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$31.1 billion USD (2005)Rauber, Chris. Kaiser 2005 profits drop 38%. Portland Business Journal, February 17 2006.| homepage = kp.org Kaiser Permanente is an integrated managed care organization, based in Oakland, California, founded in 1945 by industrialist Henry J. Kaiser and physician Sidney R. Garfield. Kaiser Permanente is a consortium of three distinct groups of entities: the Kaiser Foundation Health Plan, Inc. and its regional operating organizations, Kaiser Foundation Hospitals, and the Permanente Medical Groups. As of 2006, Kaiser Permanente operates in nine states and Washington, D.C., and is the largest managed care organization in the United States. Kaiser Permanente has 8.5 million health plan members, 148,884 employees, 12,879 physicians, 37 medical centers, 400 medical offices, and $31.1 billion in annual operating revenues. The Health Plan and Hospitals operate under state and federal not-for-profit tax status, while the Medical Groups operate as for-profit partnerships or professional corporations in their respective regions.
Structure and governance Kaiser Permanente provides care throughout eight regions in the United States. Each of these regions comprise two or three (and, in one case, four) separate but interdependent legal entities. This structure has endured since Kaiser Permanente physicians and leaders agreed to this framework, known as the Tahoe Agreement, in 1955.
National structureThe two types of organizations which make up each regional entity are:
Regional entitiesKaiser Permanente is administered through eight regions, including one parent and five subordinate health plan entities, one hospital entity, and nine separate, affiliated medical groups:
GovernanceEach entity of Kaiser Permanente has its own management and governance structure, although the structures are interdependent and cooperative to a certain degree.
Kaiser Foundation Health Plan and HospitalsKaiser Foundation Health Plan and Hospitals has a single Board of Directors which is the ultimate governing body. George C. Halvorson is the chairman of the Board and the chief executive officer of Kaiser Foundation Health Plan and Hospitals. In this capacity, Mr. Halvorson is sometimes referred to as the chairman and CEO of Kaiser Permanente, although he is not a director for any of the Permanente Medical Group boards or an officer of any of those organizations. Halvorson leads a national leadership team that manages health plan and hospital operations across all the Kaiser Permanente regions. Each region is headed by a regional president, who all report to a member of the national leadership team. The Kaiser Foundation Health Plan and Hospital Board of Directors consists of fourteen members including Mr. Halvorson. The other thirteen members of the Kaiser Foundation Health Plan and Hospital board are Christine K. Cassel, MD, Thomas W. Chapman, EdD, Daniel P. Garcia, William R. Graber, J. Eugene Grigsby III, PhD, Judith A. Johansen, Kim J. Kaiser, Philip A. Marineau, Jenny J. Ming, Edward Pei, J. Neal Purcell, Cynthia A. Telles, PhD, and Sandra P. Thompkins.Board of Directors
Permanente Medical GroupsThe Permanente Medical Groups all have varying organizational structures, but all are led by a physician executive (called the executive director or executive medical director) who reports to a board of directors made up of the physician-owners of the medical group. The executive director or executive medical director in each region partners with the health plan and hospitals regional president to provide direction to operations in that region. On a national level there is a subordinate entity representing the regional Permanente Medical Groups called the Permanente Federation. Its executive director is Francis Crosson, MD. The Federation is accountable to an Executive Committee, and is made up of four of the nine regional Permanente Medical Group chiefs, along with the executive director of the Permanente Federation. The current Executive Committee is made up of Permanente Federation executive director Francis J. Crosson, MD, TPMG executive director and CEO Robert Pearl, MD, SCPMG medical director and chairman Jeffrey A. Weisz, MD, TSPMG medical director and chairman Bruce Perry, MD, and OPMG president and medical director Ronald Copeland, MD. Dr. Copeland also serves as chairman of the Permanente Federation Executive Committee.
