Evolution of Kaiser Permanente

Evolution of Kaiser Permanente
Seema Meraj, MD
North Shore University Hospital
• The height of the Great Depression
• Dr. Sidney Garfield, surgeon, built a 12-bed hospital
in the Mojave Desert to treat construction workers
working on an aqueduct construction project
• Insurance companies were not paying bills on time
• No payment for services rendered  expenses
exceeded income
Prepayment System
• Engineer/insurance agent Harold Hatch suggested
insurance companies pay Dr. Garfield a fixed amount
per day, per covered worker, up front: “prepayment”
• Health coverage for each worker for work-related
health care = $1.50/month
• For an additional 10¢/day, workers could obtain
coverage for non-job related medical problems
• Dr. Garfield provided health care to 6,500
workers and their families at the Grand
Coulee Dam construction site
– Replicating what had been done at the aqueduct
construction site
• He recruited a team of doctors to work in a
“prepaid group practice”
• The practice was a financial success
• Thousands of workers on ships and aircraft carries
during World War II came to the Kaiser Shipyards in
Richmond, CA
• Kaiser needed to provide care for all of the workers
and believed Dr. Garfield’s method would work
• After Dr. Garfield was released from his military
obligation by President Roosevelt, following a plea
from Henry Kaiser, Dr. Garfield organized a prepaid
group practice for the workers at the Richmond
• When the war came to an end, workforce fell to
13,000 employees
• Only about 12 of the 75 members of the medical
group remained forcing the plan to find new clients
• But Dr. Garfield wanted to continue practicing his
new style of medicine, and Henry Kaiser wanted the
plan to continue
– Subsequently, the Permanente Health Plan officially
opened to the public on October 1, 1945
• In 10 years, enrollment surpassed 300,000 members
in Northern California
Kaiser Permanente
• In 1952, the name of the Health Plan and the
Hospitals was changed from Permanente to
Kaiser because of the national recognition of
Henry Kaiser and Kaiser Industries. The
medical group maintained the Permanente
name, to clarify that they were not employees
of Henry Kaiser
• Now known as Kaiser Permanente
Current Day
8.7 million health plan members
167,300 employees
14,600 physicians
35 medical centers
431 medical offices
Currently, Kaiser Permanente is a health care
organization partnership between two entities
– Kaiser Foundation Health Plans (not-for-profit )
– Permanente Medical Groups
Kaiser Permanente News Center http://xnet.kp.org/newscenter/aboutkp/historyofkp.html
Sacramento Business Journal
The rise and fall of HMOs: an American health care revolution.
The Permanente Journal http://xnet.kp.org/permanentejournal/fall97pj/history.html

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