Kaiser Permanente

• 1. Introduction

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  Kaiser Permanente traces its roots to 1933, to a tiny hospital in the desert town of Desert Center, California. Sidney Garfield had just finished his residency at Los Angeles County-USC Medical Center, at a time when jobs were scarce. He secured a contract with an insurance consortium called Industrial Indemnity. It covered care for 5,000 construction workers building the Colorado River Aqueduct in the Mojave Desert. Garfield ran the hospital deep into debt, treating every patient regardless of ability to pay. His staff of three went unpaid for a stretch while he insisted on equipping the hospital for critically injured patients. Today, Kaiser Permanente is the largest managed care organization in the United States, serving eight states and the District of Columbia. How did a struggling desert clinic grow into an organization employing hundreds of thousands of people? And what did it take, across nine decades, to build a model of care that regulators, unions, and rival health systems have all had strong opinions about?

• 2. Origins In The Desert

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  Harold Hatch, an Industrial Indemnity executive, proposed the fix that would shape Kaiser Permanente's future. Industrial Indemnity would prepay 17.5 percent of premiums, or $1.50 per worker each month, to cover injuries on the job. Workers would separately contribute five cents a day to cover injuries off the job. Garfield later credited a second Industrial Indemnity executive, Alonzo B. Ordway, with the underlying idea of prepaying for industrial health care. He admitted he knew little about comparable plans at the time, aside from the Ross-Loos Medical Group. The arrangement pulled Garfield's budget out of the red and let him broaden his services beyond emergency care. By the time the aqueduct project ended, Garfield had paid off his debts. He supervised ten physicians across three hospitals and held a reserve of $150,000.

  In March 1938, Consolidated Industries, a consortium led by the Kaiser Company, began work on the upper half of the Grand Coulee Dam in Washington state. Henry Kaiser's son, Edgar Kaiser, ran the project and inherited a workforce that had been treated poorly under the previous contractor. Hatch and Ordway persuaded Edgar to meet Garfield, and Edgar in turn persuaded Garfield to tour the Grand Coulee site. Garfield agreed to rebuild what he had done on the aqueduct project. He spent $100,000 renovating the decrepit Mason City Hospital and hired seven physicians. Many of the Grand Coulee workers had brought dependents with them, unlike Garfield's first patients. The unions forced the Kaiser Company to extend coverage to those dependents, pushing Garfield's practice from pure industrial medicine toward family care. It was during this period that Henry Kaiser and Garfield became personal friends, a bond that lasted until Kaiser's death. That shift toward family coverage, forced by the Grand Coulee unions, would be tested again within a few years by a war effort far larger than any dam.

• 3. Shipyards And Sacrifice

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  In 1939, the Kaiser Company began major shipbuilding contracts in Oakland. By the end of 1941, it controlled four shipyards on the West Coast. Wartime expansion swelled the workforce at the Richmond shipyard through 1940. In January 1941, Henry Kaiser asked Garfield to negotiate an insurance plan for the Richmond workers directly with insurance companies. A year later, Kaiser asked Garfield to reproduce what he had built at Desert Center and Mason City. Unlike those two earlier projects, this one outlived the construction job that created it. It became the direct ancestor of today's Kaiser Permanente.

  On the 1st of March 1942, Sidney R. Garfield & Associates opened its Oakland offices to serve 20,000 workers. The Permanente Health Plan followed on June 1, giving shipyard families a formal outpatient network for the first time.

  The Permanente Foundation formed in July to run new Northern California hospitals linked to that outpatient plan, with sister foundations soon opening in Oregon, Washington, and Southern California. The name Permanente came from Permanente Creek, which ran past Henry Kaiser's cement plant on Black Mountain in Cupertino. Kaiser's first wife, Bess Fosburgh, simply liked the sound of it.

  An abandoned Oakland facility reopened as the 170-bed Permanente Hospital on the 1st of August 1942, the building that would eventually grow into today's Kaiser Oakland Medical Center. The 71-bed Richmond Field Hospital opened three weeks later, backed by six shipyard first aid stations, each with its own ambulance to rush the injured to surgery. A twin hospital opened two weeks after that in Vancouver, Washington, to serve the Kaiser shipyard workers there. Shipyard employees paid seven cents a day for the coverage. Within a year, the plan employed sixty physicians earning between $450 and $1,000 a month. Those same physicians went on to found California Physicians Service, extending similar coverage to shipyard families. By 1944, Kaiser had decided to keep the program running after the war ended and to open it to the public.

