If, as the Rolling Stones once put it, you can't always get what you want, but you can get what you need, then the health care field might have a new old tune to sing. Costs for everything in health care, from prescription drugs to surgical procedures and routine office visits, continue spiraling upward. Insurers are feeling the pinch, but so are medical practitioners and patients. While many ask the question, "Whatever is to be done?" one local organization has been quietly adapting to the changing environment. It may not have all the answers, but Group Health Cooperative's experience may serve as a guide as health care costs are felt ever more acutely.

Group Health Cooperative is one of the original health maintenance organizations, established in 1947 to help shield its members from the crippling cost of medical care. But in more recent years, the three-letter acronym HMO has come to be more of a four-letter word, evoking cold-hearted, clench-fisted bureaucrats who reduce sick people to a risk assessment on an actuarial table.

"I would acknowledge that since the 1980s and 1990s, the three-letter term HMO as applied to many organizations, including Group Health, is a very negative term," says Scott Armstrong, Group Health's soft-spoken chief executive. "Some deserved it," he adds. "Here, the label is a source of intense consternation."

Group Health, now the third-largest health care provider in Washington state, with more than half-a-million members and nearly 10,000 employees, has largely ditched "HMO" as a descriptive term, preferring "integrated care" as a better way of articulating what the organization does. (Group Health Cooperative is the name of the HMO plan. The organization as a whole also includes Group Health Options, a point-of-service plan, and KPS Health Plans of Bremerton, which Group Health acquired in 2005. The latter two account for less than a fifth of the membership.) But the basic model of putting doctors, insurers and insurance brokerage functions under one roof remains the same.

There are cost advantages to putting all those functions in the same organization, says health care consultant Rennie Coit. The country's health care system is based on a chain of providers all purchasing from the next link up, from the patient to employer, to an employer group, to the insurance broker, to an insurer, to a network of physicians or maybe a smaller group. "Each step along the way, the needs of the purchaser and provider are typically different than the needs of the patient," Coit says.

Costs are imposed at each of these steps, with 40 percent to 50 percent of the cost of health care going into this commodity-purchasing scheme. "Those costs are what's driving much of the [growth in] cost," he says. "The inflation there has been as significant as that in the cost of drugs or cost of hospitalization."

But economies of scale are only one part of cost containment. How that model is used to leverage other savings is the grand experiment being undertaken by Group Health. A big part of the organization's strategy is in information technology. Starting in 2004, Group Health put into place a software suite that places all clinical records online and makes them available to all providers in the network, from the exam rooms to the claims offices. Patients can also call up their files to review their information, order prescription refills, even send e-mail to their doctors about noncritical issues. Because the doctors at Group Health are salaried, they can budget e-mail-response time into their schedules, or take longer than 15 minutes to see a patient, without any adverse financial effects.

"It's technology we're all familiar with, but its application to health care is so powerful," Armstrong says. Patients don't need to sit in exam rooms, for example, to get answers to simple questions from their doctors, and that keeps office visits and co-payments down. All care providers dealing with a patient have easy access to everything that patient has been prescribed or has undergone before.

Dr. Jorge Garcia, a family practitioner at Swedish Medical Center who used to work at Group Health, says that having a good system in which to work is an important part of providing care for patients. In a centralized system, a network of doctors can share patient information more efficiently. He's noticed the difference in his own practice, where he and several specialists might all be prescribing drugs, but it will take time before everyone knows what's going on. "I will get the information from my specialists, eventually, but there's no central place I can go," Garcia says.

The technology component is just one part of a three-pronged approach Group Health is taking to improve the delivery of health care. The other two are making sure that clinical decisions are consistent when the evidence points in one direction, so there is less variation in treatment and prescribing, and getting patients to take a personal stake in their health.

Group Health has been running a pilot program, offering health risk assessments (HRAs) to its own and state employees, in which members fill out a survey and have periodic telephone consultations with staff focusing on overall wellness. It's a program businesses are also starting to embrace, and Group Health opened it up to the public in January.

