What Kaiser’s Mental Health Clinician Strike Means for Hospital Executives

Things didn’t end well for Kaiser Permanente when the open-ended, high-profile strike by 2,200 California mental health clinicians against the HMO finally concluded after ten weeks on October 20. The surprising way this strike resolved offers vital lessons for Kaiser’s top management and the executive team at every other United States healthcare system threatened by a strike.

And as we pointed out in our MHAOnline feature article on the explosion of labor actions in the healthcare industry, in early 2023, virtually every hospital across the nation appears to be facing a significant probability of a strike within the next 12 months.

Kaiser’s chief executives might benefit from a crash course in those lessons. Not a week went by during 2022 without a story appearing somewhere in the press about a labor action underway or threatened against the HMO. And no sooner did the mental health clinicians’ landslide ratification vote end their walkout than stories soon emerged about a new strike threat by ten times as many Kaiser employees.

In what might turn into one of the largest private-sector nursing strikes in U.S. history, organized labor fired its latest opening salvo when National Nurses United notified Kaiser of strike plans by 22,200 nurses over two days starting November 21. NNU had been negotiating with KP since June and expected this walkout to affect 22 hospitals in Northern California and Los Angeles.

Like the mental health clinicians, the nurses mainly want Kaiser’s management to address their concerns over chronic short-staffing and several workplace safety and health issues. Specifically, the nurses are bargaining for minimum staffing requirements and relief from short-staffing through KP’s guaranteed hiring and training of more nurses.

Kaiser counters that because the HMO meets or exceeds nurse staffing ratios mandated by California state regulations, the NWU’s assertions that staffing levels are unsafe cannot be valid. KP also argues that its negotiations with the union have made progress, and already yielded some agreements over issues like diversity and safety. It also offered the nurses their highest raise in decades: 21 percent over the next four years.

Before we take a look at the lessons from the strike Kaiser just settled, it’s important to recognize that walkouts in the healthcare industry are taking place within the context of a dramatic surge in labor actions across the nation in many different sectors of the economy. A tight labor market has bolstered all these strikes with a historically-low 3.7 percent unemployment rate that’s reduced part of the risk to workers. And the healthcare sector is far from the only service industry where widespread strikes were threatened or broke out during 2022.

According to the Labor Action Tracker database maintained by the School of Industrial and Labor Relations (ILR) at Cornell University, almost three times as many employees went on strike in the first half of 2022 compared with the first half of the previous year. In 2022’s first six months, about 78,000 workers walked out during 180 strikes, compared with 102 strikes that encompassed 26,500 employees during the previous year’s first two quarters.

Some expected strikes never materialized. The Biden Administration orchestrated a deal that narrowly averted a strike by railroad workers in September. That action would have disrupted large portions of America’s economy, including critical industries like food manufacturing and distribution, plus mining and commuter transit.

Boeing also averted a strike when its workers at three plants that manufacture weapons systems and military aircraft approved a new contract in August. The factories produce F-15 fighter jets along with training aircraft and drones.

But like Kaiser, other employers weren’t able to preclude strikes from happening. About 6,000 teachers won a new contract that ended their strike in Washington State, and a similar walkout by 4,500 teachers won a new agreement in Ohio. Amazon was hit by strikes at nine facilities and Starbucks Coffee at 72 stores.

About 48,000 graduate teaching and research assistants at the prestigious University of California—in many ways the university’s academic backbone—were poised to strike only weeks before final exams in late 2022. It would be the largest strike of higher education professionals in history within the United States.

The strike against Kaiser by its mental health clinicians was unusual in several respects. Economist Dr. Joanne Spetz, the director of the Philip R. Lee Institute for Health Policy Studies at the University of California at San Francisco, told public radio station KQED about two atypical aspects of this strike:

That strike was unusual both because of the group of people involved—in behavioral health—and then also the duration. It’s much more typical for healthcare sector strikes to be short-term, and to be deliberately three-day, or one week, or some limited duration of time.

Moreover, a third atypical characteristic of this strike was its unpredictability. Early in the strike, one could never have predicted that the clinicians’ union would eventually ratify Kaiser’s final contract offer in a 1,561 to 36 landslide vote because, during the early weeks, Kaiser’s management displayed such a tough, hard-line strategy.

For example, Kaiser consistently refused to negotiate with the clinicians’ union leaders from the National Union of Healthcare Workers during the first four weeks of the strike. Meanwhile, the HMO replaced the mental health clinicians on strike by hiring temporary workers—a union-busting practice legal in the United States, but forbidden by Germany’s constitution and against the law in other advanced economies.

In mid-September, initial negotiations quickly collapsed after Kaiser refused to even consider the union’s two main proposals. The NUHW had previously asked Kaiser to hire more psychotherapists to reduce chronic understaffing and allocate additional time and resources so the clinicians could complete their patient charting and other essential administrative tasks.

