The Kaiser Health Plan:
A Business-Professional Partnership

EUGENE E. TREFETHEN, JR.*

IN THE EYES of the general public, the name Kaiser has come to mean the engineering and building of dams, bridges, ships, and industrial plants, mining of ores, and making aluminum, steel, cement, and gypsum. Today, however, in partnership with the doctors, we are becoming almost as well known for the delivery of medical care as we were during World War II for the delivery of ships.

Some question the need for an industrial organization becoming involved in the management of health care services. If you believe-as we do that the delivery of better medical care for the people of this country requires the combination of professional and business abilities, then there is a need for some form of partnership which utilizes the talents of a number of professional and business disciplines.

The Kaiser Foundation Medical Care Program is a very real part of the total Kaiser organization, even though it is distinctly separate because of its nonprofit status. While there may be two "sides" to Kaiser-one organized for profit and the other nonprofit-there is only one philosophy of management. Basic to that philosophy is integrity, hard work, and filling an essential need with a constructive product or service.

While Henry Kaiser, his son Edgar, and I had the responsibility for beginning and continuing the health plan, the basic principles were established by Dr. Sidney Garfield, a visionary leader and a highly capable physician. In addition to the contributions of Dr. Garfield, our plan has withstood the tests of time as a result of the extraordinary dedication of such people as Dr. Clifford Keene, Dr. Raymond Kay, Dr. Cecil Cutting, Dr. Ernest Saward, and Dr. Phillip Chu.

When it was decided to continue the health plan after World War II, I doubt that any of us ever thought in terms of a corporate fulfillment of the "social responsibility of business." To us it was simply a matter of an organization having a proven ability in performing necessary and worthwhile services and, therefore, we should continue to fulfill that vital need.

As I look back upon those critical years in the growth of the plan, especially in

THE KAISER HEALTH PLAN; A BUSINESS-PROFESSIONAL PARTNERSHIP

9

the context of the priorities of today's businessmen, Henry Kaiser was ahead of his time once again. With the continuance of the plan, he took a giant step forward and crossed a new frontier by providing top managerial talent and committing corporate resources to meet a social need.

Since that time the business community has more and more come to recognize its public responsibilities and to respond fully to meet the total needs of our country. In recent years we have seen a major corporate effort, at times in partnership with government and the communities involved, in helping to solve the urban problems of unemployment, lack of shelter, and inadequate education. The quality of our environment is one of our immediate concerns and, for the decade of the Seventies, providing health care for all Americans is a top national priority.

We are convinced that the business community must play a vital role in health affairs by sharing its talent in a vigorous attack on the problems confronting us. We believe we will do this, not because of "social responsibility" alone, but because of the conviction that all Americans must have equal opportunity for health. It is our hope that this symposium will accelerate the availability of better medical care for more people.

PART ONE

THE KAISER-PERMANENTE STORY

BASIC PHILOSOPHY AND ORGANIZATION

Kaiser Industries and the
Kaiser-Permanente Health Care

Partnership

CLIFFORD H. KEENE, M.D.*

THE KAISER INDUSTRIAL ORGANIZATION consists of about 100 active companies and subsidiaries. The major companies are Kaiser Aluminum, Kaiser Steel, Kaiser Cement and Gypsum, and Kaiser Engineers. There are about 60,000 employees. Annual sales total $1.8 billion; assets, about $2.8 billion. There are 242 major plants and facilities, located in 35 of the 50 states and in 23 foreign countries. These facts and figures place three of the Kaiser organizations in Fortune magazine's five hundred largest American industries.

There is nothing unique about the Kaiser organizations as evidenced by these figures. However, one aspect of this industrial combine is unusual: the unparalleled corporate interest in health and medical affairs. These interests were held by our founder, the late Henry J. Kaiser, and have been continued by the members of his personal family and his industrial family. Arising out of the needs and interests of the Kaiser companies over the past 30 years, there has developed one of the largest, if not the largest, direct-service nongovernmental medical programs in the world.

The Kaiser health care programs fall into three groups: (1) industrial programs, (2) community programs, and (3) foundations.

The industrial medical programs are similar to those of any large American industry. They are in compliance with the workmen's compensation laws and, depending upon the nature and personality of the particular industry, go to various lengths beyond legal requirements in adjusting the balance between man and the industrial environment.

Kaiser's unusual interest in community health is most prominently evident in the Kaiser Foundation Medical Care Program, also known as the Kaiser-Permanente Medical Care Program. It is this program that is the focus of the present symposium.

* President, Kaiser Foundation Hospitals and Kaiser Foundation Health Plan, Inc.

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KAISER-PERMANENTE BASIC PHILOSOPHY AND ORGANIZATION

The Kaiser Foundation School of Nursing, the Research Institute, the Rehabilitation Center, and Kaiser Foundation International, while separate organizations, are offshoots of the Kaiser-Permanente medical care endeavors.

For completeness of information, rather than indicating firm organizational relationship, I mention two eleemosynary foundations. The Permanente Foundation, once called the Kaiser Foundation, was established in 1942 to own our hospitals and our health plan, although presently it is relatively inactive.

The Henry J. Kaiser Family Foundation is the vehicle by which the personal estates of various members of the Kaiser family can serve broad community needs. The Family Foundation provided funds to assist in health plan expansion to Ohio and Colorado.

OUR NAMES

The ubiquitous Kaiser name sometimes causes confusion. The term refers to the surname of Mr. Henry John Kaiser, an industrialist who was born in upstate New York on May 9, 1882, and died in Hawaii on August 24, 1967. In 1939, Mr. Kaiser built his first cement plant on the slopes of the Santa Cruz Mountains about 40 miles south of San Francisco. A pleasant, ever-running creek meandered through the area of the proposed cement plant. It still does. The Spanish name of this creek was the Permanente and it was natural that the plant should be called the Permanente Cement Plant.

Mrs. Bess Kaiser, Henry Kaiser's first wife, took a fancy to the name Permanente and, when the first foundation and hospital organizations were created in 1942, she suggested that they be called Permanente. Over the years, the names have been changed to the Kaiser Foundation Hospitals and Kaiser Foundation Health Plan, but the groups of physicians associated with Kaiser have retained the designation as Permanente Medical Groups.

Our total program of community health care can be called the Kaiser Foundation Medical Care Program, reflecting its early sponsorship. With equal justification, it can be called the Kaiser-Permanente Medical Care Program, reflecting the duality of its nature: the Kaiser Foundation Health Plan and the Kaiser Foundation Hospitals in joint enterprise with the six Permanente Medical Groups. To stress this duality, whenever speaking of the program as a whole, the term Kaiser-Permanente or its abbreviation K-P will generally be used throughout this volume.

Each of the six Permanente Medical Groups has its separate legal name. The original group, in Northern California, is the Permanente Medical Group. The younger groups have variant names connecting the term Permanente with the locale.

OVERALL CONCEPTS

As we proceed, it would be well to keep in mind certain general concepts. When we speak of the organization of health care, we mean a definition of the problem, the establishment of goals, the marshalling of resources, the management of resources, and an evaluation of results. In outline form, this means:

1. Define the problem.