By Laura Thomas
Henry J. Kaiser and Sidney R. Garfield, MD, survey the site for the Walnut Creek Medical Center, completed in 1953
Throughout its history, Kaiser Permanente has relied on the “can-do spirit” of its dedicated workers and on the support of organized labor to keep the prepaid health plan strong.
Coming out of World War II, the medical plan had proven its viability in caring for a large shipyard workforce, but with the end of shipbuilding contracts, Henry Kaiser and Permanente founder and medical director Dr. Sidney Garfield had a big problem. Where were the large numbers of new members going to come from?
Kaiser, a friend of labor, attracted workers’ unions whose leaders understood the power of prepaid health care and wanted it for the welfare of their workers. Bay Area workers – from Oakland city employees, who were the first to sign up, to union typographers, street car drivers and carpenters – embraced the Permanente Health Plan with its emphasis on preventive medicine.
In 1950, Harry Bridges brought the 6,000-member International Longshoremen and Warehousemen Union (ILWU) into Kaiser Permanente, bringing the total West Coast membership, including Los Angeles, to almost 160,000. In 1951, the Retail Clerks union added 30,000 to the membership rolls in Los Angeles.
Opposition tries to squelch KP
Despite this success, Kaiser and Garfield often faced rear guard actions from private practice doctors who felt threatened by group practice medicine. In 1953 when KP opened a new hospital in Walnut Creek and sought the health plan contract with workers in the U.S. Steel plant in Pittsburg, California, all hell broke loose in that small town along the Carquinez Strait.
A family visits the new KP Walnut Creek facility completed in 1953
Before Kaiser Permanente came along, the steelworkers union had both a national hospitalization plan and a local supplementary health plan with local private practice doctors. The workers were not satisfied with the current health plan and were complaining that providers charged too much and were lackadaisical about responding to emergencies and requests for house calls.
For their part, the Pittsburg area doctors argued that inflation required rates to rise and disputed the idea that service to members was lax.
Kaiser Permanente already provided care to steelworkers at the South San Francisco Bethlehem Steel plant and was prepared to expand services to the Pittsburg area. The beginning of KP’s negotiations with the Steelworkers Local 1440 in Pittsburg raised the hackles of the 41 private practice doctors already established in the area.
These doctors, all members of the East Contra Costa branch of the Alameda-Contra Costa Medical Association, quickly devised a new and better plan to offer the union, including 24-hour emergency service and a cap on fees.
Offer steelworkers couldn’t refuse
Joseph Garbarino, in his 1960 study of the Pittsburg conflict for the University of California, reported that the union bargainers welcomed Kaiser Permanente because of its offer to provide comprehensive care for a specific price for a specified period of time. This arrangement was attractive to the local union whose leadership had never before been able to negotiate such a favorable deal with their private practice providers.
The first Pittsburg clinic was in an old motel
The Pittsburg area doctors were furious and immediately mounted a campaign to discredit the Kaiser Permanente agreement. The doctors appealed to the steelworkers to reject the decision of their insurance committee and place the KP plan and the private doctors’ revised offer side by side for a vote of the full membership.
Fred Pellegrin, a Kaiser Permanente physician in the new Walnut Creek facility, remembers a rally where the local doctors “begged us not to go to Pittsburg … People stood up, yelling at us, called us Communists. It was a real shouting match.”
Using full-page newspaper ads, handbills and direct mail, the fee-for-service doctors bombarded the community with arguments supporting their plan and implied that the national Steelworker union officials were investigating the local’s decision.
The union answered the doctors’ charges in its newsletter and then agreed to a Sept. 3 (1953) election. Both sides agreed to a break in hostilities for the month of August. The agreement called for the doctors to stop their campaign and for the union leaders to remain neutral on the election.
The truce ended just days before the election when the union distributed voting packets with both health plan proposals, and included a leaflet encouraging members to favor the Kaiser Permanente plan. Enraged private practice doctors took to the battlements again, issuing a more detailed plan explanation and blasting the union in a full-page newspaper ad.
The doctors hired a truck with a loud speaker that cruised through workers’ neighborhoods broadcasting their opposition to Kaiser Permanente. They enlisted supporters, including Pittsburg doctors’ wives, to distribute literature in the steel company parking lot. Plan B was to drop leaflets from the air if solicitors were barred from the plant. According to news reports, tensions rose and the sheriff’s department was called, but no clashes occurred.
Victory of KP health plan
The Pittsburg medical establishment’s effort failed as steelworkers voted 2,182 to 440 to retain the Kaiser Permanente plan. For KP, this was a victory, but more struggles related to organized labor were yet to come.
Financial troubles in the 1980s and 1990s resulted in labor issues that threatened to stunt the health plan’s progress. Happily, those years of turmoil spawned Kaiser Permanente’s landmark Labor Management Partnership (LMP), which forged a cooperative relationship between KP’s 26 unions and the health plan leadership. The partnership fosters a respectful collaboration to improve health care for members and to create a positive work environment.
Kaiser Permanente unions had a big role in bringing about that partnership. In the midst of hostile bargaining in 1995, union leaders realized the labor disputes could damage the future of the health plan. Kathy Schmidt, a member of the bargaining team from Oregon, recalled, “We realized: here is the most unionized system in the country. Why don’t we try to help them? We learned more about trying to have a Partnership.”
Then-Kaiser Permanente CEO David Lawrence reached back across the abyss and agreed. “What I remember thinking about at that meeting was: We’ve got nothing to lose by being forthcoming about what I believed needed to happen …about the kind of collaboration that I think is required to deliver modern medical care in all of its complexity,” he told Harvard University researchers in 2002.
Today, scholars at both Harvard’s School of Government and Stanford University’s School of Business are following the progress of the LMP and consider it a prime example of labor and management cooperation. Its continued success will contribute to the realization of KP’s goal of being the model for health care delivery in the United States.
Read more about the Labor Management Partnership.