Healthcare Insights: A Strike and Settlement at Kaiser Permanente, What Can We Learn?

After many months of acrimonious negotiations and harsh publicity from labor and management directed at each other, with each side accusing the other of “bad faith bargaining”, union-led informational picketing, and finally a 3-day strike, Kaiser Permanente and its largest coalition of unionized workers settled on a new 4-year contract on October 13, 2023. The pre-strike actions and the strike itself captured national and international attention. The dispute and strike were seen by many observers as part of a larger upheaval reflecting increased militancy of unions in the past two years.

Indeed, in healthcare the uptick in strikes has been noteworthy:

• According to the Bureau of Labor Statistics (BLS) there were only 85 major strikes in hospitals from 1993-2021.
• According to the Cornell-ILR Labor Action Tracker, there were 40 strikes in healthcare and social services (most of these are in hospitals) in 2022.
• According to Becker’s Healthcare Report, there have been 18 strikes in healthcare in 2023 (not counting the recent 3-day strike at Kaiser Permanente).

The strike at Kaiser Permanente, the nation’s largest not-for-profit health plan, and among the largest health systems, was characterized as the largest healthcare strike in U.S. history. 75,000 service, maintenance, clerical, and technical employees in California, Oregon, Colorado, and metro Washington, DC walked off the job from October 4-6, 2023 (only for one day in the DC metro area). The strike occurred during an expanding strike by the UAW against the Big Three automakers, the SAG-AFTRA strike against the entertainment industry and in the atmosphere of two years of strike activity higher than in the past two decades at least.

The goal of this article is to:

• Understand the Kaiser Permanente-Union contract settlement terms. It seems clear that the unions achieved much of what they were seeking.
• Understand the Kaiser-Permanente strike/settlement in the context of the 26 year-long Labor-Management Partnership (LMP). The just-settled strike was the first-ever national strike at Kaiser Permanente, and the first-ever strike by the unions who are signatories to the Labor Management Partnership. The LMP is the largest, most complex, and most successful labor-management partnership in U.S. history.

What is in the contract settlement between Kaiser Permanente and the Coalition of Kaiser Permanente Unions (CKPU)?

The CKPU is made up of 85,000 members who belong to SEIU, by far the largest union in the Coalition with 57,000 members in California, Oregon, Colorado and Washington State and includes the International Federation of Professional and Technical Employees in Northern California, and Office Professional Employees International Union in Metro DC, Seattle, Northern California, San Diego, and Hawaii. 75,000 members were involved in this dispute in California, Oregon, Colorado, and DC metro.

Here are the major terms of the contract settlement:

• 21% across-the-board wage increases for all union members across the regions over 4 years (6%, 5%,5%,5%). These wage increases will be applied in all states and regions which is a major break from the past. It has been a long- standing practice in the Kaiser Permanente-Union negotiations that different wage increases were applied to different regions based on labor market conditions in each region or state. That practice which provided higher wage increases in California than other states and regions, and even differences between southern and northern California was a major dispute in this negotiation.
• A minimum wage of $25/hour in California, and a minimum wage of $23/hour outside of California.
• Continuation of current contract language, which discourages and limits subcontracting and outsourcing of jobs. Kaiser Permanente was seeking to increase its ability to outsource.
• Improved workforce planning and development resources while completing the hiring of 10,000 new hires during this negotiation. Complaints of under-staffing was a major public issue in this dispute and strike. New major commitments to apprenticeship programs, and new methods to increase speed of hiring and deployment of new employees.
• Re-vamping of the Performance Sharing Program (PSP), which guarantees bonuses for workers in all regions when patient-focused performance goals are met in the 8 regions of the organization. These bonuses have ranged from hundreds to thousands of dollars in annual bonuses to individual workers over the course of the 26 years of the LMP. Previous to this agreement, workers would only receive a bonus if the Region achieved a financial margin, even if the performance goals were met; a very sore point for the workers and unions over the years. Going forward, PSP bonuses will be paid out regardless of this “financial gate”. And very significantly, some of the performance metrics have been established nationally so as to reduce complexity of the Performance Sharing Program, which usually varied from region to region of the enterprise. The parties will establish two national metrics: to establish significant goals in the reduction and maintenance of safe blood pressure control among Kaiser Permanente members, and to maximize the number of Kaiser Permanente members to receive preventative health vaccinations.
• The unions agreed to limit union members’ move from one job to another to a maximum of once per year, thus improving the stability of the deployment of the workforce and reducing vacancies
• A commitment to “re-build” the LMP. I will comment more on this later in the article. In brief, that there is an explicit agreement to rebuild the LMP speaks to a public acknowledgement that the LMP has broken down. The parties seem to be recognizing that there ought to be a better way to resolve disputes than a strike. This set of issues raises very important questions about the need for evolved labor-management relations in addressing issues that led to a strike to resolve.

