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Kaiser Permanente

Kaiser Permanente logo
Company type	not-for-profit health plan and hospitals, for-profit medical groups
Industry	Healthcare
Founded	1945
Headquarters	Oakland, California
Revenue	$31.1 billion USD (2005)
Number of employees	145,000
Website	kaiserpermanente.org

Kaiser Permanente is an integrated health maintenance organization (HMO), based in Oakland, California, founded in 1945 by industrialist Henry J. Kaiser and physician Sidney R. Garfield. Kaiser Permanente is actually a consortium of three distinct entities composed of Kaiser Foundation Health Plans, Kaiser Foundation Hospitals, and The Permanente Medical Groups. "Kaiser Permanente" as a single entity does not technically exist. As of 2006, Kaiser operates in nine states and Washington, D.C., and is the largest non-profit HMO in the United States. Kaiser has 8.3 million health plan members, 134,000 employees, 11,000 physicians, 30 medical centers, 431 medical offices, and $22.5 billion in annual operating revenues. The umbrella organization Kaiser Foundation Health plan operates under the tax status of a not-for-profit organization.

Structure

Kaiser provides care through eight regional divisions. Each of these regions are comprised of three co-dependent organisations. This structure has endured since Kaiser physicians and leaders agreed to this framework, known as the Tahoe Agreement, in 1955.

Kaiser is administered through eight regions, or divisions:

• Northern California
• Southern California
• Colorado
• Georgia
• Hawaii
• Mid-Atlantic (vicinity of Washington, D.C. including Maryland and Virginia)
• Northwest (Northwest Oregon and Southwest Washington)
• Ohio

The three 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.
• Kaiser Foundation Hospitals operate medical centers in three states and outpatient facilities throughout the Kaiser region. 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.
• The Permanente Medical Groups are partnerships of physicians, which provide and arrange for medical care for Kaiser Foundation Health Plan members in each respective region. The medical groups are for-profit partnerships and also receive funding from Kaiser Foundation Health Plans. The first medical group, The Permanente Medical Group, formed in 1948 in Northern California.

There was a major reorganization of Kaiser in 1996 when twelve Kaiser medical groups were unified within the Permanente Federation, which focuses on standardizing patient care and performance under one name and system of policies and the Permanente Company, which provides a central governance structure for corporate activities.

History

Kaiser was founded in 1933 at Eagle Mountain in Desert Center, California. Garfield opened the Contractors General Hospital, with twelve beds, to treat construction workers building the Los Angeles Aqueduct in the Mojave Desert. The hospital was in a precarious financial state, due in part to Garfield's desire to treat all patients regardless of ability to pay. Harold Hatch, an insurance agent, proposed that the insurance companies pay the hospital a total amount, in advance, for each worker covered. The financial relationship between the insurance companies and the hospital was efficient, and allowed Garfield to focus on a new idea: preventive health care.

Observing the concept developed by Hatch and Garfield in the Mojave Desert, Henry Kaiser persuaded Garfield to open a prepaid practice for his construction workers who, in 1938, were building the Grand Coulee Dam in Washington state. Coverage was later extended to the families of the workers. In 1942, Kaiser established health plans for workers and families at shipyards in Richmond, California and Vancouver, Washington, and at a steel mill in Fontana, California. In 1945, Kaiser membership was opened to the public, as membership had dropped to 11,000 following World War II. When the shipyards closed in 1946, membership dropped to 25,000, from a height of 200,000.

Between 1952 and 1955, membership grew to 500,000, as Kaiser worked with union leaders to extend health care to all unionized employees. In 1958, Kaiser added Hawaii to its initial three regions in Northern California, Southern California, and Oregon. Membership reached one million by 1963. In 1969, Kaiser added regions in Colorado and Ohio. Nine years later, in 1976, membership reached three million.

By 1977, all six of Kaiser's regions had become federally-qualified HMOs. Some believe President Nixon specifically had Kaiser in mind when he signed the Health Maintenance Organization Act of 1973, as the organization is mentioned in an Oval Office discussion of the Act. In 1980, Kaiser acquired a non-profit group practice to create the Mid-Atlantic region, encompassing the District of Columbia, Maryland, and Virginia. In 1985, Kaiser added Georgia.

The geographic footprint of the organization has changed over time. Kaiser ultimately abandoned outposts in Texas, North Carolina, and the Northeast. In 1998 Kaiser sold its Texas operations, where reported problems had become so severe that Kaiser 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 revoke the organization's license. In North Carolina, the Industrial Union Department of the AFL-CIO issued a 1996 report critical of Kaiser's quality; in response Kaiser closed health plans in Charlotte and Raleigh-Durham in North Carolina four years later. Kaiser also sold its unprofitable Northeast division in 2000.

During the 1990s, Kaiser hired public relations firm Bain and Associates to position their brand in Washington, D.C. The organization has hired Strategic Partnerships LLC to secure tax incentives and a special hearing for government grants.

In 1995, Kaiser celebrated its 50th anniversary as a public health plan. Two years later, membership reached nine million. In 1997, Kaiser 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.

