Kaiser CEO on strike: ‘We will always make sure we’re taking care of our members’

Just before more than 80,000 workers announced Monday they planned an October strike against Kaiser Permanente, Kaiser CEO Bernard Tyson talked with The Bee about the union’s concerns about pay inequity, labor strategy and concerns voiced by workers.

Leaders of the Coalition of Kaiser Permanente Unions said their strike will begin Oct. 14 and will last seven days in California, Colorado, Washington, Oregon, Maryland, Virginia and the District of Columbia.

Those going on strike work as optometrists, clinical laboratory scientists, respiratory and x-ray technicians, licensed vocational nurses, certified nursing assistants, surgical technicians, pharmacy technicians, phlebotomists, medical assistants, housekeepers and more. More than half of the 80,000 are members of the Service Employees International Union-United Healthcare Workers West.

Here are Tyson’s answers to six questions posed by The Bee:

Q. Will patient care be affected by any strike?

A. “A strike ... obviously creates the challenges of us needing to prepare for all possible scenarios, and we will because we will always make sure we’re taking care of our members.“

Q. Sacramento, and the state of California, has seen a number of high-profile strikes and protests this year and in 2018 after labor contracts expired. Right now, General Motors workers have walked out for the first time since 2007. How would you assess the labor-management relationship right now?

A. “If you look at the state of America right now,...many are feeling that they have not benefited from all of the efficiencies and the wealth that have been created over … time – 10, 20, 30, 40 years. I think there’s a lot of unrest in our country today.

“I think in some ways, the unions feel like 1) this is an opportunity for them to stand up and be counted more and 2) people are looking for others to help to raise some of the legitimate issues that should be dealt with in terms of the inequities of pay against the market and all the other challenges that people generally are feeling around the country. ...

“I think that the union is trying to find its voice overall in the debate that is going on, and that’s what made them so effective over the years inside of Kaiser Permanente, that they have in fact been a voice at the table and a respected voice at the table. On many occasions, I’ve sat down with them and we’ve come up with a better answer because ... they are partners at the table. That’s the way to go.”

Q. If they have been treated as partners, why are roughly 80,000 members of the Coalition of Kaiser Permanente Unions going on strike?

A. “About 25 years ago, we formed this labor management partnership, and 12 of the 16 unions formed a coalition of unions, and that’s the labor side of the labor-management partnership. I was there. I was one of the architects that actually established the labor-management partnership that lasted 25 years and hopefully it’s going to be here for another 25 years.

“We began to have conflict about two years ago, driven by SEIU’s new leadership … Dave Regan. ... Things began to become more tense inside of the coalition, and about two years ago, it reached a tipping point where nine of the 12 unions came forward and said that they believed they were going to sever their relationship with the coalition.

“They didn’t believe in the philosophy that this leader was promoting, which was more traditional bargaining, moving away from interest-based bargaining, as we have done throughout the years, the resolution and dispute processes that we’ve had in place. He believed that wasn’t aggressive enough. ...

“We started national bargaining, and the day that we started national bargaining, nine of the 12 unions severed their relationship with the coalition, and then they formed what’s called an Alliance of Health Care Unions. They came to management, and they said, ‘We would like to re-establish the partnership,’ and we re-established the partnership with them and we negotiated a contract, and we have a wonderful agreement that works for them, and it works for us. It works for our employees and it works for our affordability agenda for our members and our customers.

“During all of that time, we maintained conversations with the remaining unions in the coalition and told them that we still want to have a partnership with you, but we have to also work on your partnership behavior for this to be effective. The alternative is just to have a labor relations, but we have every intention of reaching a fair and equitable agreement with you as well on behalf of our employees.

“We started those negotiations in earnest with them and the SEIU leaders over the last several months. In the middle of all these discussions, he’s (Regan has) deployed what he’s been working on for the last five to seven years. ... He’s taken a strike vote. He’s ...(sponsored legislation) to bring pressure to get a deal better than all the other unions to demonstrate that his approach is the better way to go. That’s the context for what’s going on here.”

