strategic plan for Kaiser Permanente
is Michael Porter’s value chain framework that is useful in analyzing company activities and
determining how they can be used in the creation of value and competitive advantage
(Simatupang et al., 2017). The model is applicable for Kaiser Permanente because, due to the
network’s complexity, the only way to ensure effective implementation of any strategy is by
breaking it down into its specific functional components. The relative competitive advantage
in consideration for Kaiser Permanente relates to the network’s quality of service for its
clients, its ability to cut healthcare costs for clients, expansion of its market reach, and its
ability to improve the effectiveness of its preventive care programs.
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References
Booth, M. (2016). Insurers’ enormous cash surpluses prompt calls for rebates or community
spending. The Denver Post. https://www.denverpost.com/2011/03/12/insurersenormous-cash-surpluses-prompt-calls-for-rebates-or-community-spending/
Chuang, S. (2014). Kaiser nurses holding 2-day strike over staffing levels, ebola protections.
NBC Bay Area. https://www.nbcbayarea.com/news/local/kaiser-nurses-to-hold-2-daystrike-over-ebola-protections/78151/
Kaiser Permanente. (2020). Fast facts. Kaiser Permanente.
https://about.kaiserpermanente.org/who-we-are/fast-facts
Rauber, C. (1998). Kaiser fires back in arbitration suit. San Francisco Business Times.
https://www.bizjournals.com/sanfrancisco/stories/1998/02/23/story4.html
Seipel, T. (2015). California drops hammer on Blue Shield tax-exempt status. The Mercury
News. https://www.mercurynews.com/2015/03/19/california-drops-hammer-on-blueshield-tax-exempt-status/
Simatupang, T. M., Piboonrungroj, P., & Williams, S. J. (2017). The emergence of value
chain thinking. International Journal of Value Chain Management, 8(1), 40–57.
https://doi.org/10.1504/IJVCM.2017.082685