Julie Su, the Acting U.S. Secretary of Labor participated in the final week of negotiations that led to the settlement. In the post-settlement press conference, Acting Secretary Su said: “We saw healthcare workers put the nation on their backs during the pandemic, and the Biden Administration wanted to be sure that they achieved the respect and value they deserved.”

What Happened to the Labor-Management Partnership?

At a press conference jointly attended by Steve Shields, the Kaiser Permanente SVP for Labor Relations and chief representative to the LMP, and Dave Regan, President of the largest and most powerful union in the Union Coalition, SEIU – United Healthcare Workers West, both men acknowledged that the 26-year long era of labor peace under the LMP ended with the strike, and that re-building the LMP was essential going forward. Through national bargaining from 2000-2023, there were no strikes or work stoppages until now.

Much more than labor peace, the LMP was central to both union growth and Kaiser Permanente growth. Union membership among LMP unions grew from 56,000-140,000. Kaiser Permanente membership grew from 8 million to more than 13.7 million in that period. Kaiser Permanente has become a leader in healthcare safety and quality as year in and year out all of its regions receive 4.5-5 star ratings from CMS. (highest possible). Its state-of-the-art electronic medical record system KP HealthConnect, is an industry leader, and its modern facilities continue to be a state-of-the-art infrastructure for healthcare.

Turnover rates are lower than the industry, and employee engagement rates are much higher than industry norms.

The Unions and Kaiser Permanente agree that turnover rates are lower than the industry as a whole.

A well-established factor in higher retention rates is high employee engagement. In a study done by the Office of Labor Management Partnership (see Peter Nixon, Culture Matters, An Investigation into UBTs Workplace Culture and Performance, January 17, 2012, Labor Management Partnership) the data showed that in departments where employees were highly engaged in partnership activity their employee engagement scores were higher than other Kaiser employees. Overall Kaiser employees enjoy much higher engagement scores than industry norms, as demonstrated in the data in the recent Gallup study.

Kaiser Permanente employees enjoy employment security. This does not mean that jobs cannot be eliminated, but well-used procedures are in place to see to it that displaced workers will be trained and deployed to comparable jobs or better jobs. 

With all of this success, how do we explain the failure of the LMP to prevent the strike?

In their seminal study of the LMP, Healing Together, industrial relations scholars, Thomas Kochan, Adrienne Eaton, Robert McKersie, and Paul Adler (2009, Cornell University Press, page22) explain that labor-management partnerships are fragile by definition. “They challenge traditional labor union precepts that stress the need to avoid getting too close to management or being co-opted into supporting unpopular management decisions.” The LMP “challenges the traditional management precepts for “maintaining control” over the workforce and labor relations.”

Add to this inherent fragility, major events often challenge the very existence of a partnership. Such events include:

• Leadership change
• Financial stress
• Competitive pressures
• Technological and systems change in industry
• Internal leadership and organizational disputes

It is thought that any one of the above major events can challenge the existence and effectiveness of a labor-management partnership.

In the case of the Kaiser-Coalition LMP, it is fair to say that all five of the above events have been at play for the past decade at least:

• There have been three changes in Kaiser Permanente CEOs
• The organization had to weather three major financial and industry events including the Great Recession of 2008-2009, the implementation of the Affordable Care Act, and the near economic depression caused by the pandemic
• Union leadership change in the Coalition of Unions
• A deep schism within the Coalition which created two separate Coalitions, and in some respects two LMPs
• Unions independent of the LMP and Coalitions (National Union of Healthcare Workers and National Nurses United) represent thousands of healthcare professionals and RNs outside the collaborative framework of the LMP
• The pandemic

The LMP Agreements that guide the parties labor relations and overall engagement contain explicit and well- tested tools for attaining mutual gain through four major categories of activity:

• Defining and attaining a shared vision which includes providing the best place to receive care and the best place to work, maintaining competitive pricing of healthcare, while maintaining the highest wages and benefits in the markets in which Kaiser Permanente operates
• Providing business literacy to all employees, managers, and physicians so that they will always understand the relationship of attaining the shared vision by the business models and practices of Kaiser Permanente in place to support that shared vision
• Interest Based Bargaining and Interest Based problem solving
• Issue Resolution and Corrective Action to avoid grievances and arbitrations

In 2005, the concept of Unit Based Teams (UBTs) was added to the commitment to the LMP by all parties. More than 4000 UBTs, made up of unit-by-unit frontline staff, managers, and physicians go to work each day, equipped with both problem-solving skills and performance improvement science as they tackle patient centered improvements in patient and employee safety, quality, patient experience, affordability, and maintaining and enhancing the best place to work.

