August 2010

Executive Summary

HealthPartners is the largest consumer-governed, nonprofit health care organization in the nation. It serves 1.25 million medical and dental health plan members, has 10,000 employees, and brings in annual revenues of $3.1 billion. It began as an insurance plan and later became a fully integrated finance and care-delivery organization. Today, HealthPartners employs a blended model: some patients and physicians are in the integrated care system, but the health plan also works with other contract care providers, while the medical group also works with other payers.

Growing a co-op takes time
Congress recently discussed whether the United States could grow enough co-ops fast enough to compete with private insurance companies. But policy makers, employers, and consumers will need time to become comfortable with the integrated care model. In the early days of HealthPartners, many viewed anything other than fee-for-service as socialist. Physician recruitment was low because doctors were unwilling to stake their reputations and earnings on a move to the new system. HealthPartners began to thrive only after highly credible institutions, like the University of Minnesota and Mayo Clinic, put their doctors on salary.

Physicians need to trust the numbers

Sound metrics and data are the foundation for evidence-based medicine and performance- based compensation. At HealthPartners, trustworthy data required considerable investment in internal platforms and collaboration by regional players to create impartial standards including Minnesota’s ICSI, which functions at a “level above” any of its member organizations.

The cost of medicine is lowest with full integration
National health leaders often point out Minnesota’s cost of care, which is 30% below the national average in medical costs. Medical costs for patients treated by HealthPartners Medical Group, however, are even lower than Minnesota’s state average and measure 38% below the national average. According to HealthPartners’ leaders, most of the 8% differential derives from practices attributed to their integrated system, rather than lower prices paid to physicians or hospitals. Of the plan’s nearly one million members, more than 30% remain in the “core” staff model—users of HealthPartners Plan, Medical Group, and Hospitals.

Primary care can be redesigned to reduce cost and improve care
HealthPartners aims for its doctors’ offices to book half as many patient visits a day to enable longer visits with sicker patients. The plan promotes retail clinics and e-visits, as well as the delivery of basic care at clinics based in the workplace. Plan administrators are discussing how to change compensation as doctors begin to see sicker patients in expanded visits.

Technology can be leveraged so everyone can practice to the top of their license
HealthPartners invests in sophisticated diagnostic tools like a diabetes wizard that enables nurses to manage and monitor diabetic patients. Many procedures have been moved out of the hospital owned by HealthPartners and into lower-cost health specialty centers that are equipped with advanced equipment. The ability to fully utilize various medical technologies and shift work between health care providers requires the crucial support of regulatory groups and credentialing organizations.

Consumer perceptions affect the rate of innovation
Many states are facing a potential reprise of the negative effects of capitation and HMOs in the 1990s, but Minnesota has been comparatively progressive. Yet even in this market, employer groups and individual customers purchasing insurance typically value choice. They perceive changes in insurance premiums designed to drive them toward the lower-cost integrated model as a reduction in choice. Also, several care providers mentioned that the care team approach employed at HealthPartners works best when customers understand that the doctor is not the only credible source of care. One practitioner pointed out that politicians, including those supporting health reform, actually hamper the use of care teams when they avow that “no one should get between you and your doctor.”


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.

  • Jason Hwang
    Jason Hwang