The story
Founded by Henry J. Kaiser and Sidney Garfield in 1945.1
Early years
The history of Kaiser Permanente dates to 1933 and a tiny hospital in the town of Desert Center, California. At that time, Henry J. Kaiser and several other large construction contractors had formed an insurance consortium called Industrial Indemnity to meet their workers' compensation obligations. Sidney Garfield had just finished his residency at Los Angeles County-USC Medical Center at a time when jobs were scarce; he was able to secure a contract with Industrial Indemnity to care for 5,000 construction workers building the Colorado River Aqueduct in the Mojave Desert. Soon, Garfield's new hospital was in a precarious financial state (with mounting debt and the staff of three going unpaid), due in part to Garfield's desire to treat all patients regardless of ability to pay, as well as his insistence on equipping the hospital adequately so that critically injured patients could be stabilized for the long journey to full-service hospitals in Los Angeles.
Garfield found willing allies in two Industrial Indemnity executives, Harold Hatch and Alonzo B. Ordway. It was Hatch who proposed to Garfield the specific solution that would lead to the creation of Kaiser Permanente: Industrial Indemnity would prepay 17.5% of premiums, or $1.50 per worker per month, to cover work-related injuries, while the workers would each contribute five cents per day to cover non-work-related injuries. Later, Garfield also credited Ordway with coming up with the general idea of prepayment for industrial health care and explained that he did not know much at the time about other similar health plans except for the Ross-Loos Medical Group.
Hatch's solution enabled Garfield to bring his budget back into the positive, and to experiment with providing a broader range of services to the workers besides pure emergency care. By the time work on the aqueduct concluded and the project was wrapped up, Garfield had paid off all of his debts, was supervising ten physicians at three hospitals, and controlled a financial reserve of $150,000.
Garfield returned to Los Angeles for further study at County-USC with the intent of entering private practice. In March 1938, Consolidated Industries (a consortium led by the Kaiser Company) initiated work on a contract for the upper half of the Grand Coulee Dam in Washington state, and took over responsibility for the thousands of workers who had worked for a different construction consortium on the first half of the dam. Edgar Kaiser, Henry's son, was in charge of the project. To smooth over relations with the workers (who had been treated poorly by their earlier employer), Hatch and Ordway persuaded Edgar to meet with Garfield, and in turn Edgar persuaded Garfield to tour the Grand Coulee site. Garfield subsequently agreed to reproduce at Grand Coulee Dam what he had done on the Colorado River Aqueduct project. He immediately spent $100,000 on renovating the decrepit Mason City Hospital and hired seven physicians.
Unlike the workers on Garfield's first project, many workers at Grand Coulee Dam had brought dependents with them. The unions soon forced the Kaiser Company to expand its plan to cover dependents, which resulted in a dramatic shift from industrial medicine into family practice and enabled Garfield to formulate some of the basic principles of Kaiser Permanente. It was also during this time that Henry Kaiser personally became acquainted with Garfield and forged a friendship which lasted until Kaiser's death.
World War II
In 1939, the Kaiser Company began work on several huge shipbuilding contracts in Oakland, and by the end of 1941 would control four major shipyards on the West Coast. During 1940, the expansion of the American defense-industrial complex in preparation for entrance into World War II resulted in a massive increase in the number of employees at the Richmond shipyard. In January 1941, Henry Kaiser asked Garfield to set up an insurance plan for the Richmond workers (this was merely contract negotiation with insurance companies), and a year later Kaiser asked Garfield to duplicate at Richmond what he had done at Desert Center and Mason City. Unlike the two other projects, the resulting entity lived on after the construction project that gave birth to it, and it is the direct ancestor of today's Kaiser Permanente.
On March 1, 1942, Sidney R. Garfield & Associates opened its offices in Oakland to provide care to 20,000 workers, followed by the opening of the Permanente Health Plan on June 1. From the beginning, Kaiser Permanente strongly supported preventive medicine and attempted to educate its members about maintaining their own health.
In July, the Permanente Foundation formed to operate Northern California hospitals that would be linked to the outpatient health plans, followed shortly thereafter by the creation of Northern Permanente Foundation for Oregon and Washington and Southern Permanente Foundation for California. The name Permanente came from Permanente Creek, which flowed past Henry Kaiser's Kaiser Permanente Cement Plant on Black Mountain in Cupertino, California. Kaiser's first wife, Bess Fosburgh, liked the name. An abandoned Oakland facility was modernized as the 170-bed Permanente Hospital opened on August 1, 1942 (this facility evolved over the decades into today's flagship Kaiser Oakland Medical Center). Three weeks later, the 71-bed Richmond Field Hospital opened. Six first aid stations were set up in the shipyards to treat industrial accidents and minor illness. Each first aid station had an ambulance ready to rush patients to the surgical field hospital if required. Stabilized patients could be moved to the larger hospital for recuperative care. The Northern Permanente Hospital opened two weeks later to serve workers at the Kaiser shipyard in Vancouver, Washington. Shipyard workers paid seven cents per day for comprehensive health care coverage, and within a year, the shipyard health plan employed sixty physicians with salaries between $450 and $1,000 per month. These physicians established California Physicians Service to offer similar health coverage to the families of shipyard workers. In 1944, Kaiser decided to continue the program after the war and to open it up to the general public.