As of August 1, 2022, based on unit-based team self-reporting of organizational savings, $602,656,955 in savings has been achieved. (The Promise of the Kaiser Permanente Labor Management Partnership, John August and Jim Pruitt, September, 2022, unpublished book chapter)

Many observers of the 2023 bargaining, including myself, hoped that the success of 26 years of labor management partnership would assist the parties in achieving a settlement without a strike.

We now know that did not happen!

What can we learn from this experience?

1. The combined erosion of stability of the LMP as outlined above created the conditions for competition among the unions, provided opportunities for factions within the management to extract concessions from competing unions (for example in 2021 in national negotiations with the Alliance of Healthcare Unions, the competing group with the CKPU, Kaiser Permanente tried to achieve a two-tier wage agreement which nearly provoked a strike). Through this experience, reliance on mutual interests has been seriously eroded, replaced by positional negotiation and demands. Without a foundation of mutual interest, partnership is sure to be challenged. While unit-based teams are still in place, positional bargaining has filtered into daily disputes which also erodes mutual interest. The National Agreement states unequivocally that: “It is the vision and intent of the Partnership concept (that it) will become pervasive throughout Kaiser Permanente. Further, the involvement of employees from all levels of the organization in appropriate and relevant issues results in high quality decisions beneficial to the continued viability of the enterprise.” (From the original 1997 Partnership Agreement)

Based on much public reporting, workers at the frontline expressed lingering frustrations with staffing which creates difficulty in maintaining the partnership structures that are essential for the Partnership to thrive.

2.  The 2023 negotiations began in the larger context of strikes and disputes in healthcare as well as other industries where the issues were virtually identical to those within Kaiser Permanente. The union’s central demands to achieve higher-than-inflation wage increases for all of their members as well as seeking the $25 and $23 per hour minimum wage was not embraced as a mutual interest within the Kaiser Permanente bargaining teams. Given these growing worker-driven demands, without a foundation of mutual interest, bargaining leverage due to the vast number of union-represented employees, and popular opinion largely favoring the unions, it is clear that the LMP’s history and problem-solving machinery was overwhelmed by the unique historical moment that had been building for more than a decade.

3.  In the final analysis, there is at least one more additional factor at play: the Kaiser Permanente-Union Coalition experiment in labor-management partnership exists in a virtual vacuum. Bernard Tyson, long time Kaiser Permanente executive and leader and CEO from 2013-2018 when he died unexpectedly, used to quip in public all the time as follows: In speeches to union members he would tell of many meetings he would attend with fellow industry leaders who would openly chide him for having such a “cozy” relationship with unions, clearly expressing a dominant view that the industry would prefer not to deal with unions or if they did, would certainly not be in a “partnership”. Bernard would laugh and explain to the assembly of union members that he would tell the industry leaders that they were wrong, that Kaiser Permanente as an organization was founded on the belief that the employees and their unions were the backbone of the organization through their labor-management supported empowerment to use their skill and experience to make Kaiser Permanente great.

There would be wild cheering from the crowd of union members. Then with the timing of a skilled orator, Bernard would pause and then look the assembly in their collective eyes and say: “Let’s make sure this works, so we don’t all look bad in the face of such opposition to what we are doing.” More cheers.

What Bernard Tyson was saying is that he feared that the LMP as an island in a sea of non-union and non-partnership relationships in the industry was extremely fragile, and that without external support and understanding, the inherent complexities of partnership would not be saved by anyone but by those directly involved, the people of Kaiser Permanente - a daunting task!

The symbolism of this story is based in reality. There is an unforgiving financial, public policy, competitive, technological, and demographic set of forces that exist for the entire industry and everyone in its hold: patients, taxpayers, communities, government, and 18 million workers comprising nearly 20% of the U.S. economy. In other words, it is a tremendous, perhaps near-impossible task for one organization with a very different model of care delivery, and labor-management cooperation to survive.

In next month’s article, I will explore the broader implications of the strike for the healthcare industry, and the centrality of the rest of the industry adopting the fundamentals of the labor-management partnership.

John August is the Scheinman Institute’s Director of Healthcare and Partner Programs. His expertise in healthcare and labor relations spans 40 years. John previously served as the Executive Director of the Coalition of Kaiser Permanente Unions from April 2006 until July 2013. With revenues of 88 billion dollars and over 300,000 employees, Kaiser is one of the largest healthcare plans in the US. While serving as Executive Director of the Coalition, John was the co-chair of the Labor-Management Partnership at Kaiser Permanente, the largest, most complex, and most successful labor-management partnership in U.S. history. He also led the Coalition as chief negotiator in three successful rounds of National Bargaining in 2008, 2010, and 2012 on behalf of 100,000 members of the Coalition.