Early yearsThough it has since become the largest organization of its kind, Kaiser was not the first HMO. In its modern form, the HMO combines a large group practice, contracts with employers to care for a group of workers, and a prepayment plan for both hospitals and group practices. The first "contract doctor" system in the West was orchestrated by Dr. Raymond G. Taylor, who created a temporary healthcare system from 1908 to 1912 on behalf of the Los Angeles Board of Public Works to care for the 10,000 workers on the Los Angeles Aqueduct project. The first group prepayment plans appeared in 1929 in response to the onset of the Great Depression. That year, Baylor University started a hospital prepayment plan, the first of several which would ultimately join together to become the Blue Cross insurance network. In Oklahoma, Dr. Michael Shadid recruited local farmers around Elk City, Oklahoma into a small consumer healthcare cooperative. And in Los Angeles, Dr. Donald Ross and Dr. H. Clifford Loos founded the Ross-Loos Clinic to care for City of Los Angeles public utilities workers.Rickey Hendricks, A Model for National Health Care: The History of Kaiser Permanente (New Brunswick, NJ: Rutgers University Press, 1993), 13-17As for Kaiser Permanente, its history dates back to the year 1933 and a tiny hospital in a little town called Desert Center, California. At that time, Kaiser and several other large construction contractors had formed an insurance consortium called Industrial Indemnity to meet their workers' compensation obligations. Garfield had just finished his residency at Los Angeles County-USC Medical Center at a time when jobs were scarce; fortunately, he was able to secure a contract with Industrial Indemnity to care for 5,000 construction workers building the Colorado River Aqueduct in the Mojave Desert. Soon enough, Garfield's new hospital was in a precarious financial state (with mounting debt and the staff of three going unpaid), due in part to Garfield's desire to treat all patients regardless of ability to pay, as well as his insistence on equipping the hospital adequately so that critically injured patients could be stabilized for the long journey to full-service hospitals in Los Angeles.Hendricks, 19-26However, Garfield's dedication and competence won over two Industrial Indemnity executives, Harold Hatch and Alonzo B. Ordway. It was Hatch who proposed to Garfield the specific solution that would lead to the creation of Kaiser Permanente: Industrial Indemnity would prepay 17.5% of premiums, or $1.50 per worker per month, to cover work-related injuries, while the workers would each contribute five cents per day to cover non-work-related injuries. Later, Garfield also credited Ordway with coming up with the general idea of prepayment for industrial healthcare. Garfield also later explained that he did not know much at the time about other similar health plans except for Ross-Loos.Hendricks, 26-27Hatch's solution enabled Garfield to bring his budget back into the positive, and to experiment with providing a broader range of services to the workers besides pure emergency care. By the time work on the aqueduct concluded and the project was wrapped up, Garfield had paid off all his debts, was supervising ten physicians at three hospitals, and controlled a healthy financial reserve of $150,000.Hendricks, 28Garfield returned to Los Angeles for further study at County-USC with the intent of entering private practice. However, in March 1938, Consolidated Industries (a consortium led by the Kaiser Company) initiated work on a contract for the upper half of the Grand Coulee Dam in Washington state, and took over responsibility for the thousands of workers who had worked for a different construction consortium on the first half of the dam. Edgar Kaiser, Henry's son, was in charge of the project. To smooth over relations with the workers (who had been badly treated by their earlier employer), Hatch and Ordway persuaded Edgar to meet with Garfield, and in turn Edgar persuaded Garfield to tour the Grand Coulee site. Garfield subsequently agreed to reproduce at Grand Coulee Dam what he had done on the Colorado River Aqueduct project. He immediately spent $100,000 on renovating the decrepit Mason City Hospital and hired seven physicians.Hendricks, 28-35Unlike the workers on Garfield's first project, many workers at Grand Coulee Dam had brought dependents with them. The unions soon forced the Kaiser Company to expand its plan to cover dependents, which resulted in a dramatic shift from industrial medicine into family practice and enabled Garfield to formulate some of the basic principles of Kaiser Permanente. It was also during this time that Henry Kaiser personally became acquainted with Garfield and forged a friendship which lasted until Kaiser's death.Hendricks, 36-38In 1939, the Kaiser Company began working on several huge shipbuilding contracts in Oakland, and by the end of 1941 would control four major shipyards on the West Coast. During 1940, the expansion of the American defense-industrial complex in preparation for entrance into World War II resulted in a massive