  The American Medical Association had opposed managed care organizations from the start and spent the war years promoting the rapid growth of Blue Cross and Blue Shield networks instead. A novel called Courage to Heal, written by KP Historical Society president Paul Bernstein, later dramatized Garfield's clashes with the AMA and the origins of the organization. None of that opposition stopped Kaiser Permanente's membership from swinging wildly once the shipyards began winding down.

• 4. The Name Becomes Kaiser Permanente

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  In 1943, Henry Kaiser and Garfield opened a 50-bed hospital staffed by six physicians at the new Kaiser Steel Mill in Fontana, California, covering 3,000 employees and their families. Adults paid sixty cents a week for the plan and children paid thirty cents. Two years later, in 1945, the health plan opened to the general public for the first time. In 1948, Kaiser established the Henry J. Kaiser Family Foundation, a separate operating foundation focused on national health care issues that remains independent of Kaiser Permanente itself.

  Fifty thousand workers left the Northern California shipyards by July 1945 as the war ended, and systemwide membership bottomed out at just 17,000. It surged back to 26,000 within six months as Garfield aggressively marketed the plan to the public. Sidney Garfield & Associates, previously a sole proprietorship, was reorganized in 1948 into a partnership called Permanente Medical Group.

  Fortune magazine reported in 1944 that 90 percent of Americans could not afford fee-for-service health care, and union members increasingly saw Kaiser Permanente as the affordable alternative. Membership climbed to 154,000 in 1950, 283,000 in 1952, 470,000 in 1954, 556,000 in 1956, and 618,000 in 1958.

  In 1951, Henry Kaiser unilaterally directed the trustees of the health plans, hospitals, and medical groups to add his own name ahead of Permanente. The physicians of the Permanente Medical Group resented the suggestion that Kaiser directly controlled their work. They forced him to back off with respect to their part of the organization. That same year, the organization began large scale multiphasic screening to catch conditions members did not know they had. Garfield's medical judgment was never in question. His skills as an executive were increasingly strained as the organization outgrew what one person could manage. Henry Kaiser was about to take a much more hands-on role in fixing that problem himself.

• 5. A Family Feud

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  Henry Kaiser became fascinated with the health system Garfield had built for him and began directly managing both the organization and Garfield personally. His enthusiasm produced a financial disaster at the new Walnut Creek hospital, and his constant interference created friction at every level. Kaiser then married Garfield's head administrative nurse, the woman who had cared for his first wife on her deathbed. He also convinced Garfield to marry her sister and had Garfield move in next door. Clifford Keene, who would later serve as Kaiser Permanente's president, recalled that the arrangement produced a genuinely dysfunctional family running the organization.

  Garfield had personally hired Keene as a Permanente physician in 1946. On the morning of the 5th of December 1953, with internal tensions worsening daily, Garfield met Keene at the Mark Hopkins Hotel in San Francisco. He asked Keene to turn the organization around. It took Keene fifteen years to realize that Henry Kaiser, not Garfield, had engineered his own replacement. Keene initially took the vague title of Executive Associate. It soon became clear he was actually in charge. Garfield, meanwhile, shifted into a role as lobbyist and public ambassador for the HMO concept.

  Henry Kaiser's authoritarian style kept causing friction even after Garfield stepped back. Permanente Medical Group physicians met with Kaiser's top adviser, Eugene Trefethen, at Kaiser's estate near Lake Tahoe on the 12th of July 1955. Trefethen proposed a formal contract between the medical groups and the health plans and hospital foundations. It spelled out roles, responsibilities, and how money would be split between them. Trefethen, already a successful attorney, stayed with Kaiser Permanente for the rest of his career and later became a well known vintner in retirement.

• 6. Building An Empire

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  The 1955 contract that Trefethen brokered still shapes how Kaiser Permanente operates today, across eight regions in the United States. Each region contains two, three, or in California's case four legally separate but interdependent entities. A regional Kaiser Foundation Health Plan collects premiums and funds the system. A Kaiser Foundation Hospitals entity runs facilities, and a for-profit Permanente Medical Group employs the physicians.

