More than 80,000 unionized Kaiser Permanente workers started voting this week on a new contract. The tentative deal, reached in late September and likely to be ratified, avoided a massive nationwide walkout. The contract includes provisions to boost pay and expand career development opportunities. Kaiser Permanente Chairman and CEO Bernard Tyson said he is proud of the deal that was worked out. He sat down with Modern Healthcare’s editorial board last week. The following is an edited transcript.
MH: How are you feeling about the tentative contract and avoiding a strike?
Tyson: We have 16 international unions inside of Kaiser Permanente. They make up 60 bargaining (units). Twelve of the 16 international unions belonged to a coalition and that coalition made up a labor-management partnership.
Inside of that coalition, nine of the 12 unions have been going at it with each other for several years and it was a philosophical issue. SEIU felt that they needed to be much more aggressive with management and that it was OK to be in a partnership, as I call it, but also do things that may harm the organization because they wanted to get the organization’s attention.
The other nine unions felt that was not the definition of partnership. That came to a head right as we were going into national bargaining last year. The nine served notice to the coalition that they were going to sever their relationship with the coalition, and they did that the first day of bargaining.
They formed an alliance, and they came to management to say, “We want a labor-management partnership with you.” So we signed an agreement with them with the understanding that our preference would be for all of them to remain together, but if they could not remain together, we would have one partnership, but we would sit at two tables.
So management’s view is we’re going to treat you both the same, equitable, but we’re willing to sit at two tables, because clearly the tension was between the two. So we met with the alliance and reached an agreement fairly quickly.
MH: That’s the group of nine?
Tyson: Yes. Then we met with the coalition and that’s where we had the challenges. We were actually very transparent about the economic package for all of our unions.
I’m so pleased about the agreements that we have reached. We were clear that we are going to continue to be highly competitive on wages and benefits. Right now that means we are the highest in all of our markets that we’re in around the country. We also understand that people continue to spend money and things continue to get expensive, so absolutely we’re going to look at wage increases. But we’re going to balance those wage increases against our affordability agenda.
We’re not going to pass on additional costs beyond what’s reasonable to our members, to our customers. That’s our commitment on affordability.
The second thing is that we said we want to figure out together how to invest in upskilling our workforce.
We’re going to go upstream and bring younger people who are just getting started in their careers into the organization, and we’re going to provide the additional training for that population as well. So in the contract, if it’s approved, we have committed about $130 million to $140 million to that strategy.
We’ve now put through about 600 nurses in the master’s or bachelor’s program inside of our nursing agreement with the nursing academy that we are now a part of.
The final thing … during the negotiations I thought that the workforce had a better understanding of the finances, and I discovered that they didn’t. Labor may have a different view if they were sitting here. We were clear about how much of an increase within the context of affordability. Labor felt strongly it should be more of an increase within the context of profitability.
So labor was saying, “We’re the most profitable we’ve ever been. We have all this money in reserve. We are doing fantastic. We deserve more.” That’s the wrong way to look at that.
Over the last four years, we’ve set the operating margin … at 2%. Labor said, “Yeah, you set it at 2%, but look how high it’s been going.” The 2% is the amount that we need to do all the things above the investments, the retirement benefits, and all that kind of stuff that we talk about all the time.
The affordability agenda is not in the 2%. The affordability agenda is in the 98%. So one of the things that we also have in the agreement is to spend time with the employees every year, making sure that they understand the finances better, and in particular, our rate position, which is where affordability is.
MH: One of the things that the unions hit hard on was this gap between the haves and have-nots, like your salary and revenue. What are your plans to address that? Where do you as leader re-create a community within your organization?
Tyson: First of all, most important, I’m going to be out there. Labor kept the heat on and kept amplifying the heat, and then I felt the need at a certain point to say, “Hey, I’ve got to get the other side of the story out now.” Since we’re pulling the public into this more and more, I need the public to understand how we got here.
I got hundreds of emails from the employees asking me how to think about this, because I would say that a large part of our workforce was confused. They were confused, as somebody said with, “What side should we believe? We trust you and we know what you’re about, so we hear your version, but we also hear from our union leadership, and we hear their version. So how do we sort through the truth?”
I will tell you the organization was relieved that we reached an agreement. We had complete support from the physicians, to my board, to the management, that it was critically important that we followed through on this, because this, to me, was the centerpiece of the future of this organization.
At the same time, I have no beef with the union. People ask me all the time, “So what do you think about the union?” I’m pro-union.
The last 25 years, every year inside of Kaiser Permanente, there’s been wage increases. I think we would’ve done that anyway, but there’s no question with the union being the added voice that they played their role very well, which is to make sure our employees, their members, are being recognized for the hard work that they’re contributing to Kaiser Permanente.
We had a disagreement on the issue and the approach, and I still believe that you cannot be a partner and then try to harm your partner. It doesn’t set up a good collaborative relationship.
The strike would’ve been awful. We were planning for 80,000-plus employees going out. We had massive teams working 24/7. We had set up a command center. We had begun to work with the health industries around the country where we knew we were going to have challenges, not just within Kaiser Permanente.
MH: The unions were successful lobbying for legislation that calls for greater transparency of Kaiser’s operations, forcing you to break out profits by each facility. Do you expect to see more of that pressure from the unions?
Tyson: The bill that was passed, unfortunately, was a bad piece of legislation from my standpoint, because it is requiring us to report as if we’re a fee-for-service hospital system, and we’re not. We have to figure out how to take our true model and, in essence, feed it through the lens of a fee-for-service model. That’s not going to help transparency at all. In fact, it’s going to confuse people.
We were given the exemption because we have a different model.
The notion that we’re not transparent is not correct. As we continue to figure out how to meet this new requirement, the challenge for us is we don’t want our reputation to be harmed by giving out something that doesn’t represent how we operate as an organization.
