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University of California Berkeley Regional Oral History Office University of California The Bancroft Library Berkeley, California Kaiser Permanente Medical Care Oral History Project James A. Vohs ASCENDING THE RANKS OF MANAGEMENT, KAISER PERMANENTE MEDICAL CARE PROGRAM, 1957-1992 An Interview Conducted by Malca Chall in 1996 and 1997 Copyright C 1999 by the Regents of the University of California Since 1954 the Regional Oral History Office has been interviewing leading participants in or well-placed witnesses to major events in the development of Northern California, the West, and the Nation. Oral history is a method of collecting historical information through tape-recorded interviews between a narrator with firsthand knowledge of historically significant events and a well- informed interviewer, with the goal of preserving substantive additions to the historical record. The tape recording is transcribed, lightly edited for continuity and clarity, and reviewed by the interviewee. The corrected manuscript is indexed, bound with photographs and illustrative materials, and placed in The Bancroft Library at the University of California, Berkeley, and in other research collections for scholarly use. Because it is primary material, oral history is not intended to present the final, verified, or complete narrative of events. It is a spoken account, offered by the interviewee in response to questioning, and as such it is reflective, partisan, deeply involved, and irreplaceable. ************************************ All uses of this manuscript are covered by a legal agreement between The Regents of the University of California and James A. Vohs dated October 15, 1997. The manuscript is thereby made available for research purposes. All literary rights in the manuscript, including the right to publish, are reserved to The Bancroft Library of the University of California, Berkeley. No part of the manuscript may be quoted for publication without the written permission of the Director of The Bancroft Library of the University of California, Berkeley. Requests for permission to quote for publication should be addressed to the Regional Oral History Office, 486 Library, University of California, Berkeley 94720, and should include identification of the specific passages to be quoted, anticipated use of the passages, and identification of the user. The legal agreement with James A. Vohs requires that he be notified of the request and allowed thirty days in which to respond. It is recommended that this oral history be cited as follows: James A. Vohs, "Ascending the Ranks of Management, Kaiser Permanente Medical Care Program, 1957-1992" an oral history conducted in 1996 and 1997 by Malca Chall, Regional Oral History Office, The Bancroft Library, University of California, Berkeley, 1999. Copy no. James A. Vohs Cataloguing information Vohs, James A. (b. 1928) President, CEO, Board Chairman, Kaiser Foundation Health Plan and Hospitals Ascending the Ranks of Management, Kaiser Permanente Medical Care Program, 1957-1992. 1999, xiii, 257 pp. Family, Idaho Falls, and education, UC Berkeley; Kaiser companies industrial and labor relations, 1952-1957; Kaiser Permanente Medical Care Program, 1957-1992: Health Plan Manager, regional manager, Southern California, 1957-1970, to Oakland CA Central Office of KPHP/KPH, 1971, promoted to president, 1975, CEO, 1978, chairman, 1980; discusses expansion, personnel, board, relationships with physicians, Kaiser Permanente Committee, rate structure, quality of care, community service, media and advertising; thoughts on management and leadership, comments on Eugene Trefethen, Sidney Garfield, Carl Steil, Clifford Keene, Edgar Kaiser, Raymond Kay, Bruce Sams, other physicians and associates. Interviewed 1996 and 1997 by Malca Chall for the Kaiser Permanente Medical Care Program Oral History Series. The Regional Oral History Office, The Bancroft Library, University of California, Berkeley. TABLE OF CONTENTS --James A. Vohs PREFACE i INTERVIEW HISTORY viii BIOGRAPHICAL INFORMATION xii I FAMILY BACKGROUND AND EDUCATION: FROM IDAHO FALLS TO BERKELEY Parents and Grandparents Move to Berkeley, 19AO 4 Indications of Leadership Potential 6 College as a Goal The Army Experience, 1946-1948 9 University of California, Berkeley, 1948-1952 11 II BEGINNING EMPLOYMENT WITH KAISER, 1952-1957 17 Kaiser Services: Industrial Relations, 1952-1954 lY Permanente Services: Employee Relations, 1954-1956 21 Dealing with the Tensions Between Henry Kaiser and the Doctors 24 Kaiser Gypsum; Kaiser Firtex: Industrial and Labor Relations, 1956-1957 Permanente Services: Employee Relations Advisor, 1957 30 Decision to Become Health Plan Manager, Southern California Region, 1957 31 III FIRST RUNGS ON THE