  James A. Vohs became CEO in 1978 and chairman in 1980. He served until his retirement in 1992, the first chairman who was not a member of the Kaiser family. David M. Lawrence held the chairman and CEO roles until his own retirement in 2002, and George Halvorson followed until December 2013. The board announced in November 2012 that Bernard J. Tyson, then president and chief operating officer, would succeed Halvorson; Tyson died in November 2019. Greg A. Adams became chairman and CEO that same December.

  The Permanente Medical Group, formed in Northern California in 1948, became the first of the medical groups and remains one of the largest physician organizations in the country, with 11,225 medical professionals across 186 locations at the start of 2023. Its physicians become stockholders in the group after three years. In 1997, the twelve Permanente Medical Groups of the time formed The Permanente Federation to standardize patient care and policy. The Permanente Company was chartered around the same time to manage investments for the for-profit medical groups. One of its ventures, Kaiser Permanente Ventures, is a venture capital firm that invests in medical technology. A separate mutual benefit corporation, the Kaiser Foundation for the Advancement of Integrated Health Care, was established on the 27th of December 2017, to lobby for integrated care models. Its founder, Maryann Bodayle, has served as Kaiser Foundation Health Plan's Governance Administrator since 2013.

  Kaiser Permanente added a Mid-Atlantic region covering the District of Columbia, Maryland, and Virginia in 1980, then expanded into Georgia in 1985. By 1990, it covered roughly a third of the population of San Francisco and Oakland, with Northern California membership above 2.4 million. Growth elsewhere proved harder. Kaiser sold its Texas operations in 1998, after regulators threatened to revoke its license over a state insurance report the organization had tried to block. It closed its Charlotte and Raleigh-Durham health plans in North Carolina four years later. An unprofitable Northeast division was sold in 2000, and the Ohio division was sold to Catholic Health Partners in 2013. National membership passed nine million in 1997, the same year the organization struck a Labor Management Partnership agreement with the AFL-CIO.

  In 2017, Kaiser acquired Group Health Cooperative, which had been founded partly with funds from Washington state longshoremen after Kaiser chose not to expand its shipyard-era coverage north of Portland. On the 26th of April 2023, Kaiser announced it would acquire Geisinger Health System, folding it into a new entity called Risant Health. Risant then agreed on the 21st of June 2024, to acquire the Cone Health hospital system in Greensboro, North Carolina. In September 2025, Kaiser announced a joint venture with Renown Health to enter northern Nevada. It will take a majority stake in Renown's insurance arm, Hometown Health. Coverage is expected to begin in 2026, with three new clinics planned within three years.

  As of 2025, Kaiser Permanente reported 12.6 million health plan members, 243,975 employees, 78,730 nurses, and 25,505 physicians. Its facilities spanned 40 hospitals and 610 medical offices. Its health plan and hospital entities, including Risant Health, posted operating income of $1.4 billion on $127.7 billion in revenue. None of those numbers explain why regulators, patients, and rival health systems keep singling out Kaiser's specific approach to care.

• 7. The Kaiser Model

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  In the California Healthcare Quality Report Card's 2013 edition, Kaiser's Northern and Southern California regions each earned four out of four stars for meeting national standards of care. Each region also received three out of four stars for how members rated their HMO. That performance rested on three practices. Kaiser leans heavily on preventive care, pays its physicians a salary instead of a fee per service, and shortens hospital stays by shifting care to outpatient clinics. A comparison with Britain's National Health Service found that patients spent two to five times as long in NHS hospitals as in Kaiser's.

  In 2002, Kaiser abandoned an attempt to build its own clinical information system with IBM, writing off roughly $452 million in software assets. Under George Halvorson, the organization compared two outside vendors, Cerner and Epic Systems, and chose Epic to build a replacement. The new system, branded KP HealthConnect, took six years to deploy across all eight regions and cost more than $6 billion. By 2010, it was the largest civilian electronic medical record system in the world, serving more than 8.6 million members. The rollout cost more than half a million dollars per physician. By 2020, KP HealthConnect supported 12.2 million members.

