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Kaiser Permanente workers are on strike. Here’s what makes it such a unique health care company

<i>Mike Blake/Reuters</i><br/>
Mike Blake/Reuters

By Samantha Delouya, CNN

Los Angeles (CNN) — On Wednesday, thousands of unionized health care employees walked off the job after failed contract negotiations with their employer, Kaiser Permanente, a company whose business model is distinctive, compared to most health care providers in the United States.

Here’s what you should know about the medical system.

Kaiser is funded by membership fees

Unlike traditional health care providers in the United States, Kaiser operates both as an insurance plan and a provider of all care covered by that plan. Patients (or their employers) pay a membership fee to Kaiser Permanente to access its services. That means that although thousands of workers are on strike at Kaiser, the company will continue to collect money from membership fees.

“They have members, they have subscribers and so they will continue to get their monthly payments,” said John August, former executive director of the Coalition of Kaiser Permanente Unions.

Founded in 1945 in Oakland, California, Kaiser Permanente is one of the nation’s largest not-for-profit health providers. It operates 39 hospitals and 622 medical offices across California, Colorado, the District of Columbia, Georgia, Hawaii, Maryland, Oregon, Virginia and Washington. It also employs nearly 213,000 employees and has a membership of 12.7 million, according to Kaiser’s website.

Members are mainly locked in to using Kaiser health workers

Kaiser’s membership dues set it apart from America’s traditional “fee-for-service” health care model, in which a doctor or health care provider is paid a fee for each service they perform.

Kaiser was designed to be a one-stop shop for all patients’ needs. Members can access a wide array of services through the system, including primary care, lab testing, telemedicine, mental health care, pharmacy services and even cosmetic treatments. However, except for emergencies and special cases, any care outside Kaiser Permanente’s system is not covered.

“If you join Kaiser Permanente, you are saying, ‘I’m going to see Kaiser doctors, and I’m going to go to Kaiser hospitals,’” said Gerald Kominski, a senior fellow at the UCLA Center for Health Policy Research.

Proponents of Kaiser Permanente argue that its fixed membership fees offer a financial incentive to focus on preventative care and keep patients healthy rather than performing a high volume of costly medical procedures.

“One of the reasons that Kaiser has grown over the last few decades is because they offer quality care at an affordable price,” Kominski said.

It’s a nonprofit entity

Although Kaiser Permanente operates as a nonprofit entity, it generates billions of dollars in profit. During the first six months of the year, Kaiser Permanente reported a total net income of $3.3 billion.

Nonprofits are generally required to reinvest surplus assets back into the business, though they are allowed to reserve money for future unexpected expenses.

The coalition of unions that is striking against Kaiser Permanente has accused the company of hoarding profits despite its nonprofit status. The coalition argues that Kaiser should reinvest more money in frontline care, including higher pay for employees and a strategy to combat chronic short staffing that has left workers feeling overworked and burnt out.

“Kaiser executives must address the Kaiser short-staffing crisis that frontline health care workers see getting worse at great costs to patients — patients who have seen their premiums going up along with their wait times. The Kaiser model has certainly proven effective at generating billions in reserves for the company,” said Renee Saldana, a spokesperson for SEIU-UHW, the largest union representing Kaiser workers on strike. “It’s time for Kaiser executives to invest those resources in addressing the desperate needs of Kaiser patients and frontline health care workers. That means Kaiser executives providing relief on increasing premiums to consumers, and relief to their battered frontline health care workforce in the form of improved staffing and retention.”

However, Kaiser took a profit hit during the pandemic, reporting a net loss of more than $2 billion in the first six months of 2022. Kaiser cited rising costs and pandemic-related disruptions for the multibillion-dollar losses.

Workers are feeling Covid-19 burnout

Kominski said he believes the health care industry and its workers have yet to rebound from the pandemic.

“The fact that there’s burnout and problems with retention and recruiting because of the work environment is, in my opinion, probably one of the longer-term consequences of the pandemic,” he said.

August said in his experience at Kaiser Permanente, employees were “very proud” of their work.

“Because you have such a loyal workforce who feels that they have to take this step, it’s a very significant moment,” he said of the strike.

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