But the organization's approach to its employees' health manifests itself in other ways. Group Health sponsors the annual Seattle-to-Portland bicycle ride (STP), and several executives ride in it every year. When Armstrong became CEO two years ago, others in the administrative office asked him if he would ride. "I didn't even own a bike," Armstrong says. But he trained for and rode in the STP and is now an avid rider. He's also joined a yoga group for men ages 45-65 that meets weekly in a conference room. "We need to do a much better job helping individuals take responsibility for a healthy lifestyle, making choices and reducing preventable causes of illness," he says.

"What Group Health has demonstrated relatively well is that if you keep people healthy, you can reduce the overall costs of health care," says Coit, who used to be a physician at Virginia Mason and was the chief operating officer of the University of Washington's primary care clinics.

But Group Health does face some challenges as a result of its model, Coit says. "They can't sell services that are customized to the individual patients, which is what patients are increasingly demanding," he says. Likewise, there is no financial incentive for innovation at Group Health. They have adopted many innovative ideas and practices, such as their information technology infrastructure, but those were developed outside their system. Their medical records system was developed by Epic Systems Corp., for example. It's the best out there, Coit says, and Group Health deserves kudos for adopting it.

And then there is the old issue of choice of treatments. The perception of penny-pinching bureaucrats with DENIED stamps at the ready is the antithesis of how Group Health approaches care, Armstrong says. Medical personnel fill equivalent positions opposite the insurance personnel to come to an agreement over what constitutes covered care within the network. The latest drugs being advertised on television may not be approved when there is a less invasive and less expensive alternative that medical evidence supports as being just as good or better. "We're not going to limit our members' access to services more than anywhere else in the country," Armstrong says. "Physicians need to play a significant role in medical decisions." And including prevention and wellness in the care equation will result in healthier members, fewer necessary procedures and lower costs.

There is evidence that the membership is satisfied. Data compiled by the state Office of the Insurance Commissioner shows that there were 34 total complaints against Group Health in 2005. Given the size of the membership and its 20 percent market share, that ranks it fourth from lowest on the number of complaints relative to membership. Both Premera Blue Cross and Regence Blue Shield, the two largest insurers in the state, had less favorable scores.

But there is also a limit to how much one organization can do to keep costs down. Coit points out that while the cost of medical care continues to rise (Armstrong estimates 6 percent to 9 percent currently), the costs of drugs are also rising, driven mostly by the cost of development and bringing new drugs to market, and hospital costs are rising as a result of personnel costs. The most significant factor, in that it's the most uncontrollable, is demographics.

"The population of this country is aging rapidly," says Coit. "That's like a tsunami that's driving everything. Even if you could stop the inflation of drug costs, personnel costs, the aging population will rush over all of that."

Armstrong sees the policy level as the next stage for action. He was recently appointed co-chair of the policy committee of America's Health Insurance Plans, the national industry association. He's been active on Gov. Chris Gregoire's blue ribbon commission on health are and with the Puget Sound Health Alliance. "I think the path there is to take on some bite-sized objectives and deal with those issues and use them as a platform for more," he says. In particular, getting all the children in the state into a health plan, starting with the 16,000 uninsured kids in King County, is one goal that can be accomplished. Then it can be expanded to other cities and regions.

Nationally, Armstrong has come to realize that there is more alignment among the large national plans and the smaller regional plans like Group Health on the need to promote health. There are some differences in goals - Group Health is opposed to regulatory loosening, which some of the national plans favor so they can be successful in more states - but there are common areas they can work toward.

Cheryl Scott, Armstrong's predecessor as CEO and now the chief operating officer at the Bill and Melinda Gates Foundation, also sees the policy questions coming to the forefront. "I personally believe the real breakthroughs are at the federal, not the state, level," Scott says, with a focus on how care is financed so everyone will be provided some level of benefit. She would push for individual mandated coverage on a national level if she had the choice. "I think it's a crime, if not completely unconscionable, that we have a country where 40 million people are uninsured," she says.

Whether it's getting individuals to take more responsibility for their health, finding better ways to deliver care or changing the environment in which his organization operates, Armstrong is highly motivated to address these challenges. "I spend $62 million per year on the medical benefits for my own employees," he says. "I personally, and Group Health as an organization, feel responsible for developing solutions at all three of these levels."

Chris Winters is senior associate editor at Washington CEO.