KAISER PERMANENTE MANAGEMENT LADDER: SOUTHERN CALIFORNIA REGION, 1957-1970 34 Health Plan Manager, 1957-1963 34 Balancing Time for Family and Work 35 Advanced Management Program at Harvard 37 Staffing Patterns: Personnel and Personalities 39 Dorothea Daniels and James Smits: Hospital Administrators 39 Karl Steil, Regional Manager 41 Clifford Keene, M.D., General Manager, Kaiser Permanente Health Plan and Hospitals 44 Dr. Raymond Kay, Medical Director 46 Doctors Fred Scharles and Herman Weiner, Associate Medical Directors 47 Handling Dynamic Growth 49 The Federal Employees Health Benefits Act 49 Raising the Capital for Expansion 51 Appointment to Assistant Regional Manager, 1963 52 Regional Manager, 1964-1970 54 Hiring New Staff The Kaiser Permanente Committee is Organized, 1967 58 Extension to San Diego, 1966 58 Denver, Colorado: Creating a New Region, 1969 60 Cleveland, Ohio: Taking on an Existing Medical Group, 1969 63 IV THE CENTRAL OFFICE, 1971-1992: RISE IN MANAGEMENT TO PRESIDENT, CEO, AND CHAIRMAN 66 Executive Vice President and Manager of Operations, 1971-1974 66 The Ohio Region (continued) 66 Responsibility for the Functioning of All Regions 69 The Oregon Region 69 Excellent Personnel in the Central Office 72 More on Regional Management 73 Possible Merger with the Health Insurance Plan of Greater New York (HIP) 74 The Board of Directors: Some Early Changes 76 Meaning of the Term Emeritus 79 President Designate, 1974-1975 80 Appointment to President, 1975 81 Revising the Operations of the Board of Directors 84 Reviewing Some Issues Faced by the Central Office 85 President Richard Nixon and the Wage/Price Freeze, 1971 85 The HMO Act, 1973: Paul Elwood and Scott Fleming 86 Digression: President Clinton s Failed Health Care Initiative 89 Alain Enthoven, Consultant to Central Office Staff 90 Handling the Phenomenal Growth of the Mid-1970s 91 The Evolving Importance of the Kaiser Permanente Committee 92 Appointments to CEO (1978) and Chairman (1980) 95 Taking a Stand on Principle 95 V THE CENTRAL OFFICE, 1971-1992 (CONTINUED): EXPANSION; THE PROBLEMS OF GROWTH AND COMPETITION 99 Expansion into Various Regions of the United States 99 Dallas, Texas, 1979, 1982 99 Georgetown (Mid-Atlantic States Region) , 1980 102 Chicago, Briefly Considered 105 The Medical Groups Views on Expansion 106 Connecticut (Northeast Region) , 1982 107 Obtaining Capital for the Expansions 109 The Southern Region, 1984 110 North Carolina 1 1 1 Georgia 112 Treating the Poor 114 Staffing the Regions: Management 115 Staffing the Regions: Medical Groups 116 Kansas City, Kansas, 1985 117 Extending the Regions in Washington State and California, 1984 119 Regional Boards of Directors 119 Organizational Patterns of the Permanente Medical Groups 122 Expansion, Competition, and the Kaiser Response 122 Organizing the Regions to Handle Growth and Develop Financial Stability 125 Attempts to Meet the Competition Throughout the System 128 Concern with the Commercialization of Medical Care 133 Advertising: Yes and No 134 Unfavorable Media Coverage 136 VI THE CENTRAL OFFICE, 1971-1992 (CONTINUED): DEVELOPING AND REFINING BASIC POLICIES AND PROCEDURES 139 Phone Logs 139 James Vohs List of Key Milestones in the Direction of the Medical Care Program 140 The Larson Commission 140 Changing the Composition of the Board of Directors 141 The Kaiser Family Foundation and the Expansion Fund 143 The Kaiser Permanente Executive Program at Stanford 143 The Harvard Advanced Management Program and the Bank of America 146 The Quality of Care Committee 148 Making Necessary Changes Within the Regions 151 Handling Wage-Price Stabilization Regulations and Other Decisions 153 The Dental Plan in Oregon 154 The Psychiatric Component 155- The Arbitration Clause 157 Contractual Incentives with the Medical Groups 159 Using the Telephone: All Lines Lead to Vohs 161 Travel: On the Road to the Regions 164 Revising the Mission Statement, 1985 167 Marketing and Risk Adjusted Medical Outcome Studies 168 The "Dirty Dozen": Quality Measurement Studies 171 Competition and the Adjusted Community Rating Concept 172 Multiple Choice Insurance Policies 177 Point of Service Plan 178 Interregional Committees: The Interregional AIDS Committee 179 VII THE CENTRAL OFFICE, 1971-1992 (CONTINUED): FINANCIAL PLANNING, COMPETITION, AND THE MEDIA 182 Long Range Capital and Financial Planning 182 The Kaiser Permanente Model and the Mission 184 Providing High-tech Medical Procedures to Members 185 Competitive Pressures and Growth 189 Kaiser Permanente and the Press: The Continuing Concern 191 Changing the Attitudes of the Medical Service Providers 195 Public Relations and Advertising 195 Planning for Growth 196 Purchasing the French Hospital 196 The Multi-billion Dollar Modernization Plan for Northern California 197 The Impact