Instead, the HMO mischaracterized the dispute as one concerning pay—even though the union had already accepted Kaiser’s salary increase offer. Then Kaiser’s negotiators refused even to schedule any future bargaining sessions.

But Kaiser’s management didn’t expect the backlash they were about to confront from a highly visible and well-connected customer group.

Almost 60 percent of the 70,000 employees of the City and County of San Francisco are Kaiser insureds; KP collects nearly half a billion dollars from the City annually for their coverage. Most of them work for municipal and county divisions decimated by understaffing issues exacerbated by the pandemic, including police, fire, public works, housing, public health, the Unified School District, and City College. Retaining these employees and protecting their well-being is more important than ever in City Hall, says San Francisco Examiner public health reporter Sydney Johnson.

With only one negotiation session having taken place in seven weeks and the HMO adamantly refusing to schedule any more, the gloves came off after Kaiser executives failed to show up at a highly publicized San Francisco Board of Supervisors hearing about the strike on September 27. As this news video from KRON-TV depicts, during the raucous session carried live on local cable TV, the supervisors listened for almost three hours to emotionally-charged testimony from both patients and clinicians—all attacking Kaiser.

This humiliating public relations disaster probably marked the turning point where KP abruptly lost control over the strike’s coverage in the news media across the state. Then Kaiser lost control of the strike.

For example, one exasperated Kaiser psychotherapist testified that he only had 30 appointments available each week, but that his managers had recently increased the number of patients under his care to 180. That meant many seriously ill patients could only receive treatment once every six weeks.

The Kaiser executives’ failure to appear and testify then prompted one of the irate supervisors, Hillary Ronen, to call on Governor Gavin Newsom to intervene. “It is time for the state government to step up and intervene with Kaiser,” Ronen said. “This is so tremendously serious and our governor needs to intervene, end this strike and get this monster corporation to provide services that are being paid for.”

Although Ronen’s remarks made headlines across California, any observer who had closely followed Governor Newsom’s career would have accurately predicted that he would resist intervening against the HMO. The reason is that the Governor has maintained a cozy relationship with Kaiser for many years. According to Kaiser Health News (which is not affiliated with Kaiser Permanente):

[Kaiser Permanente] has given nearly $100 million in charitable funding and grant money to boost Newsom’s efforts against homelessness, Covid response and wildfire relief since 2019, according to state records and KP news releases. The healthcare giant was also one of two hospital systems awarded a no-bid contract from the state to run a field hospital in Los Angeles during the early days of the Covid pandemic, and it got a special agreement from the Newsom administration to help vaccinate Californians last year.

Jim DeBoo, Newsom’s executive secretary, used to lobby for KP before joining the administration. Toby Douglas, a former director of the state Department of Health Care Services, which runs Medi-Cal, is now Kaiser Permanente’s vice president for national Medicaid.

Despite the Governor’s AWOL status, after Kaiser’s failure to show up infuriated the Board of Supervisors and the HMO was savaged by the resulting news coverage, four of the most powerful state elected officials in California publicly put pressure on Kaiser’s leadership to end the strike.

That alliance included State Senator Scott Wiener (D-San Francisco), Lieutenant Governor Eleni Kounalakis, Senate President Pro Tem Toni Atkins, and the Speaker of the Assembly, Anthony Rendon. In addition, a veteran mental healthcare advocate and former Senate president, Sacramento Mayor Darrell Steinberg, stepped in to mediate negotiations during the strike’s final seven days.

That’s never the magnitude of political and public relations backlash any company’s leadership ever wants to provoke. But all this damage in the court of public opinion is particularly troublesome for a healthcare organization like Kaiser. That’s because a little-known fact about this HMO is that it relies on governments for a substantial amount of its revenue.

For example, California’s Medicaid program Medi-Cal covers about 14 million low-income Californians. Currently, Kaiser receives state funding to provide care for about 900,000 of those patients.

But under a deal cut with the Newsom Administration, California will pay Kaiser to provide care for one-quarter of the state’s Medi-Cal patients—about 3.5 million Californians—by 2027. That’s a 289 percent increase in Medi-Cal patients—and their lucrative revenue—for Kaiser. But the HMO could have a rough time getting deals like that one extended after antagonizing so many elected officials and regulators during this strike.

The signal that this strike’s resolution sends to the leadership of other healthcare organizations is clear. If hospital system CEOs in 2023 believe they still can combat labor disputes using the brutal tactics that companies in other industries used to fight strikes during the past 50 years—like the outrageous antics through which Wall Street corporate raider Carl Icahn broke the unions at Trans World Airlines—those chief executives need to be prepared to pay an exorbitant price.

The costs to their hospital systems in terms of political and public relations damage, along with the subsequent loss of goodwill among customers and the public, could very well be substantial.

Healthcare system CEOs need to think long and hard about whether they want to accept the risks of all these consequences that could damage the hospitals they supervise for years to come.