Kaiser teams with IBM for $500M “real-time” health care initiative

MADISON - Kaiser Permanente (KP) and IBM Healthcare signed a $500 million, seven-year strategic agreement on March 13. The deal is designed to ensure the continued leadership of the provider's information technology “real time health care delivery,” initiative to better serve its patients in the areas of insurance, claims and managed care. Kaiser has 8.6 million members nationwide.

As part of the agreement, IBM will leverage its global technology capabilities to manage Kaiser Permanente's data center operations, including mainframes, servers, storage systems and associated software. Kaiser Permanente will continue to manage applications, including the organization's large scale Epic electronic health record, HealthConnect.

In an exclusive interview with WTN News, Phil Fasano, chief information officer for Kaiser Permanente was asked about the return on investment justification of this agreement and how long he estimated it would be before Kaiser realizes a cost savings? Fasano replied, “We expect a modest cost benefit over time, but this agreement is not about cost cutting. The ROI is measured in a variety of benefits, the most important of which is the high performance and always-on capacity of our systems that power technology-enabled health care.”

Fasano added, ”This agreement, grown out of our long-standing strategic relationship with IBM, will allow us to build on our leadership in health care technology, staying focused on the safety, satisfaction and privacy of our members and patients and ensuring that our physicians and clinicians continue to deliver real-time, personalized health care.”

According to Fasano, his organization serves 14,000 physicians and thousands of other caregivers with daily access to KP HealthConnect and related IT systems to support care and service delivery. Additionally, 2.7 million members use MyHealth Manager on kp.org to access their online personal health record and other services, including secure email and prescription refills. "To meet the expectations of patients, members and physicians, Kaiser must have real-time access to medical data and tools whenever and wherever they need it and this agreement will allow Kaiser to continue to enhance their technology capabilities. IBM will bring its technology leadership to Kaiser's data center operations and some associated functions,” said Chris Nicoletti, IBM vice president, Healthcare and Life Sciences Industry.

“The IBM strategic agreement will help ensure that these systems are available for use when and wherever they are needed,” he said.

Fasano said, “IBM will begin working with our internal teams to put short-term processes in place and assess mid- to long-term strategies to enhance the systems that our technology sits on. There is a comprehensive transition plan in place to ensure our internal knowledge and strengths are best combined with IBM's expertise in data center management.”

As a result of the agreement, about 700 positions in Kaiser Permanente's data center operations will be eliminated. Some of the affected employees will be eligible for employment with IBM.

According to Fasano, before the workforce reduction there were about 6,200 IT employees on staff. Over a transition period of 6 months, about 400 additional employees will transition out as a result of the IBM deal.

Separately, Kaiser Permanente also is taking the difficult step of eliminating an additional 160 positions at more than 30 locations across its eight regions, as part of a realignment of its Information Technology function and as a result of economic challenges said Fasano.

“This step is necessary to enable us to operate as efficiently as possible during these extraordinary and challenging times,” said Fasano. “Making decisions like these that affect employees is never easy. However, like many other organizations, due to the slowing of the economy, we are slowing our growth in IT expense which has resulted in elimination of positions.”

In total, roughly 860 employees will be affected by the announcements. No clinical positions have been eliminated.

Peter Strombom, a founder of CHIME and past Chair and President of Strombom Associates said,"Kaiser Permanente is to be commended for making a very difficult decision in these uncertain times. I congratulate Phil Fasano for going out on a limb and facilitating this decision. Having the courage to make a strategic decision of this magnitude is the mark of a true leader. This strategic decision will ensure a strong platform for future years and solid employment and a foundation for managing costs and providing a high level of clinical care. Yes, some staff have been displaced and many will find employment with IBM. I strongly believe that healthcare providers need to begin to share facilities as one method of containing IT costs and Kaiser Permante in their own way are making a strong statement."

Employees whose positions are eliminated, either as part of the realignment or in the coming months through the IBM partnership agreement, will receive a 60-day notice of position elimination. During this period, the employees will receive full pay and benefits. At the end of 60 days, employees will be eligible to receive severance benefits, including continued Kaiser Permanente group health benefits. The average severance benefit for these employees is six months, depending on length of service, meaning the average employee notified would continue to have pay and benefits for eight months following notification. In addition, Kaiser Permanente provides comprehensive re-employment, career and personal counseling services as part of its outplacement services.

When Fasano was asked about the organizations use of contractors he replied. “We use contract companies for a variety of projects and as needed to achieve the goals of the IT organization and KP. We have a comprehensive workforce management strategy that considers full-time employees, part-time employees, contractors, and consultancies."

According to Nicoletti, "As governments and businesses work to better integrate and update healthcare systems, IT infrastructure outsourcing can greatly help with cost containment and operational excellence.”

Kaiser Permanente is America's leading integrated health plan. Founded in 1945, the program is headquartered in Oakland, Calif., and serves members in nine states and the District of Columbia. Today it encompasses Kaiser Foundation Health Plan Inc., Kaiser Foundation Hospitals and their subsidiaries, and the Permanente Medical Groups.

Nationwide, Kaiser Permanente includes approximately 164,000 technical, administrative and clerical employees and caregivers, and 14,000 physicians representing all specialties. The organization's Labor Management Partnership is the largest such health care partnership in the United States. It governs how more than 130,000 workers, managers, physicians and dentists work together.