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Meanwhile, during the war years, the American Medical Association (AMA) (which opposed managed care organizations from their very beginning) tried to defuse demand for managed care by promoting the rapid expansion of the Blue Cross and Blue Shield preferred provider organization networks.
Courage to Heal, a novel by KP Historical Society President and Medical Director Emeritus of KP San Diego Paul Bernstein, MD, is based on the story of Garfield's life, his struggles with the AMA, and the origins of Kaiser Permanente.
Postwar growth
In 1943, Henry J. Kaiser and Dr. Sidney R. Garfield opened a 50-bed hospital, housing six physicians for the 3000 employees and their families at the new Kaiser Steel Mill in Fontana, California, offering a pre-paid health care plan for $0.60/week for adults, and $0.30/week for children. In 1945, the Kaiser Permanente health plan was opened to the public.
In 1948, Kaiser established the Henry J. Kaiser Family Foundation (also known as Kaiser Family Foundation), a U.S.-based Mixed profit, private operating foundation focusing on the major health care issues facing the nation. The Foundation, not associated with Kaiser Permanente or Kaiser Industries, is an independent voice and source of facts and analysis for policymakers, the media, the health care community, and the general public.
The end of World War II brought about a huge plunge in Kaiser Permanente membership; for example, 50,000 workers had left the Northern California yards by July 1945. Membership bottomed out at 17,000 for the entire system but then surged back to 26,000 within six months as Garfield aggressively marketed his plan to the public. Sidney Garfield & Associates had been a sole proprietorship, but in 1948, it was reorganized into a partnership, Permanente Medical Group.
During this period, a substantial amount of growth came from union members; the unions saw Kaiser Permanente care as more affordable and comprehensive than what was available at the time from private physicians under the fee-for-service system. For example, Fortune magazine had reported in 1944 that 90% of the U.S. population could not afford fee-for-service health care. Kaiser Permanente membership soared to 154,000 in 1950, 283,000 in 1952, 470,000 in 1954, 556,000 in 1956, and 618,000 in 1958.
From 1944 onward, both Kaiser Permanente and Garfield fought off numerous attacks from the AMA and various state and local medical societies. Henry Kaiser came to the defense of both Garfield and the health plans he had created.
In 1951, the organization acquired its current name when Henry Kaiser unilaterally directed the trustees of the health plans, hospital foundations, and medical groups to add his name before Permanente. The physicians in the Permanente Medical Group were proud professionals who deeply resented the implication that they were directly controlled by Kaiser, and successfully forced him to back off with respect to their part of the organization. That same year, Kaiser Permanente also began experiments with large-scale multiphasic screening to identify unknown conditions and to facilitate treatment of known ones. Simultaneously, although no one questioned his medical competence, Garfield's deficiencies as an executive were becoming apparent as the organization expanded far beyond his ability to manage it properly.
With his wartime glory receding into history, Henry Kaiser became fascinated with the health care system created for him by Garfield and began to directly manage Kaiser Permanente and Garfield. This resulted in a financial disaster when Kaiser splurged on the new Walnut Creek hospital; his constant intermeddling led to significant friction at every level of the organization. The situation was not helped by Kaiser's marriage to Garfield's head administrative nurse (who had helped care for Kaiser's first wife on her deathbed), convincing Garfield to marry the sister of that nurse, and then having Garfield move in next door to him. Clifford Keene (who would eventually be president of Kaiser Permanente) later recalled that this arrangement resulted in a rather dysfunctional and combative family in charge of Kaiser Permanente.
Keene was an experienced Permanente physician whom Garfield had personally hired in 1946. During 1953 he had been trying to get a job at U.S. Steel, but on the morning of December 5, 1953, with internal tensions worsening day by day, Garfield met with Keene at the Mark Hopkins Hotel in San Francisco and asked him to turn around the organization. It took Keene 15 years to realize that Kaiser had forced Garfield to ask Keene to become his replacement. Due to the chaos on the board, Keene at first took control with the vague title of Executive Associate, but it soon became clear to everyone that he was actually in charge and Garfield was to become a lobbyist and "ambassador" for the HMO concept.
Even with Garfield out of day-to-day management, the underlying problem of Henry Kaiser's authoritarian style continued. After several tense confrontations between Kaiser and Permanente Medical Group physicians, the doctors met with Kaiser's top adviser, Eugene Trefethen, at Kaiser's personal estate near Lake Tahoe on July 12, 1955. Trefethen came up with the idea of a contract between the medical groups and the health plans and hospital foundations that would set out roles, responsibilities, and financial distribution. Trefethen, already a successful attorney, went on to a successful career with Kaiser Permanente and in retirement became a famous vintner.
