Kaiser Permanente chairman and CEO George Halvorson says he'll retire from "the best job in healthcare on the planet" in December 2013
For 10 years, Halvorson has been the chief of two companies—the nation's largest nonprofit health plan and a health system with 37 hospitals and 600 medical offices—which bring $50 billion in annual revenue from nine million enrollees in nine states. He has been among the highest paid health care executives, earning $7.7 million in 2010, according to a Kaiser spokeswoman.
Halvorson says the job has been "challenging."
"I love it, but it's time," he says. He'll be 67 in January, 2014, and wants to spend more time with his family at his Sausalito home, to "fish and boat" and to hear his five grandchildren call for their "Grandpa."
He also has two books he wants to write. And Halvorson is excited about his plan for a coaching initiative to help companies of all kinds increase the number of minorities in leadership roles.
Kaiser Permanente's vertically integrated care model was a template for many provisions in the Patient Protection and Affordable Care Act. Under Halvorson's leadership, major quality initiatives produced dramatically better outcomes than the rest of the country's average, and lawmakers tried to model a system that could replicate that achievement, he says.
He gave his board 14 months notice in order to find his replacement and smooth the transition.
In an interview Thursday, Halvorson shared his thoughts on Kaiser Permanente and the challenges for healthcare reform and for his successor.
HLM: Why do you think it's time now?
GH: When I joined Kaiser, I was 55 years old and I said to the board I would work for a decade. I wanted to retire at 65. But there are so many things in transition in healthcare right now, I thought leaving now would be premature. I agreed to stay on through some transition as we try to get the new exchanges and marketing environment set up.
HLM: Why wouldn't you work with Kaiser until you drop? You love this stuff.
GH: That's a good question, actually. Partly because I do want to spend some time with family. But I do have another agenda: [to grapple with] the issue of diversity and intergroup synergy and conflict...We're one of the most diverse organizations on the planet...with a very diverse leadership group. A lot of folks are finding that diversity creates stress and conflict, so I want to help and coach in those areas, not as a business, but as a calling. I want to turn diversity into a strength.
HLM: Are you thinking of diversity in other healthcare organizations?
GH: I want to help communities and schools deal with these issues. Inside KP, we've been a leader in these areas and won a ton of awards, employer of the year... We don't have a majority group within KP. We're 57% minority in our workforce.
HLM: Can you explain how you would measure that? Just by the number of minority employees? Or something more?
GH: I want to coach them and say what kinds of things do they need to do to be inclusive. What kinds of things do you need to do to be a meritocracy internally. To be a meritocracy, it basically means whoever you are, if you join this organization you will be advanced on your ability.
HLM: Can you be more specific?
GH: When I'm coaching white CEOs who run big companies, and I say "think about your organization. If you were to get a job and you looked up the chain of command and saw the CFO, CEO, chairman of the board, the COO, the chief marketing officer and the head of information technology were all black women, and you're a white male, what do you think your chances would be of getting ahead? Would you want to be high performing if high performing isn't going to get you to the top?
But if you come in and see that some people are black women and some are Asian American men, and you look up the chain of command and you see diversity, you know that people got promoted based on their ability, not based on their race or ethnicity.
And people, when I tell that story, they say "Jesus, is that what it looks like here?" And I say, "yeah, pull out your annual report."
HLM: Let's get back to Kaiser Permanente a minute. How big was the organization when you arrived?
GH: We had 8 million enrollees when I arrived, with $30 billion in revenue. Now we have 9 million enrollees and $50 billion. We had 30 hospitals when I came on board and 411 clinic sites. We now have 37 hospitals and 611 clinic sites. We had 12,000 physicians, and now have 17,000.
HLM: A lot of hospital providers have a resentment of Kaiser because of its model. Nevertheless, you've been influential in modeling healthcare reform. How were you able to influence health policy leaders to incorporate Kaiser's provisions into PPACA?
GH: You're right. The ACO (accountable care organization) model in the ACA is designed in several ways to have other organizations look and function more like us. Even the medical home part of the bill is designed to have organizations look and function like our medical home and our Team Care. So yes.
So the way we influenced that was by delivering great care. We've cut sepsis death rates in half, the number of pressure ulcers by more than half. We've done an incredibly good job of cutting the number of strokes and we've cut the number of heart attacks and the number of broken bones and our HIV death rate is the lowest in the country.
So the reason we have credibility is that when someone looks at us and says "how are they doing? Wow, they cut the HIV death rate in half?" That's what gives us standing. It's based on performance, not hypothetical, theoretical, or political.
HLM: Talk about your biggest frustrations and challenges.
GH: I actually have remarkably few. We've got computerized care. We put $4 billion into an electronic medical records and support system. And it worked.
HLM:What issues will your successor have to grapple with?
GH: Keeping up. The new technology world is changing rapidly. We lead right now with EMR available to people on their iPhones, the type of thing that is cutting edge. But I think healthcare technology, the app universe, is going to explode.
And whoever succeeds me will have to be right on top of that whole agenda, making sure KP keeps up and is a leader. Right now, we have more e-visits and e-connectivity and more electronic lab results than anybody. But if we stopped right now and just put a stake in the ground and said we're done, the market and care delivery process [would] move past us.
HLM: I mentioned that a lot of hospitals resent Kaiser. Talk about that and how you've been able to forge relationships with providers in those communities?
GH: I always feel a little bad for hospitals that are totally bound to a fee-for-service world. I've done that...and I know that hospital world very well. It's hard to be a fee-for service hospital. You have to wait for something bad to happen to someone to get them into your hospital, and then you make more money when the worst things happen. There's a perversity there that makes being in that world challenging.
And I think some of the hospitals are jealous. I don't have a sense that it's a nasty energy, but I think some hospitals are jealous of the fact that we can figure out how to cut broken bones by a third, and not lose revenue from all those patients...
We get the money up front and then we have savings, and we can divert the savings to other uses without losing revenue stream. I think other hospitals are jealous of that...people wish they had our model.
HLM: Regardless of whether the President is re-elected, what challenges do you see for the implementation of healthcare reform?
GH: I think it's going to be really important to get the exchanges right. They will define the insurance market going forward, and if they're done well, there will be consumer choice and people will be able to go to the exchanges with a broader array of choices, with good data about quality and service. If they're done badly, they can end up being just narrow channels with dueling actuaries rather than dueling healthcare systems.
HLM: Who will be your successor?
GH: We have some extremely highly qualified internal candidates. I've given our board a rich array of people to choose from and we have some exceptional people. In addition to that, it's the best job in healthcare, a vertically integrated healthcare system. And there are going to be some people outside who will say, "Oh boy, I would love to have that job."
HLM: What kind of fishing and boating do you like?
GH: I love to fly fish. I do it for trout, small mouth bass and panfish. I love every kind of boat. I have canoes, kayaks, wind boards, motorboats and a sail boat. The sailboat is a 26-foot MacGregor.
Segments of this interview were edited for brevity.