In 1999, a number of groups successfully sued Kaiser in regard to its “In the Hands of Doctors” advertising campaign. The lawsuit revealed that Kaiser doctors were not fully in control of decision-making and that they had been persuaded to limit care with financial bonuses. In 2004, Kaiser hired 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's “In the Hands of Doctors” campaign.

International Reputation

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 .

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.

Regulation

In California the Department of Managed Healthcare of the state government is the regulatory organisation. Other states have similar organisations.

In 2005 the DMHC reported Kaiser as being as good as any of the HMOs, and superior on preventive care.

Quality of care

Registered Patients

U.S. News and World Report's annual ranking of U.S. commercial health plans list Kaiser Hawaii at No. 45 (out of over 250 health plans), Kaiser Northern California at No. 58, and Kaiser Southern California at No. 88 in 2005.

A 2004 Consumer Reports study of planholders ranked Kaiser overall as average or better. It showed below average ratings in the Colorado and DC/MD/VA regions for two measures of quality of care: 'care from doctors' and the 'quality of their primary care physician' and other Kaiser division received average scores. The same survey ranked Kaiser's Northern California region as the best HMO overall among rated plans. .

Care of Unregistered Patients

Hospitals, prisons and police in Los Angeles area, including Kaiser, have discharged indigent patients to Skid Row. Kaiser among others has paid fines for patient dumping.

Medical experimentation

I has been alleged that Kaiser has used tested vaccines on patients without obtaining proper consent. Between June 1990 and October 1991, Kaiser, along with the Los Angeles County Department of Health and the CDC, injected 900 mostly black and latino babies with an experimental measles vaccine. Although the vaccine was licensed in other countries, parents were not informed that the vaccine was unlicensed in the U.S.

Dispute handling

In 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. 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 .

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 found 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 reform

Patients and consumer interest groups sporadically attempt to bring lawsuits against Kaiser. Recent lawsuits include Gary Rushford's attempt to use proof of a physician lie to overturn an Arbitration decision.

Kidney Transplantation

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In 2004 Kaiser initiated an in-house program for kidney transplantation, aiming to improve the cost/benefit ratio over their previous commissioning of services from university hospitals. The results were disappointing and on 13 May 2006 after less than two years of operation Kaiser announced the program will be wound down and patients be transferred back to the previous arrangements. This affects around 2000 patients.

Kaiser Northern California has been criticized for its mishandling of patients and organs available for transplantation. On May 13, 2006, Kaiser announced that it will discontinue its start-up kidney transplant program after less than two years of operation, due to administrative problems and failure to communicate with regulatory agencies that removed patients from the organ list. These administrative failures created undue delays for those awaiting kidney transplantation. During the transplant program's first year, 56 transplants were performed (with around 2000 people on the wait list) and twice that number of people died waiting for a kidney. At other California transplant centers more than twice as many people received kidneys than died during the same period. Kaiser suspended the program after being hit with a series of lawsuits.

References

1. http://www.bizjournals.com/portland/stories/2006/02/13/daily42.html?from_rss=1
2. http://xnet.kp.org/permanentejournal/fall97pj/history.html
3. Transcript of taped conversation between President Richard Nixon and John D. Ehrlichman
4. http://www.networks.nhs.uk/39.php#kaiser UK NHS reports and briefings on the mode of operation of Kaiser and its effectiveness
5. http://news.bbc.co.uk/1/hi/health/1764713.stm
6. Feachem RG, Sekhri NK, White KL (2002). "Getting more for their dollar: a comparison of the NHS with California's Kaiser Permanente". BMJ. 324: 135–41. PMID 11799029.{{cite journal}}: CS1 maint: multiple names: authors list (link)
7. http://www.opa.ca.gov/report_card/ Califonia regulatory body report card for 2005 on HMOs operating in the state
8. http://www.usnews.com/usnews/health/best-health-insurance/rankings/commercial.htm
9. http://www.abcnews.go.com/GMA/story?id=1761873&page=1
10. http://www.newscientist.com/article.ns?id=mg15020361.000
11. Chris Rauber. "Kaiser fires back in arbitration suit." San Francisco Business Times. February 20, 1998.
12. The Foundation for Taxpayer & Consumer Rights. "'Independent' Administrator Of Kaiser Arbitration System Is Rep For Corporate Lobby" News Release. January 8, 2003.
13. Full opinion of the California Supreme Court in the case of Engalla v. Permanente Medical Group, Inc.
14. The Foundation for Taxpayer & Consumer Rights. "A Placebo Kaiser Arbitration Bill Killed In Senate Committee: Kaiser's 'Independent' Arbitration System Administrator Lobbies For Kaiser." News Release. April 26, 2000.
15. http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/05/13/KAISER.TMP SF Gate account of closure of kidney transplant program (2006 May 13 viewed May 19)
16. http://www.latimes.com/news/printedition/la-me-kaiser4may04,1,156658.story?ctrack=1&cset=true

External links

• Kaiser Permanente - Official website
• Regulatory department of California government - reports on HMOs including Kaiser
• MSNBC - "Kaiser Permanente bucks the HMO trend"
• Health Administration Responsibility Project - anti-HMO organization. Critical of Kaiser.

• Current events
• Healthcare in the United States
• Non-profit organizations
• Hospital networks