increase in the number of employees at the Richmond shipyard. In January of 1941, Henry Kaiser asked Garfield to set up an insurance plan for the Richmond workers (this was merely contract negotiation with insurance companies), and a year later Kaiser asked Garfield to duplicate at Richmond what he had done at Desert Center and Mason City.Hendricks, 40-47 Unlike the two other projects, the resulting entity lived on after the construction project that gave birth to it, and it is the direct ancestor of today's Kaiser Permanente.Hendricks, 63On March 1, 1942, Sidney R. Garfield & Associates opened its offices in Oakland to provide care to 20,000 workers, followed by the opening of the Permanente Health Plan on June 1.Hendricks, 49 From the beginning, Kaiser Permanente strongly supported preventive medicine and attempted to educate its members about maintaining their own health.Hendricks, 58In July the Permanente Foundation was formed to operate Northern California hospitals that would be linked to the outpatient health plans, followed shortly thereafter by the creation of Northern Permanente Foundation for Oregon and Washington and Southern Permanente Foundation for Southern California. The name Permanente came from Permanente Creek, which ran by Henry Kaiser's first cement plant; Kaiser's first wife, Bess Fosburgh, liked the name. The first Permanente Hospital opened in Oakland on August 1. Three weeks later, the Richmond Field Hospital opened, and the Northern Permanente Hospital opened two weeks later to serve workers at the Kaiser shipyard in Vancouver, Washington.Hendricks, 49-50 In 1944 Kaiser decided to continue the program after the war and to open it up to the general public.Hendricks, 63Meanwhile, during the war years, the American Medical Association (AMA) (which opposed managed care organizations from their very beginning) tried to defuse demand for managed care by promoting the rapid expansion of the Blue Cross and Blue Shield preferred provider organization networks.Hendricks, 79Courage to Heal, a novel by KP Historical Society President, Paul Bernstein, MD, is based on the story of Garfield's life, his struggles with the AMA, and the origins of Kaiser Permanente.
Postwar growthThe end of World War II brought about a huge plunge in Kaiser Permanente membership; for example, 50,000 workers had left the Northern California yards by July 1945. Membership bottomed out at 17,000 for the entire system but then surged back to 26,000 within six months as Garfield aggressively marketed his plan to the public.Hendricks, 65 Sidney Garfield & Associates had been a sole proprietorship, but in 1948, it was reorganized into a partnership, Permanente Medical Group.Hendricks, 185During this period, a substantial amount of growth came from union members; the unions saw Kaiser Permanente care as more affordable and comprehensive than what was available at the time from private physicians under the fee-for-service system. For example, Fortune magazine had reported in 1944 that 90% of the U.S. population could not afford fee-for-service healthcare. Kaiser Permanente membership soared to 154,000 in 1950, 283,000 in 1952, 470,000 in 1954, 556,000 in 1956, and 618,000 in 1958.Hendricks, 66-75From 1944 onward, both Kaiser Permanente and Garfield fought off numerous attacks from the AMA and various state and local medical societies. Fortunately, Henry Kaiser came to the defense of both Garfield and the health plans he had created.Hendricks, 96-101, 142-150In 1951 the organization acquired its current name when Henry Kaiser unilaterally directed the trustees of the health plans, hospital foundations, and medical groups to add his name before Permanente.Hendricks, 111 However, the physicians in the Permanente Medical Group deeply resented the implication that they were directly controlled by Kaiser, and successfully forced him to back off with respect to their part of the organization. That same year, Kaiser Permanente also began experiments with large-scale multiphasic screening to identify unknown conditions and to facilitate treatment of known ones.Hendricks, 123-124 Simultaneously, although no one questioned his medical competence, Garfield's deficiencies as an executive were becoming apparent as the organization expanded far beyond his ability to manage it properly.Hendricks, 133Even worse, Henry Kaiser became fascinated with the healthcare system created for him by Garfield and began to directly micromanage Kaiser Permanente and Garfield. This resulted in a financial disaster when Kaiser splurged on the new Walnut Creek hospital; his constant intermeddling led to significant friction at every level of the organization. The situation was not helped by Kaiser's marriage to Garfield's head administrative nurse (who had helped care for Kaiser's first wife on her deathbed), convincing Garfield to marry the sister of that nurse, and then having Garfield move in next door to him. Clifford Keene (who would eventually serve as president of Kaiser Permanente) later recalled that this arrangement resulted in a rather dysfunctional and combative family in charge of Kaiser Permanente.Hendricks, 