blog.fixkp.org

Update: In related news (to the post below), KP today said it has cut 175 positions from KP-IT headquarters in Pleasanton. Nearly two weeks ago, KP said it was laying off 100 employees, so it is not yet clear whether the the 175 figure is an additional round of layoffs or just an upward revision of the original figures released.

You might already know that not a dime of corporate income tax will be paid on that $2.5 billion in profit Kaiser Permanente has made so far this year. That’s because the Kaiser Foundation Health Plan and Hospitals side of Kaiser Permanente long ago applied to the Internal Revenue Service and was granted tax exemption as a “charitable” organization under section 501(c)(3) of the Internal Revenue Code.

What makes Kaiser Permanente different from, say, WellPoint, which owns Blue Cross of California? WellPoint has to pay federal and state income taxes, so why not Kaiser Permanente, you ask? Theoretically, the $800 million that Kaiser Permanente pays out to various community organizations makes it more charitable than WellPoint, which gives away about $300 million each year through its various foundations. Of course, WellPoint is also a publicly-traded company, with shareholders who get a cut of its $3 billion in profit each year. On the flip side, all of Kaiser Permanente’s profit is supposed to go back into the community or into its hospitals (incidentally, both areas which have seen their funding cut significantly recently).

Otherwise, the big requirement that Kaiser Permanente set for itself a number of years ago is that it should operate for the “public benefit,” and that “its assets are irrevocably dedicated to public and charitable purposes.”

Which, at last, brings me to my topic of the day: how is eliminating jobs in California, and moving those jobs to India, Russia, the Philippines, China, and Israel “benefitting” Californians? (More than two-thirds of Kaiser Permanente members are in California, for what it’s worth.)

Two years ago, the California State Auditor did a report on offshoring by organizations which receive money from state contracts. The audit found Kaiser Permanente was one of six out of 39 audited organizations that shipped a portion of its workload to other countries. In the case of Kaiser Permanente, the state auditor found a “small portion” of the dollars the state paid the organization ultimately wound up employing someone in another country, instead of in California.

At that time, I believe about 100 of about 500 employees in the application support division within the organization’s information technology department were offshored. While those figures are important, the big difference is in cost: Kaiser Permanente spent about $107,000 in salary and benefits for the California workers, compared to only about $47,000 for the offshore workers. The direct amount of pay eliminated from the California economy? About $10 million.

No big deal, you say? The application support division offshoring was a test. An experiment. To see how well offshoring worked. Sadly for us, it went pretty well. At that time, about a fifth of the application support team was offshored. The new head of KP-IT, Phil Fasano, has a strong need to continue to cut costs (to keep his own job). What if a fifth of all of Kaiser Permanente’s information technology workforce was offshored? The total direct cost to the California workforce economy would be upwards of $110 million.

So, an organization that is specifically mandated to operate for the public benefit, which has “irrevocably” dedicated all its resources to benefit Californians, is offshoring a significant portion of its workforce. Does eliminating California jobs to cut costs, and shipping those jobs overseas fit within the requirements of a not-for-profit?

I think it’s very difficult to justify, especially for a not-for-profit that’s generating nearly $1 billion in profit every few months, tax free.

What do you think?

This story was originally posted at justendeal.com.

Update: Two hours later and KP still has not yet posted the results to its website, so here is a link to a PDF of the results. You have to dig down to the sixth paragraph to find mention of the “relatively flat” membership growth, which I’ve highlighted for your convenience.

Kaiser Permanente announced its most recent quarterly results today. Membership growth crumbled, with no new members added during the quarter, compared to more than 30,000 new members being added in the year-ago quarter. Reported operating income improved slightly, inflated by George Halvorson’s continued short-sighted efforts to burnish operating results at the expense of the organization’s balance sheet.

Year to date, membership growth has fallen more than 75%. This is the third quarter in a row that California healthcare consumers showed they were tired of George Halvorson’s “transformation” of Kaiser Permanente. For two quarters in a row now, Kaiser Permanente hasn’t added a single net new member (compared to having added nearly 75,000 net new members during the same period last year). How’s that for a testament to George Halvorson’s leadership?

It was a year ago this week that my internal message on the perils of Mr. Halvorson’s flawed leadership first became public. The key concern I emphasized most was the impact of Mr. Halvorson’s financial mismanagement of the organization. Internal financial models projected $2 billion in operating losses this year, $5 billion for 2008. Mr. Halvorson has worked to hide operating costs at the expense of our long-term stability, and his efforts have helped postpone those losses until another day. But our faltering membership shows the true colors of Mr. Halvorson’s mismanagement of the organization, as more and more of the organization’s precious resources have been shifted to Mr. Halvorson’s HealthConnect, instead of in true investment in our infrastructure and care delivery.

George Halvorson is trying to hold on to his job as long as possible. To do that, he will continue to erode investments in healthcare delivery for Kaiser Permanente members, to try and conceal his mismanagement of the organization’s finances. One tactic he is employing is job cuts. Barely a month ago, he trimmed a little less than 2% of our staff in Hawaii (which follows up on initial cuts in Hawaii late last year). In the past few days, he shipped another 2% of our information technology positions overseas. Two percent here, two percent there will add up.

This didn’t start last month, though. Over the past two years, Mr. Halvorson has been gradually degrading healthcare quality at Kaiser Permanente to fund his legacy, his pet project, HealthConnect. The kidney transplant fiasco in Northern California was a core component of Mr. Halvorson’s plan: cut costs by transferring patients from more expensive outside hospitals to new, cheaper in-house programs. The results were devastating for those patients and their families, and the program was eventually halted, but not before much damage had been done.

George Halvorson is determined to cut expenditures on patient care to fund his broken projects and misaligned priorities, and the only place for those cuts to come from is the quality of healthcare delivered at Kaiser Permanente.

