Kaiser Permanente’s historic labor-management deal survives again

Kaiser Permanente’s tentative deal with labor leaders means the health system’s historic labor-management partnership survives another pivotal moment in the group’s history. Still, it’s in a fragile state, according to some union officials and workers.

What they perceive as a slow crumble of the labor-management partnership is a major reason behind the authorized strike in the first place. Kaiser Permanente in southern California recently averted a major crisis, as the agreement avoided an open-ended strike that was set to begin Nov. 15, with as many as 28,400 workers expected to walk off the job in what would have been the largest strike in the U.S. this year. 

“I think the deterioration of the partnership and how it functions, and how it was functioning, [was] a major contributor” to the tense relations that almost resulted in a strike, Peter diCiccio, one of the key architects behind the labor-management partnership, told Healthcare Dive, though he said there are likely other contributing factors.

Labor experts at the time called the formation of the partnership a significant event for labor relations. In 1997, the pact was considered “one of the most comprehensive and complex in the history of U.S. labor relations,” according to an analysis of the partnership.

The labor-management partnership, or ‘LMP’, is a unique arrangement because it eschews the traditional top-down management style and brings the workforce into the decision-making process at nearly every level. It requires a drastically different approach to leadership, and one that requires training. This arrangement is designed to improve the quality of care, from the bottom up, and the organization as a whole.

For example, front-line staff may work closely with executives such as a medical center’s CFO to resolve a range of issues. 

But even as the partnership saw results early on, according to researchers, it did have its challenges. Experts had warned “foreseeable” events in the future were likely to challenge the long-term viability of the partnership that has now been in existence for more than two decades.

‘Slow crumble’ of partnership

Over the years, workers describe a dwindling partnership. Some believe it is this deterioration that led the organization to where it is today — recently on the brink of a major work stoppage following disputes over a new contract.

The union put a pause on partnership activities, further underscoring how the pact was in peril as contract negotiations remained tense, with workers frustrated over management’s proposals for the latest contract.

“It has been a slow crumble,” Kim Mullen, a registered nurse who conducts training sessions on the LMP with management and union members, told Healthcare Dive.

Mullen attributes the partnership breakdown to turnover in managers and new ones failing to take the training on how LMP works — and by extension how the organization works.

Jacqueline Asfall, a registered nurse, also blamed turnover and a lack of training.

“I started to see it unravel probably around 2016 or so. It may have been because there was a turnover in managers who were trained, or believed, in the partnership. In my opinion it’s gone downhill from there,” Asfall said.

Without the training on LMP, new managers adopt a more traditional styling of leading, Asfall said.

She’s worked for Kaiser since the very beginning of the partnership just as it was being implemented. As the partnership called for, she worked closely with her medical center’s chief financial officer on a range of decisions — even as a registered nurse, highlighting the uniqueness of the partnership. The collaborative style gave workers a sense of ownership in the organization, she said.

A hallmark of the partnership (and Kaiser) is the presence of unit-based teams. They’re teams of employees on certain units, from every level, and they work together to advance and improve the organization. They can even tackle projects to test whether a new way of doing something may improve patient care or outcomes. From there, these ideas are moved up the chain if they work and considered for national rollouts, Mullen said.

The partnership principles are supposed to be applied every day — not just when a labor contract is near expiring. The “partnership is the building block of everything,” Mullen said.

“I started to see it unravel probably around 2016 or so. It may have been because there was a turnover in managers who were trained, or believed, in the partnership. In my opinion it’s gone downhill from there.”

Jacqueline Asfall

Kaiser Permanente registered nurse

For example, to solve problems in the workplace (and even at the bargaining table), the partnership calls for interest-based problem solving. The core tenet is to refrain from staking out a position.

“That’s not how we do problem solving,” Mullen said, noting there’s no chance in finding common ground by digging in on a desired position or outcome. Instead, when each side shares their interests, like improving patient care, it’s easier to find solutions.

The impending strike raised questions about whether it would lead to the demise of the LMP, already on pause, with relations so fractured. But with the strike averted and a tentative agreement secured, it seems the LMP has survived another key moment in the organization’s history.

How the unique partnership came together

The historic labor management partnership was born during a perilous time for Kaiser Permanente, which did not respond to repeated requests for comment for this story.

In the early 1990s, Kaiser began to face serious competitive threats from other healthcare operators, and as a result, the company started to lose money, researchers reported.

As losses mounted, management responded by “pursuing a new, tougher labor relations strategy; this in turn led to a series of layoffs, strikes, collective bargaining concessions, and an increasingly demoralized workforce,” one analysis of the arrangement found.

It created considerable upheaval for the organization as it tried to work out a deal with numerous unions representing thousands of employees across multiple states.

Despite the serious contention between the two sides, David Lawrence, Kaiser’s chief executive at the time, described the need to do something radically different.

“It was clear that the path we were on … was a dead end. We were going to be facing labor strife in every corner of our organization,” Lawrence said at the time, according to the research report.

Lawrence met the labor unions in what he described at the time as a “make-or-break” meeting.

The groups hashed it out and decided they would give this unique collaboration a try, first hiring a consulting group with expertise in labor management partnerships.

Eventually the partnership was born after “an intensive negotiation and problem-solving process that took most of 1996 and into 1997,” according to the analysis.

What was novel about the arrangement was the intense collaboration the partnership called for, forcing the unions and management to quickly move from adversaries to close collaborators.

However, in many ways, Kaiser owes its start to unions. Its founder Henry Kaiser, who built ships for World War II, wanted healthcare for his workers and their families and struck up a deal with founding physician Sidney Garfield. But as the war came to a close, shipyard closures were imminent, raising questions about the viability of the new medical system. But one union endorsed Kaiser’s model and pledged to keep sending its workers to Kaiser physicians. 

Must survive ‘pivotal events’ 

The LMP has survived critical moments in the past. But labor experts who closely examined the first few years of the partnership in a series of reports warned its continued viability would depend on surviving other challenging moments in the future.

“Prior research suggests that partnerships cannot be sustained unless the parties derive concrete benefits from it and survive pivotal events,” researchers found.

In the first eight years, the partnership faced a handful of such events, researchers found, including leadership transitions, regional budget crises and national contract negotiations.

Kaiser’s decentralized structure only served to fuel the rise of these pivotal events, the study found, and also posed a challenge to implementing the principles of the partnership in the first place.

“In other words, in a complex decentralized organization such as this, initiation [of the LMP] was not a one-time ‘big bang,’ but a struggle repeated many times over,” the study reported.

After conducting 300 interviews between 2001 and 2006 — with a wide range of Kaiser employees from executives to front-line staff — researchers found that the principles of the partnership, even then, were hard to implement at lower levels of the organization. At the time, Kaiser invited the researchers to conduct a review of the implementation of the LMP to document its strengths, weaknesses and success up until that point.

“The KP case highlights the potential value of partnership for addressing contemporary organizational and workforce issues; but it also highlights the precariousness of partnerships in the U.S. industrial relations system.”

Still, amid the turbulence over the years, the partnership remained intact after each event.

And despite the recent turmoil, management and labor leaders say they have strengthened the partnership once again through the tentative deal. Labor leaders characterized it as “groundbreaking” new staffing language that creates a new committee solely dedicated to staffing issues.

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