Kaiser Permanente
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 8.7 million health plan members, 156,000 employees, 13,729 physicians, 37 medical centers, 400 medical offices, and $34.4 billion in annual operating revenues and $1.3 billion in net income. 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's headquarters (the Ordway Building in downtown Oakland)
One of Kaiser's many other office buildings in Oakland
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 structure
The two types of organizations which make up each regional entity are:
Kaiser Foundation Health Plans work with employers, employees, and individual members to offer prepaid health plans.
The health plans are not-for-profit and provide infrastructure for and invest in Kaiser Foundation Hospitals and for-profit medical groups.
Permanente Medical Groups are physician-owned organizations, which provide and arrange for medical care for Kaiser Foundation Health Plan members in each respective region. The medical groups are for-profit partnerships or professional corporations and receive funding from Kaiser Foundation Health Plans.
The first medical group, The Permanente Medical Group, formed in 1948 in Northern California.
In addition, Kaiser Foundation Hospitals operates medical centers in California, Oregon and Hawaii, and outpatient facilities throughout the Kaiser Permanente regions. The hospital foundations are not-for-profit and primarily rely on the Kaiser Foundation Health Plans for funding.
They also provide infrastructure and facilities that benefit for-profit medical groups.
Regional entities
Kaiser Permanente is administered through eight regions, including one parent and five subordinate health plan entities, one hospital entity, and nine separate, affiliated medical groups:
Northern California
Kaiser Foundation Health Plan, Inc. (KFHP)
Kaiser Foundation Hospitals (KFH)
Southern California Permanente Medical Group (SCPMG)
Colorado
Kaiser Foundation Health Plan of Colorado (KFHPCO)
Colorado Permanente Medical Group, P.C.
(HPMG)
Mid-Atlantic (vicinity of Washington, D.C., including Maryland and Virginia)
Kaiser Foundation Health Plan of the Mid-Atlantic States Inc. (MAPMG)
Northwest (Northwest Oregon and Southwest Washington)
Kaiser Foundation Health Plan of the Northwest (KFHPNW)
Northwest Permanente, P.C.
Physicians and Surgeons (NWP)
Ohio
Kaiser Foundation Health Plan of Ohio (KFHPOH)
Ohio Permanente Medical Group, Inc. (OPMG)
In addition to the regional entities, in 1996, the then-twelve Permanente Medical Groups created The Permanente Federation, a separate entity, which focuses on standardizing patient care and performance under one name and system of policies.
Around the same time, The Permanente Company was also chartered as a vehicle to provide investment opportunities for the for-profit Permanente Medical Groups. One of the most successful ventures of the Permanente Company is Kaiser Permanente Ventures, a venture capital firm that invests in emerging medical technologies.
Governance
Each 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 Hospitals
Kaiser Foundation Health Plan and Hospitals has a single Board of Directors which is the ultimate governing body. Halvorson is the chairman of the Board and the chief executive officer of Kaiser Foundation Health Plan and Hospitals.
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.
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. Cochran, MD, TPMG executive director and CEO Robert Pearl, MD, SCPMG medical director and chairman Jeffrey A.
Copeland also serves as chairman of the Permanente Federation Executive Committee.
History
Early years
Though 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. 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. Michael Shadid recruited local farmers around Elk City, Oklahoma into a small consumer healthcare cooperative.
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. Later, Garfield also credited Ordway with coming up with the general idea of prepayment for industrial healthcare.
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.
Unlike 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.
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. From the beginning, Kaiser Permanente strongly supported preventive medicine and attempted to educate its members about maintaining their own health.
In 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. 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. Sidney Garfield & Associates had been a sole proprietorship, but in 1948, it was reorganized into a partnership, Permanente Medical Group.
During 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. 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.
From 1944 onward, both Kaiser Permanente and Garfield fought off numerous attacks from the AMA and various state and local medical societies.
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.
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.
However, even with Garfield relieved of day-to-day management duties, the underlying problem of Henry Kaiser's authoritarian management style continued to persist. 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.
While 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.
Although Kaiser's approach shifted to "buy, not build" the system was unprecedented in size and scope. 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.
In 2004, the organization retained Campbell-Ewald to develop a $40-million-dollar ad campaign called Thrive. Second, its doctors are salaried rather than paid per service, which removes any incentive for doctors to perform unnecessary procedures.
A comparison to the UK's National Health Service found that patients spend 2-5 times as much time in NHS hospitals as compared to KP hospitals.
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. The trial was ended early when increased mortality appeared in other countries.
In 2005, the Department of Managed Health Care ranked Kaiser Permanente near the top of the list of California managed care insurers, and rated the health plan as superior on preventive care.
Federal regulation of managed care
The organization is mentioned in an Oval Office discussion about the initiation of the Health Maintenance Organization Act of 1973. 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 arbitration
In order to contain costs, Kaiser requires agreement by planholders to submit patient malpractice claims to arbitration rather than litigating through the court system.
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.
On 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.