Mr. Halvorson will continue to impose measures that hurt healthcare delivery to continue to polish results. The picture is clear: Mr. Halvorson will continue to do serious damage to Kaiser Permanente as long as he is permitted to do so by our unaccountable Board of Directors.

This story was originally posted at justendeal.com.

I’m going to get to George Halvorson being one of the eight seven chief executives “honored” by a so-called “Diversity Best Practices” company in just a minute. Before I do, you should know that Kaiser Permanente is expected to report its third quarter financial results this week, and the picture is not looking good. Apparently Mr. Halvorson is beginning to run out of ways to prop up the organization’s ailing finances, and my understanding is that the Kaiser Foundation Health Plan Board of Directors is becoming more and more restless. Is the reality that their individual reputations are at stake beginning to set in and prod them into having some level of fiduciary loyalty and responsibility to Kaiser Permanente? We shall see, soon…

Back to the “news” that Kaiser Permanente is desperately trying to get any news outlet (anyone, anywhere?) to pick up: George Halvorson was one of eight seven chief executive officers “honored” as a “leader” for “diversity” by a for-profit company called “Diversity Best Practices”. You might be surprised to learn that “Diversity Best Practices” is owned by a company managed by eight white men. Go figure.

The more interesting news is that Kaiser Permanente was promoting Mr. Halvorson as one of “eight” chief executives to be honored right up to Friday. Apparently, the memo was delivered late to Oakland: at the last minute, the eighth chief executive’s “award” was revoked, leaving only seven remaining. (Here’s the corrected press release.)

That’s because that eighth chief executive, Stan O’Neal of Merrill Lynch, was fired last week for incompetence, and amid growing accusations of corruption.

Great company Mr. Halvorson keeps, no?

If that isn’t enough to make you question the integrity of this so-called “prestigious” award, this better be: the chief executives to be “honored” are “selected…based on an extensive application completed by each company.” That’s it. If Mr. Halvorson says Kaiser Permanente is promoting diversity, and is convincing enough with a bit of spun statistics, he gets honored. That, oh, and he has to “become a member” and write a big, big check from Kaiser Permanente’s bank account payable to “Diversity Best Practice”…

If George Halvorson actually shared some legitimate commitment to diversity, perhaps this “honor” would be a bit more “honorable.” But, the fact is, George Halvorson has a horrible track record on promoting diversity among the executive ranks at Kaiser Permanente.

So, let’s compare that eighth chief executive, Stan O’Neal, (the no longer “honored” one) and Mr. Halvorson, shall we?

Dishonoring Diversity: Halvorson and O’Neal

To understand just how laughable this award is, you need just go back a few months to a quote given by one of Stan O’Neal’s top lieutenants: “We’re not where I want us to be [on diversity], we’re not where Stan wants us to be or where Merrill Lynch wants to be.” I see. Perhaps “Diversity Best Practices,” the for-profit company that gives out the “award,” perhaps they decided that admitting the problem is the first step to fixing the problem? So, by extension, perhaps George Halvorson talking so much about diversity (but doing very little to actually promote it within his own organization) actually counts for a lot? Who knows.

So here’s to Mr. Halvorson and his band of eight seven brothers (yes, all seven are men, and six of them are white). Congratulations on your much deserved “honor.”

This story was originally posted at justendeal.com.

The Los Angeles Times today has a number of letters to the editor that were written in, most praising the paper for its in-depth coverage of important health issues at California hospitals. One, though, criticized the paper’s editors for not printing more positive stories about Kaiser Permanente:

The [Devin Valenzuela] story is the latest in an ongoing series portraying Kaiser Permanente in a negative light. As a Kaiser Permanente physician, I see firsthand the excellent quality of care we provide to our members on a daily basis. I cannot recall the last time I read a positive story about our organization in The Times. When we commit to the costly deployment of one of the largest electronic medical record systems in the country to benefit our members, we are criticized by you unfairly. When we are compared quite favorably with other healthcare providers by independent national evaluators, nothing is written.

We do not claim to be perfect. However, we are committed to delivering the highest quality of care and access in a cost-effective manner. Kaiser Permanente should be the type of health plan you judge objectively, rather than publishing only negative stories (as exhibited by your track record).

Stephen Munz, M.D.
Anaheim

The Los Angeles Times certainly doesn’t need my help, but I believe Dr. Munz has missed a number of recent stories in which the paper has, in fact, noted Kaiser Permanente’s achievements. The truth is that Dr. Munz has a point: there are nearly 170,000 people at Kaiser Permanente doing the right thing every day. Unfortunately, under George Halvorson and Daniel Garcia, a culture of corruption at the highest levels has grown, a culture that covers up wrongdoing instead of addressing it. In Baby Devin’s case, for example, the Times article said that the head of the Northern California physician group, Dr. Robert Pearl, was aware of issues surrounding Hamid Safari, and did nothing.

Until George Halvorson is gone, until the leadership of Kaiser Permanente recommits itself to the principles it was founded on, I can only imagine that horrific stories will continue to come to light, like the kidney transplant program breakdown, like the systematic, unethical treatment of homeless patients, like the electronic medical record system fiasco, like the coverup of an allegedly incompetent perinatologist accused of killing babies.

It’s worth, remembering, though, once again, that there are over a hundred thousand caregivers at Kaiser Permanente, including people I care deeply for, who believe passionately in their work, who go to work every single day to try to help make our members’ lives better.

Just in case Dr. Munz missed it, from earlier this week:

“…For overall clinical quality, Kaiser Permanente got the highest score…notching three out of four stars, or a ‘good’ rating.” [Los Angeles Times, October 18, 2007]

This story was originally posted at justendeal.com.