165-167Keene was an experienced Permanente physician whom Garfield had personally hired in 1946. During 1953 he had been trying to get a job at U.S. Steel, but on the morning of December 5, 1953, with internal tensions worsening day by day, Garfield met with Keene at the Mark Hopkins Hotel in San Francisco and asked him to turn around the organization. It took Keene 15 years to realize that Kaiser had forced Garfield to ask Keene to become his replacement. Due to the chaos on the board, Keene at first took control with the vague title of Executive Associate, but it soon became clear to everyone that he was actually in charge and Garfield was to become a lobbyist and "ambassador" for the HMO concept.Hendricks, 174-180However, even with Garfield relieved of day-to-day management duties, the underlying problem of Henry Kaiser's authoritarian management style continued to persist. After several tense confrontations between Kaiser and Permanente Medical Group physicians, the doctors met with Kaiser's top adviser, Eugene Trefethen, at Kaiser's personal estate near Lake Tahoe on July 12, 1955. Trefethen came up with the idea of a contract between the medical groups and the health plans and hospital foundations which would set out roles, responsibilities, and financial distribution.Hendricks, 189-190While Keene and Trefethen struggled to fix the damage from Kaiser's micromanagement and Garfield's ineffectual management, Henry Kaiser moved to Oahu in 1956 and then insisted on expanding Kaiser Permanente into Hawaii in 1958. He promptly ruined what should have been a simple project, and only a last-minute intervention by Keene and Trefethen in August 1960 prevented the total disintegration of the Hawaii organization.Hendricks, 199-203 By that year, Kaiser membership had grown to 808,000.Hendricks, 209
Managed care eraHaving overseen Kaiser Permanente's successful transformation from Henry Kaiser's healthcare experiment into a large-scale self-sustaining enterprise, Keene retired in 1975.Hendricks, 205 By 1976, membership reached three million. In 1977, all six of Kaiser Permanente's regions had become federally qualified health maintenance organizations. Some believe then-President Richard Nixon specifically had Kaiser Permanente in mind when he signed the Health Maintenance Organization Act of 1973, as the organization was mentioned in an Oval Office discussion of the Act. In 1980, Kaiser acquired a non-profit group practice to create its Mid-Atlantic region, encompassing the District of Columbia, Maryland, and Virginia. In 1985, Kaiser Permanente expanded to Georgia.
Regional evolutionBy 1990, Kaiser Permanente provided coverage for about a third of the population of the cities of San Francisco and Oakland; total Northern California membership was over 2.4 million.Hendricks, 209, 215Elsewhere, Kaiser Permanente did not do as well, and its geographic footprint changed significantly in the 1990s. The organization spun off or closed outposts in Texas, North Carolina, and the Northeast. In 1998, Kaiser Permanente sold its Texas operations, where reported problems had become so severe that the organization directed its lawyers to attempt to block the release of a Texas Department of Insurance report. This prompted the state attorney general to threaten to [https://wwwapps.tdi.state.tx.us/inter/asproot/commish/news/clips1997.asp?id=76 revoke the organization's license]. In North Carolina, the Industrial Union Department of the AFL-CIO issued a 1996 report critical of the quality of the care the organization provided. Kaiser Permanente closed health plans in Charlotte and Raleigh-Durham in North Carolina four years later. The organization also sold its unprofitable Northeast division in 2000.In 1995, Kaiser Permanente celebrated its fiftieth anniversary as a public health plan. Two years later, national membership reached nine million. In 1997, the organization established an agreement with the AFL-CIO to explore a new approach to the relationship between management and labor, known as the Labor Management Partnership.
Early in the 21st century the NHS and UK department of health became impressed with some aspects of the Kaiser operation, and initiated a series of studies involving several healthcare organisations in England.UK NHS reports and briefings on the mode of operation of Kaiser and its effectivenessBBC article on UK evaluation of KP Visits occurred and suggestions of adopting some KP policies are currently active. The management of hospital bed-occupancy by KP, by means of integrated management in and out of hospital and monitoring progress against care pathways has been admired, and given rise to trials of similar techniques in eight areas of the UK.In 2005 a controversial British Medical Journal editorial reported a study by California-based academics which compared Kaiser to the British National Health Service. The editorial in the BMJ suggested that KP managed comparable costs to the NHS, but this generated argument mainly that American costs were in fact higher than NHS, and it was generally accepted that the NHS was cheaper and more efficient whereas Kaiser may be more rapid.
