Part 1 of 2
Health care was a hot-button topic in the years after World War II. And 2 of the biggest targets were the then Permanente Health Plan (now called Kaiser Permanente) and Group Health Cooperative of Puget Sound.
Henry J. Kaiser and Sidney Garfield, MD, had paired up to provide health care for Kaiser’s 190,000 West Coast home front workers in 1942, and the plan opened to the public in 1945. Group Health began in 1947 and, as of 2017, is now part of Kaiser Permanente. Both were models of care, featuring the common-sense principles of prepayment, prevention, and group practice.
The traditional private practice fee-for-service medical establishment wasn’t too keen on competition, especially when it became clear that these new affordable plans were popular. Professional groups such as local medical societies and the American Medical Association, tried to shut down these upstarts. Physicians were frequently shunned and denied access to practice in local hospitals.
Kaiser Permanente medical economist Avram Yedidia recalled that in San Francisco in 1948, when about 1,000 city employee family members joined the plan, the Permanente Foundation had to rent a building at 515 Market Street and purchased a small hospital because “… we couldn't get hospital privileges for our doctors in any San Francisco hospital.” Yedidia further explained:
“One of the major obstacles that programs such as ours faced at that time was the unavailability of hospital privileges for their physicians. This remained a national problem for years to come. One of the most effective tools for stifling the growth of group practice prepayment plans was to withhold hospital privileges from physicians associated with them.”
Until 1954, San Diego County Medical Society bylaws stated that physicians engaged in prepay medical practice were unethical and therefore were ineligible for membership, and hospital bylaws required physicians be members of the county medical society to secure privileges to hospitalize patients. In Oregon, Kaiser Permanente lawyer Robert Ridgely described having to threaten an antitrust lawsuit against the Marion County Medical Society for conspiring to refuse privileges to the Permanente doctors. And Scott Fleming, Senior Vice President of the Kaiser Permanente Central Office, noted in an oral history that as late as 1969, when Kaiser Permanente expanded to Colorado, physicians were only allowed to use two of the four hospitals in Denver.
It was ironic that Henry J. Kaiser, a fervent anti-communist and one of America’s preeminent capitalist industrialists, found himself defending his health plan from charges that it was “socialistic.” He genuinely believed that his plan was simply the best.
For Permanente, things came to a head in October 1947 with a legal battle started by the Alameda-Contra Costa Medical Society. After a 2-day hearing the California Board of Medical Examiners found Dr. Garfield, at the time the sole proprietor of the medical group, guilty of “employing unlicensed physicians and unregistered interns.” The Board placed Dr. Garfield on probation for five years and suspended his license for one year, but withheld the suspension provided he abided by state law.
Five of the 6 charges against Dr. Garfield involved hiring doctors at the Oakland Permanente hospital who were not licensed to practice in California. The sixth charged him with keeping a doctor on the staff until 1946, although his license had been revoked in 1943. The charge of not registering interns arose when Garfield explained that the 5 doctors were undergoing training.
Dr. Garfield defended his actions, saying "The procedure which we followed over a period of years in our training program was the same as that followed in other teaching institutions in this state, such as Stanford University and the University of California.” Of the approved hospitals in the state, only Permanente has been singled out and charged with technical violations, Dr. Garfield added.
Dr. Garfield appealed the decision. At the same time, one of the targeted physicians, Clifford Keene, MD, was issued his license after a 2-day grilling by the Board of Medical Examiners and departed to run the employee medical program at Kaiser’s Willow Run, Mich., automobile plant.
Dr. Garfield’s case was eventually dropped, and his right to practice restored in 1948, but the blows had landed.
See part 2, where we learn more about the response by the Permanente Health Plan and the similar experiences of Group Health Cooperative.