Health Care Hall of Fame - 2011

The ‘patriot in pinstripes'

When Henry J. Kaiser built highways, dams, bridges and ships as leader of Kaiser Industries during the first half of the 20th century, prepaid group medical care was not a widely accepted practice.

But his partnership with Dr. Sidney Garfield, a 1988 Hall of Fame inductee, led to the creation of what is now Kaiser Permanente and the rise of group practice and the health insurance industry as we know them today.

“Of all the things that I've done, I expect only to be remembered for my hospitals,” Kaiser said at age 75, about a decade before his death in 1967. “They're filling the people's greatest need—good health.”

That proved to be a prescient statement: The rest of Kaiser Industries has either been sold, merged or gone out of business in the past four decades, while Kaiser Permanente now serves more than 8.7 million members in eight regions, one of the nation's largest not-for-profit health plans.

Kaiser and Garfield, who had previously experimented with prepayment through modest payroll reductions for workers in Southern California, forged their partnership on behalf of workers who built the Grand Coulee Dam in Mason City, Wash., in 1938; the company also built the Hoover Dam and Boulder Dam.

“He was a very garrulous, avuncular, energetic man who knew how to make his way in the world,” says Bryan Culp, director of heritage resources at Kaiser Foundation Health Plan. “He was a great believer in the program that Garfield laid out before him, that you could have nonprofit health insurance and hospitals.”

That health plan became available to the remainder of Kaiser's workforce, which quadrupled during World War II when the company took on steelmaking and shipbuilding, based in Richmond, Calif., and then the program opened to the public after the war. In 1945, Kaiser also established the Henry J. Kaiser Family Foundation to address major healthcare issues in the world.

“He became a pretty renowned figure in World War II, sometimes referred to … as the ‘patriot in pinstripes,' ” Culp says. “He realized he was riding a wave of popularity. … He saw this oversized public persona as a platform through which he could advocate for healthcare reform. It was in '42 or '43 that he challenged the National Association of Manufacturers to offer employment-sponsored healthcare.”

To establish a workforce of about a quarter-million when most able-bodied white men were being drafted into the armed forces, Kaiser became a pioneer in hiring women and racial minorities.

Of approximately 90,000 workers in the Richmond shipyard, one-third were women, recalls Dr. Morris Collen 97, director of research emeritus at Kaiser Permanente. “He set up training programs so women did everything the men did and liberated women to their current status.” This history is commemorated at the Rosie the Riveter/World War II Home Front National Historical Park in Richmond.

Kaiser and Garfield's work together led to other innovations such as preventive care to keep people healthy and hold down medical costs, multispecialty group practice that increased physician-to-physician consultations (which the Mayo Clinic first pioneered), and the joint placement of facilities such as doctors' officers, laboratories, pharmacies and hospitals under one roof, reducing coordination time and creating economies of scale. To those who saw prepaid medical insurance as “socialism,” Kaiser answered at the National Press Club in 1954: “I can't understand for the life of me why there should be any conflict or controversy over a plan that brings comprehensive, high-quality medical care to Americans at a low cost, especially when that plan was evolved and carried out under the American free enterprise system.”

And Kaiser summed up the viewpoint of the average worker thusly: “If he or a member of his family has to go to the hospital, he wants to know that he can go to the finest hospital. He wants to know that he doesn't have to worry about paying the bill because those few cents a day he has been paying and (has) committed to pay have already taken care of the hospital bill, the surgery bill, the X-rays, the drugs and the medicines and so on.”

That viewpoint stemmed from Kaiser's personal experience. Kaiser's mother died when he was just 16 because the family could not afford a doctor to attend to her. Collen says he can still recall Kaiser referring to his mother while dedicating what became Kaiser Permanente's first hospital, the former Fabiola Hospital in Oakland, Calif. “He said, ‘My mother died because of lack of adequate healthcare, and I vowed that anyone I was responsible for, my workers, would receive adequate medical care,' ” Collen says. “He was one of the greatest leaders I have ever known.”

When he first had a family of his own, Kaiser found a prepaid health insurance plan to take care of his children, which further spurred his interest. “He says part of it was taking care of our own children,” Culp recalls. Kaiser realized that “by planning in advance, my wife and I could set some aside and see that they were taken care of.”

As his workers built massive dams in hot, inhospitable climates with sheer cliffs hundreds of miles from metropolitan centers, Kaiser recognized that he would have to provide adequate care for injury or illness, Culp says, and 90% of his workforce could not afford fee-for-service medical care. Kaiser's social conscience “and a sense of justice and fairness” also provided motivation, Culp adds. “He began to see what Garfield had experimented with … was a way to get around those problems,” he says.

Collen served as Kaiser's personal internist for many years and remembers the tall, big-boned Kaiser as rather irascible when Collen prescribed a weight-reduction program.

“Mr. Kaiser was not one who accepted anyone controlling or telling him what to do,” he says. “He would say, ‘How long do I have to continue this diet?' I would say, ‘Until you've achieved the best weight for you.' And he would storm out.”

Their relationship became stormier in the 1950s when Kaiser wanted to control the decisions of the medical group in addition to running the business side, and Collen faced him down. Their showdown at a retreat on the shores of Lake Tahoe led to the end of their doctor-patient relationship and foretold a story that has echoed throughout the health insurance industry ever since.

“We acknowledged and credited the Kaiser Group with best knowing the business of medicine,” he says. “But we, the physicians, felt we knew best how to practice and how to allocate resources to patient care. … But Henry Kaiser would never accept that. It's always the story as you go back. There's always differences between the administrators of healthcare services and the physicians who provide the services.”

But the delicate, difficult balance that emerged has led to Kaiser Permanente's ongoing success, Collen believes. “That saved our organization,” he says. “We abide by it to this day. It created the greatest healthcare program in the world.”

Looking back, Collen remembers Kaiser with 4 Cs: charisma, chutzpah, creativity and compassion. “When Henry Kaiser would walk into a room—he was a big man, he wouldn't walk into a room, he strode into a room—everybody would look at him,” he says. “He loved to meet challenges and to control them. … His creativity is clear: With Garfield, they created a whole new approach to healthcare.” As for compassion, Collen says Kaiser learned that from his mother's death and showed it to his workers through his career.

Jim Vohs, a former CEO for Kaiser Foundation Health Plan and Hospitals, remembers Kaiser as “an iconic figure” whom people would avoid getting into an elevator with—out of respect, not fear. “That was just the way people dealt with him,” Vohs says. “They didn't feel like riding the elevator with this very famous figure. … He was so highly respected and regarded. People were proud to be associated with him.”

Among the character-defining stories that Vohs recalls about Kaiser involves his failed bid to build the Shasta Dam in Northern California. “He didn't get that project, but he won the bid to provide cement,” Vohs says. But there was only one problem with that: “He had no cement plant. He had to build a plant. There were those kinds of stories that we all knew about and talked about. He was bigger than life in so many ways.” At Kaiser's funeral, attendees mourned and celebrated his life to the strains of, “To Dream the Impossible Dream,” Vohs recalls. “It was exactly right for that service,” he says. “It reflected the man.”