Marketing During the 1990s, the organization hired public relations firm Bain and Associates to position their brand in Washington, D.C. The organization also hired Strategic Partnerships LLC to secure tax incentives and a special hearing for government grants.In 1999, a number of groups successfully sued Kaiser Permanente in regard to its In the Hands of Doctors advertising campaign. The lawsuit revealed that doctors at the organization were not fully in control of decision-making and that there may have been persuasion to limit care with financial bonuses. In 2004, the organization retained Campbell-Ewald to develop a $40-million-dollar ad campaign called Thrive. The campaign, which focuses on the theme of preventative care, was the first since Kaiser Permanente's In the Hands of Doctors campaign. Allison Janney is the company's advertising spokesperson.
Quality of care U.S. News and World Report, in its 2006 annual ranking of US commercial health plans, ranked Kaiser Foundation Health Plans as follows, out of 246 rated plans:
Interoperability From a clinical perspective, KP wants medical devices that function well in a hospital setting. Physician efficiency could be greatly improved if hospital technology were easier to use. One change that KP desires is a single sign-on system that would prevent doctors from having to waste time logging on to multiple machines separately. KP is also seeking systems with better patient-ID binding and with greater data recoverability in the event of a system failure.From a technical perspective, KP wants products that are easy to install and easy to connect to the rest of its system. KP also wants products that can be monitored and maintained remotely. Hiring a large number of technical experts is very expensive, so KP would like to employ a central team that could efficiently serve all its hospitals.KP has great leverage in the industry for biomedical devices because it buys in such bulk. As of yet, however, it has chosen to set its own standards for interoperability and does not endorse any general standards. KP simply requires that its vendors prove that their products will work with KP’s in-house system. The company feels that general standards for interoperability are still immature.
Research Kaiser doctors and others carry out research publishing in peer-reviewed journals and in the organization's own journal Permanente Journal.
Kaiser operates a Division of Research which in 2006 declared around 200 active studies in progress. Kaiser's bias toward prevention is reflected in the areas of interest—vaccine and genetic studies are prominent.
Measles vaccine project participationBetween June 1990 and October 1991, Kaiser, along with the Los Angeles County Department of Health, Johns Hopkins University and the CDC carried out a clinical trial of the Edmonton strain of Measles vaccine. The Los Angeles arm of the trial involved 1500 (900 receiving the study treatment) mostly black and Latino babies. Other arms ran in Haiti and several African countries. The aim was to induce immunity to Measles earlier, as cases in young children had been causing alarm. The trial was ended early when increased mortality appeared in other countries. Inadequate consent had been obtained, in that parents were not informed that the vaccine, licenced in other countries and registered with the FDA as a trial medication, was unlicensed in the U.S. This raised concerns over US government department ethics, and occasioned an apology by the CDCNew Scientist article on vaccine project who ascribed it to an administrative oversight.
Regulation In California, the Department of Managed Health Care is the state regulatory agency which oversees managed care insurers and providers. In 2005, the Department of Managed Health Care ranked Kaiser Permanente near the top of the list of California managed care insurers,California regulatory body report card for 2005 on HMOs operating in the state and rated the health plan as superior on preventive care.
Federal regulation of managed careThe organization is mentioned in an Oval Office discussion about the initiation of the Health Maintenance Organization Act of 1973. By 1977, all six of Kaiser's regions had become federally qualified HMOs.
Concerns and violations As the largest not-for-profit health plan in the United States, Kaiser Permanente is a target of both praise and criticism. In recent years, however, the organization has come under intensive scrutiny for a series of management, patient care, financial, and technology issues, primarily in its Northern and Southern California regions.