  Early in the 21st century, Britain's National Health Service and Department of Health took notice of Kaiser's approach and launched a series of comparative studies. Kaiser's methods for managing hospital bed occupancy, coordinating care inside and outside the hospital, and tracking patients against care pathways drew attention too. They led to trials of similar techniques in eight areas of the UK. A 2002 study in the British Medical Journal, written by California based academics, found Kaiser outperformed the NHS in several respects. A later analysis by NHS policy experts countered that claim. They argued Kaiser's costs were substantially higher once age and health were taken into account.

  Kaiser's Division of Research conducts between 200 and 300 studies a year. Vaccines and genetics are particular areas of focus, mirroring the organization's bias toward prevention. A related Center for Health Research had more than 300 active studies in 2009. Kaiser also operates a voluntary biobank of member blood samples, medical records, and lifestyle survey responses. As of November 2018, it held over 300,000 samples, working toward a goal of 500,000. Kaiser Permanente announced plans for its own medical school in December 2015 and welcomed its first class in June 2020. The school was later renamed after chairman Bernard J. Tyson, who had died the previous year. The school received full accreditation in June 2024 and waives tuition entirely for its first five graduating classes. That same emphasis on tightly managed care has not spared Kaiser from years of friction with the people who deliver it.

• 8. Strikes, Scandals And Scrutiny

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  Roughly 75,000 Kaiser Permanente workers walked out for three days, between October 4 and 7, 2023. It has been called the largest health care worker strike in U.S. history. Represented by the Coalition of Kaiser Permanente Unions, the workers reached a tentative agreement on the 13th of October 2023. It set minimum hourly wages of $25 in California and $23 elsewhere, with a 21 percent raise over four years. On the 9th of November 2023-98.5 percent of the coalition's 85,000 members voted to ratify the new four-year contract.

  Mental health clinicians represented by the National Union of Healthcare Workers have struck repeatedly over staffing and patient care. One strike in Hawaii ran 172 days, from the 29th of August 2022, to the 16th of February 2023, then the longest mental health strike in U.S. history. Roughly 2,400 Southern California mental health professionals broke that record two years later. Their strike ran 196 days, from the 21st of October 2024, to the 8th of May 2025, again over staffing shortages and workloads.

  The National Union of Healthcare Workers accused Kaiser of stalling contract talks in 2011 and 2012, even as the organization profited $2.1 billion in 2011. It paid CEO George Halvorson $9 million a year during that stretch. Nurses and other staff faced four separate strikes over pensions and other benefits. On the 11th of November 2014, about 18,000 nurses struck at Northern California Kaiser hospitals over Ebola safety measures and patient care standards, affecting 21 hospitals and 35 clinics.

  In 2006, Kaiser settled five cases of alleged patient dumping, the practice of delivering homeless hospitalized patients to other agencies to avoid costly care, covering incidents between 2002 and 2005. Los Angeles city officials brought the first civil and criminal action of its kind against the organization. The case was spurred partly by security footage allegedly showing a 63-year-old patient in a hospital gown, wandering toward a Skid Row mission. That footage later appeared in Michael Moore's 2007 documentary Sicko. Kaiser paid $5,000 in civil penalties and agreed to spend $500,000 on homeless services.

  Northern California Kaiser opened its own kidney transplant program in 2004, requiring members who needed a transplant to use it exclusively rather than outside centers like UC San Francisco or UC Davis. The program had a 100 percent survival rate while it ran, but patients waited longer for organs. Kaiser performed 56 transplants in 2005, while twice that many patients died waiting for one. That ratio was worse than at other California transplant centers during the same period. Kaiser closed the program in May 2006, affecting roughly 2,000 patients who then received transplant care elsewhere.

  California's Department of Managed Health Care fined Kaiser $4 million in June 2013, the second largest fine in the agency's history, for failing to provide adequate mental health care and for distributing materials that discouraged patients from seeking treatment. As of 2015, Kaiser held $21.7 billion in cash reserves, about 1,600 percent of what California regulations required, a figure critics like Jamie Court of the Foundation for Taxpayer and Consumer Rights pointed to as evidence of overpricing. Early in the COVID-19 pandemic, California's occupational safety regulator cited Kaiser twelve times and fined it nearly $500,000 for violations. Those violations included delays in reporting infections, which drew close to $90,000 in fines at Kaiser San Leandro alone. The same state regulator that levied those pandemic fines is still reviewing Kaiser's contingency plans from the 2024-2025 Southern California mental health strike, a case that remains open.