Kaiser Builds Hospitals, Bringing More Acute Care In-House

While Kaiser Permanente is usually regarded as a group-model HMO, it is also one of the largest hospital operators in California. And, despite the recession, large investment losses, and an estimated increase of 500,000 uninsured people in the Golden State, Kaiser is engaged in a major hospital construction program. Including outpatient facilities, Kaiser is spending more than $20 billion on capital projects, Christine Malcolm, senior vice president of hospital strategy and national facilities for Kaiser, tells BNET.

Much of this work consists of retrofitting older hospitals so that they comply with the state's earthquake preparedness regulations. But Kaiser is also building new hospitals in addition to the 34 facilities it already operates, Malcolm says. Some of these hospitals are located in towns like Vacaville and Modesto that have growing concentrations of Kaiser members. (Many of those members have moved out of San Francisco and Oakland, she notes.) In addition, Kaiser is building new facilities as it brings more of its acute-care business in-house, rather than contracting outside its integrated system for hospital care.

"We're internalizing more of that care, because our physicians and patients want to provide and receive seamless care by physicians who work closely with each other," says Malcolm.

Overall, Kaiser has added nearly 1,500 beds and 10 hospitals in California over the past decade, and its net bed count continues to grow. But Malcolm emphasizes that Kaiser is still planning to have only 1.1 beds per thousand members, "because we're able to design settings that are most appropriate for where care is provided." In other words, Kaiser is able to keep the ratio of hospital beds to members low by focusing on outpatient services, as well as preventive and chronic disease care to avoid unnecessary hospitalizations. Other integrated delivery systems do that to some extent, partly because Medicare penalizes them for readmissions; but, as Malcolm notes, most healthcare organizations design hospital capacity "to match the financial incentives that exist in the fee-for-service environment." Kaiser, in contrast, benefits financially when it minimizes hospital volume.

Kaiser claims that its new hospitals cost about 13 percent less than the statewide average. Malcolm says there are three reasons for that: • Contractors must follow Kaiser standards and stay within budget. • Architects use Kaiser "templates" in designing hospitals. That reduces the development cycle by 18-24 months, saving money as construction costs rise. • Kaiser will not accept bids for hospitals that have wasted space. Its plans are as low as 1560 square feet per bed.

Despite the relatively low cost of Kaiser's new hospitals, Malcolm says, they will be "fully digital," with universal access to Kaiser's electronic health record. They will also include the "OR of the future, where the people involved in operating on a patient can see the medical record, the lab results, and radiology images, as well as images from the scopes they're using in doing the procedure." And of course, all hospitals will include backup generators that not only prevent interruption of access to the EHR, but also enable the hospital to function "off the grid" for 48 hours during an earthquake or other disaster.