February 2011

Executive Summary

Group Health (GH) serves 600,000 members through its health plan. It has 1,000 employed physicians, 60% of whom are specialists, with the rest in primary care. A further 9,000 clinicians in 41 hospitals are available to members through contracted providers. Its service area covers most of Washington state, with a particular concentration around greater Seattle, as well as northern Idaho. Group Health’s medical group does not provide care to members of other health plans.

You don’t have to own hospitals to deliver integrated care
Since the 1990s, Group Health has not owned the hospitals it serves, instead entering into long-term partnerships with hospitals in the region. Group Health estimates its costs to be 50% lower than that of ownership. Besides the financial savings, GH also avoids the conflicting incentives that arise when hospitals within a system want to protect their own revenue streams. This strategy does depend, however, on excess bed capacity in the marketplace, as well as the existence of hospital partners that have aligned outlooks on outcomes and quality.

A successful Medical Home seems impossible without integration
In a setting without a team base, the Medical Home could become an attempt to replicate too superficially what really depends on integration, simply serving as a way for primary care providers (PCPs) to carve out greater payments for themselves. The Medical Home is effective at Group Health because of the unified care teams and their shared commitment to quality.

Integrated care delivery can improve quality and reduce costs
In its controlled studies of patients in the Medical Home model, Group Health has been able to show improved HEDIS1 results as well as lower costs, including 29% fewer emergency visits and 6% fewer hospitalizations. Though premiums for HMO products have not been lower in the past because of the costs of investing in high-touch primary care, leaders aim to be able to offer lower premiums of 5–10%.

Conventional wisdom believes HMO insurance products are low-frills and restrict care—Group Health has built the opposite kind of product
Group Health has developed a high-engagement Medical Home model, where customers may have four to five times more touch points a year than in a traditional care delivery system. Because the model emphasizes prevention and diligence in managing chronic conditions, GH is often “chasing customers down to deliver more care.” Patients have to stay with the Medical Home for several years in order for this type of high-touch care to result in savings through the reduction of advanced disease and emergencies.

There are mixed views about offering Choice products alongside an integrated care product
Group Health began offering a Point of Service plan, has seen less customer resistance to these offerings, and they have been a high percentage of sales recently. Some leaders felt the purpose of offering Choice products was to introduce people to Group Health and ultimately drive them to the HMO model; others felt Point of Service plans could remain an attractive and sizable market to serve long-term.

Care delivery is treated as the crown jewel
Group Health judged the administrative burden to be too high to justify opening their medical practice to outside insurers. They also fear conflicting incentives and perceive a marketing benefit from the idea that “you can only access our doctors by signing with our plan.”

Within an integrated system, EMR is essential to take full advantage of the benefits of integration
Shared health records allow care teams to have tighter coordination as well as better transitions to specialist or hospital care. It also enables the sharing of best practices through evidence-based medical guidelines, decision support tools, and care reminders that are embedded in workflows so that they are effective aids to providers and patients. The electronic medical record (EMR) also helps build and sustain a common culture within an integrated system.

Technology is key in engaging patients in their health
Technology enables Group Health to “know their patients,” to be more efficient and provide greater customer satisfaction in processing test results, refills, and patient questions. Some electronic touch points are more effective than in-patient visits with certain customer subsets. Contrary to expectations, the Medicare population served by some Group Health providers has had high uptake and is not technologically averse; if they desire high-touch or customized health care, technology is a way to do that cost-effectively.

The next substantial innovation in insurance will be products that incent members to take responsibility for their health
Group Health is experimenting with value-designed products by removing co-pays for patient care and medications associated with chronic conditions, encouraging patients to partake of increased primary care and better manage those conditions. They are also building programs to offer points and incentives so that engaging in healthy behaviors will result in rewards or premium discounts and rebates. The financial benefits of health improvement will be shared by payer, patient, and employer.


About the case study series
Disruptive innovations in health care have the potential to decrease costs while improving both the quality and accessibility of care. This paper is part of a series of case studies that uses disruptive innovation theory to examine integrated delivery systems and aims to identify the critical factors necessary to achieve many of the desired quality, cost, and access improvements called for in current reform proposals. By providing a historical and strategic analysis of integrated fixed-fee providers, this project hopes to accelerate the adoption of disruptive innovations throughout the health care delivery system.

Funding for this case study series was provided by a grant from the Robert Wood Johnson Foundation’s Pioneer Portfolio, which supports innovative ideas that may lead to significant breakthroughs in the future of health care. The authors also thank the participating health systems and interview subjects for their cooperation and assistance.


  • Vineeta Vijayaraghavan
    Vineeta Vijayaraghavan

    Prior to joining the Institute, Vineeta served as Engagement Manager at the consulting firm Katzenbach Partners, helping Fortune 500 health care clients achieve strategic, operating, and organizational improvements. She was also a Research Fellow at Harvard Business School, creating cases and conducting research focused on issues of Organizational Development. She received her MBA from Harvard Business School.

  • Greg Beasley
    Greg Beasley