(Denise Duncan, president of United Nurses Association of California/Union of Health Care Professionals, confirmed that she and eight other union leaders separated from the coalition after their membership made it clear they wanted to continue the partnership. The new alliance represents more than 45,000 Kaiser employees. The Bee requested an interview with Regan but has not received a response.)

Q. The union, however, has said that Kaiser has lost its way and is not putting members and the community first. It points out that your nonprofit organization posted $5.2 billion in profit in the first half of this year and is sitting on $37 billion in reserves. How do you respond?

A. “We are a $80 billion revenue company, thanks to the trust that millions of people have put into Kaiser Permanente, and I’ve put the bottom line (operating income) at 2 percent. That’s 2 cents on the dollar that goes into our capital program for new hospitals, new buildings, etc. It goes into our cash flow to make sure that we have money flowing through the system.

“It goes to our community benefit (to fund local needs), which we set every year and it’s currently almost $3 billion, if not more than $3 billion community benefit that we provide across the country as a not-for-profit, and so the idea that we’re trying to maximize profit is just irrational and obviously from a management standpoint, it’s not accurate.

“Our reserves cover ironically things like retirement benefits for our employees. We have something in the neighborhood of 300,000 to 400,000 employees that are either retired and/or are retiring in our forecasting period that by law we’re required to cover the pension funding and other funding that you know is a big issue in this country.

“It’s ironic that he’s talking about the very thing that is available and committed to the liabilities of the organization from the balance sheet standpoint, and so those reserves are not reserves that are just sitting as cash available, not being used. It is fundamentally part of what makes up the organization and the way we are designed.

“We have almost a quarter of a million people who work at Kaiser Permanente, and they have framed those reserves as extra cash that we’re just holding onto and is not committed. That cash is nothing more than balance sheet numbers that are a part of the reserves that cover the multiple liabilities of the organization.”

Q. By the way, they also note the size of your salary at $16 million a year. Americans, overall, increasingly are expressing concern about the size of CEO salaries. Do you hear that?

A. “The reality is we’re paid to a market like others are. I know a lot of people have questions and concerns about how CEOs are paid, and obviously unions have been talking about what they believe to be my compensation level.

“When you look at my compensation, which is actually managed by the board of directors, it is against the market rate of other CEOs of other comparable-sized organizations. We’re an $80 billion organization with a quarter of a million working inside of Kaiser Permanente taking care of almost 13 million people.

“When you look at what that role would require in terms of compensation to have someone like me or somebody else knowledgeable and capable of leading an organization like this, this is the basket range of what these kinds of jobs pay.“

Q. What can you tell me about the package you’re offering coalition employees?

A. “The average employee in SEIU makes about 20-plus percent above the market, so this is not even a catch-up-with-the-market issue that we’re dealing with. This is Kaiser Permanente saying, ‘Look, with our affordability agenda, we can no longer simply pass on the cost by saying, “OK, so for labor fees, let’s just give you another percent or two even though it’s not justified against the market whatsoever.’...

“In the alliance agreement, we were able to do a couple of things. One, we recognized that the markets in California are very different than the markets outside of California. In the markets in California, because the cost of living is higher, we had something like 3 percent (annual wage) increases that we did. ... In most of our markets outside of California, we were able to do about a 2 percent (annual wage) increase and then a 1 percent bonus. That was a different way of delivering on the economics of that package to those markets.

“We also did something around educational fund, which is one of our big initiatives of how we think through the whole retooling and retraining of employees. As we go forward, we will continue to work on that.

“For SEIU, what we’ve laid down for them is you can look at options within the economic parameters that we established as an organization and then we can work through how we can get to hopefully an agreement that works for everyone. We are starting those conversations with the bargaining unit.”

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Cathie Anderson covers health care for The Bee. Growing up, her blue-collar parents paid out of pocket for care. She joined The Bee in 2002, with roles including business columnist and features editor. She previously worked at papers including the Dallas Morning News, Detroit News and Austin American-Statesman.