While Keene and Trefethen struggled to fix the damage from Kaiser's micromanagement and Garfield's ineffectual management, Henry Kaiser moved to Oahu in 1956 and insisted on expanding Kaiser Permanente into Hawaii in 1958. He quickly ruined what should have been a simple project, and only a last-minute intervention by Keene and Trefethen in August 1960 prevented the total disintegration of the Hawaii organization. By that year, Kaiser membership had grown to 808,000.
Managed care era
Having overseen Kaiser Permanente's successful transformation from Henry Kaiser's health care experiment into a large-scale self-sustaining enterprise, Keene retired in 1975. By 1976, membership reached three million. In 1977, all six of Kaiser Permanente's regions had become federally qualified health maintenance organizations.
In 1980, Kaiser acquired a Mixed profit group practice to create its Mid-Atlantic region, encompassing the District of Columbia, Maryland, and Virginia. In 1985, Kaiser Permanente expanded to Georgia.
Regional evolution
By 1990, Kaiser Permanente provided coverage for about a third of the population of the cities of San Francisco and Oakland; total Northern California membership was over 2.4 million.
Elsewhere, Kaiser Permanente did not do as well, and its geographic footprint changed significantly in the 1990s. The organization spun off or closed outposts in Texas, North Carolina, and the Northeast. In 1998, Kaiser Permanente sold its Texas operations, where reported problems had become so severe that the organization directed its lawyers to attempt to block the release of a Texas Department of Insurance report. This prompted the state attorney general to threaten to revoke the organization's license. Kaiser Permanente closed health plans in Charlotte and Raleigh-Durham in North Carolina four years later. The organization also sold its unprofitable Northeast division in 2000. The Ohio division was sold to Catholic Health Partners in 2013.
In 1995, Kaiser Permanente celebrated its fiftieth anniversary as a public health plan. Two years later, national membership reached nine million. In 1997, the organization established an agreement with the AFL-CIO to explore a new approach to the relationship between management and labor, known as the Labor Management Partnership. Going into the new millennium, competition in the managed care market increased dramatically, raising new concerns. The Southern California Permanente Medical Group saw declining rates of new members as other managed care groups flourished.
In 2017, Kaiser acquired Group Health Cooperative, which has clients in the state of Washington outside of Southwest Washington. Group Health was started in part from funds from longshoremen in Washington state, who were left out when Kaiser chose not to expand north of the Portland area.
On April 26, 2023, Kaiser announced it would acquire Geisinger Health System. As part of the deal, Geisinger would operate as an independent subsidiary, folded into a new mixed-profit group called Risant Health. On June 21, 2024, it was announced that Risant Health would acquire Cone Health, a hospital system based in Greensboro, North Carolina.
On September 10, 2025, Kaiser announced a joint venture with Renown Health to expand into northern Nevada. Kaiser Permanente will acquire a majority interest in Hometown Health, Renown Health's insurance subsidiary and that it would be rebranded to Kaiser Permanente Nevada.
On February 3, 2026, the joint venture was finalized. Kaiser officially entered the Reno metropolitan area on July 1, 2026 with medical offices opening in Reno and Sparks. Existing Hometown Health independently contracted medical providers were removed from the network with HMO patients being told to see Kaiser or Renown physicians, which caused controversy.
KP HealthConnect
In 2002, Kaiser Permanente abandoned its attempt to build its own clinical information system with IBM, writing off some $452 million in software assets. This information technology failure led to major changes in the organization's approach to digital records. Under George Halvorson's direction, Kaiser looked closely at two medical software vendors, Cerner and Epic Systems, ultimately selecting Epic as the primary vendor for a new system, branded KP HealthConnect. Although Kaiser's approach shifted to "buy, not build," the project was unprecedented for a civilian system in size and scope. Deployed across all eight regions over six years and at a cost of more than $6 billion, by 2010, it was the largest civilian electronic medical record system, serving more than 8.6 million Kaiser Permanente members, implemented at a cost exceeding a half million dollars per physician. As of 2020 KP HealthConnect supports 12.2 million members.
International reputation
Early in the 21st century, the NHS and UK Department of Health became impressed with some aspects of the Kaiser operation and initiated a series of studies involving several health care organizations in England. Visits occurred and suggestions of adopting some KP policies are currently active. The management of hospital bed-occupancy by KP, by means of integrated management in and out of hospital and monitoring progress against care pathways has given rise to trials of similar techniques in eight areas of the UK.
In 2002, a controversial study by California-based academics published in the British Medical Journal compared Kaiser to the British National Health Service, finding Kaiser to be superior in several respects. Subsequently, a group of health policy academics who were experts on the NHS published a competing analysis claiming that Kaiser's costs were actually substantially higher than the NHS and for a younger and healthier population.
From Wikipedia’s article on Kaiser Permanente, shared under CC BY-SA 4.0.5