Mandatory arbitrationIn order to contain costs, Kaiser requires agreement by planholders to submit patient malpractice claims to arbitration rather than litigating through the court system. This has triggered some discussion and dissent.Chris Rauber. "Kaiser fires back in arbitration suit." San Francisco Business Times. February 20, 1998. Some cases proceed to court and one argument is over whether the requirement to go through dispute resolution is enforceable.Kaiser established an Office of Independent Administrators (OIA) in 1999 to oversee the arbitration process. The degree to which this is independent has been questioned.The Foundation for Taxpayer & Consumer Rights. [http://www.consumerwatchdog.org/pr/?postId=97&pageTitle=%22Independent%22+Administrator+Of+Kaiser+Arbitration+System+Is+Rep+For+Corporate+Lobby "'Independent' Administrator Of Kaiser Arbitration System Is Rep For Corporate Lobby"] News Release. January 8, 2003. Wilfredo Engalla is a notable case. In 1991, Engalla died of lung cancer nearly five months after submitting a written demand for arbitration. The California Supreme Court foundFull opinion of the California Supreme Court in the case of Engalla v. Permanente Medical Group, Inc. that Kaiser had a financial incentive to wait until after Engalla died; his spouse could recover $500,000 from Kaiser if the case was arbitrated while he was alive, but only $250,000 after he died. The Foundation for Taxpayer & Consumer Rights contends that Kaiser continues to oppose HMO arbitration reformThe Foundation for Taxpayer & Consumer Rights. [http://www.consumerwatchdog.org/pr/?postId=50&pageTitle=Placebo+Kaiser+Arbitration+Bill+Killed+In+Senate+Committee%3 "A Placebo Kaiser Arbitration Bill Killed In Senate Committee: Kaiser's 'Independent' Arbitration System Administrator Lobbies For Kaiser."] News Release. April 26, 2000.Patients and consumer interest groups sporadically attempt to bring lawsuits against Kaiser Permanente. Recent lawsuits include [http://www.harp.org/rushford.htm Gary Rushford's] attempt to use proof of a physician lie to overturn an Arbitration decision.
Homeless patient treatmentKaiser has settled three cases for alleged patient dumping since 2002. During that same period, the Office of the Inspector General settled 102 cases against US Hospitals which resulted in a monetary payment to the agency.List of Office of Inspector General fines for patient dumpingFederal Patient Dumping act applied in these finesABC news coverages of patient dumping allegationsOn November 16, 2006, Los Angeles city officials filed civil and criminal legal action against Kaiser Permanente for "patient dumping"--the delivery of homeless hospitalized patients to other agencies or organizations in order to avoid expensive medical careas reported by National Public Radio's All Things Considered. The legal filings are intended to punish hospitals for releasing homeless hospital patients (often via taxis) on the sidewalk near relief shelters instead of accepting responsibility for releasing hospital patients into the care of a relative, or of a recognized agency. The city's decision to charge Kaiser Permanente reportedly was influenced by security camera footage, allegedly showing a 63-year-old patient, dressed in hospital gown and slippers, wandering toward a mission on Skid Row, as outlined in a 20-page complaint. City officials say that as many as 10 other area hospitals are under investigation for possible future action for this practice."Kaiser Faces Charges for Dumping Homeless Patient" November 16, 2006.National Public Radio, with contribution from Associated Press. Story includes video footage.
Kidney transplant programIn 2004 Northern California Kaiser Permanente initiated an in-house program for kidney transplantation. Prior to opening the transplant center, Northern California Kaiser patients would generally receive transplants at medical centers associated with the University of California (UC San Francisco and UC Davis). Upon opening the transplant center, Kaiser required that members who are transplant candidates in Northern California obtain services through their transplant center. On May 3 2006, the Los Angeles Times published an investigative report which accused the transplant program of mismanagement which resulted in delays for patients awaiting kidneys.Los Angeles Times coverage of kidney transplant program According to the report, Northern California Kaiser performed 56 transplants in 2005 and twice that many patients died waiting for a kidney. At other California transplant centers, more than twice as many people received kidneys than died during the same period.On May 13 2006, after less than two years of operation, Northern California Kaiser announced that it would discontinue the kidney transplant program. As before, Northern California Kaiser now pays for pre-transplant care and transplants at outside hospitals, as do all other Kaiser Permanente regions. This change affected approximately 2,000 patients.SF Gate account of closure of kidney transplant program (2006 May 13 viewed May 19)MSNBC account of closure of kidney transplant program (2006 May 21 viewed May 29)Two patients have filed personal injury lawsuits against Kaiser and the widow of a patient who died has filed a wrongful death claim. According to the lawyer representing the three plaintiffs, more lawsuits are planned.Statement regarding further litigation in kidney transplant program
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