Selected Writings of Dr. Charles Phillips - 
Former Kaiser Permanente Physician

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Charles Phillips, MD, FACEP
2216 E. Los Altos Avenue
Fresno, CA93710
CPhil49401@aol.com

June 26,2004

Congressman Peter Stark and
Other Members of the Subcommittee on Health
With in the House Committee on Ways and Means
239 Canon HOB, Washington, DC 20515

Dear Congressman Stark and other members of the Subcommittee on Health
of the House Committee on Ways and Means:

Thank you for reading this letter from me, a physician in Central California spending half of my time trying to understand 

responsible health care policy1Please read it all as no short summary would do the HMO issues justice.

As a Board Member of the Managed Care Reform Committee (MCRC) and one of its physician advisors, I would like to 

share with you that this last few weeks has seen several events in Washington, DC, that further threaten the health care of 

United States citizens in Health Maintenance Organizations (and even PPOs with HMO rules in the background). Through 

this communication I hope to add a little balanced information on HMOs to help develop a real debate on good and fair policies of government  I work as a volunteer on the MCRC.²

    First in line as a patient care loss event, the Supreme Court repeated unanimously their belief that the HMO Act of 1973 and 

its companion ERISA act a year later pre-empt the 67% of the citizens of this country - all those not tethered in some way to 

government - from being able to sue HMOs on a level legal field. The cases in point revolved around the withholding standard of 

care testing and treatment to two separate citizens in Texas.

    Yet all those people who are empowered to vote or decided on these issues - including all members of Congress and all of 

the Justices on the Supreme Court - can sue their HMOs and thus get a first tier of care. All such people should recuse 

themselves from deciding if the other 2/3rds of the country should have their right to sue or agree not to exercise their elite and 

self created rights until there is final equity in justice for all.

In fact, this right to sue for damage from health plans was available to all people until it was taken away by Congress through the 

HMO Act and its ERISA companion. The Chief Justice of the Supreme Court has explained a few years ago that the HMO

construct is "the creature of Congress." The courts can not undo the legislative misadventure much as they might wish to.

    So the buck lands nowhere else but on Capitol Hill. In fact, the whole campaign on patient safety was - according to the USA 

Today (and I concur) - developed as a managed care distraction to focus on the front line care givers and away from the rights 

of patients to sue fraudulent Plan decisions. Now, patients are a bit saturated with all the safety verbiage and are wondering once

again about the right of HMOs withholding needed care, the most unsafe aspect of US medicine in the country. And patients want

back the dignity of having a confrontation with a health plan in front of a jury of their peers for resolution and not to be forced into 

arbitration contracts).

    Second, and more specific to your committee, all of you heard a presentation by Andrew M. Wiesenthal, MD, on June 17, 

2004 (Attachment #l) which asked the government to set Information Technology standards which might best fit Kaiser's current 

efforts. This would over time have the value to Kaiser of about a billion dollars. He also hinted at the need for government 

assistance in Kaiser's $3 billion IT investment, forgetting to mention that Kaiser's profit last year of almost a billion - if repeated 

for the next few years  would pay for it just fine.

    The problem is that with this handout request through a Kaiser physician and senior, for  profit partners, there appeared to be 

alternate person able or willing to present the real  inner workings of Kaiser to give you another view to consider. If you proceed 

in  Kaiser's path without opposing information, you will have guaranteed Kaiser an edge  over all competitors for the next thirty 

years - a huge gift.

    But Kaiser is a medical Enron that with all its venture investments and schemes. The  HMO runs completely opposite all of your

efforts to separate patient care into clear units  without kickbacks in your Stark I and Stark II strategies. Kaiser's exception to all 

the  rules makes the HMO - once again - the creatures of Congress. The exception concept is  that a large enough group of 

physicians could not have sufficient greed to each hold the  other to bottom line business practice where patients become 

"external customers" and  get less care. (Notice in Attachment #2 file attached Kaiser picture of patients as  "external 

customers.") I wish to tell you that such widespread greed has become the  more traveled road.

    So, at least for the Congressional Record if not for your careful reading, let me share with  you the following thoughts to give 

you a chance for balanced, patient oriented thinking  that may help you with your upcoming decisions.  My comments will be 

divided into  two parts - 1) Kaiser Permanente as an organization, and 2) Dr. Wiesenthal's particular  presentation and request 

for aid to Kaiser.

Kaiser Permanente-

    This prepaid health plan began with a physician named Sydney Garfield who decided after Los Angeles residency to try his 

practice of surgery outside of city and out in the desert along the path of the Los Angeles Aqueduct from the Colorado River. It 

was the Depression and there were not many jobs for average surgeons in the City of Angels.

    His desert hospital was called "The Contractor's Hospital" - causing no confusion of whose primary interests he would really be

serving. He quickly learned that getting prepaid was the only way to go and secured that system through businessmen in San

Francisco organized through the Business Exchange to supervise the building of the aqueduct. His care was cheaper than 

sending patients all the way to Los Angeles. Often he drove his makeshift ambulance himself.

    Dr. Garfield pocketed $250,000 during four years of the depression in his personally owned, for profit, prepaid, health 

business. With the money he bought many apartment buildings in Los Angeles.  At the same time, his nurses often worked 

without pay. This is all clear in a book Kaiser Doctor Smilie wrote about Kaiser with help from many at Kaiser - a book (Can 

Physicians Manage the Quality and Costs of Health Care? The Story of the Permanente Medical Group) probably 

meant to be used internally to motivate new physicians. The book remains Kaiser's only sanctioned, detailed history.

It will never be found in any of Kaiser's 300 (?) patient education rooms.

    Henry Kaiser, Sr., teaming up with Bechtel and others, became involved in dam building and later ship building. These 

businessmen and also wished workers to get care in business friendly clinics and stared working with Dr. Garfield. Liberty ship 

building for England entrenched the Kaiser-Garfield team in the West Coast around the cities where the building occurred.

    And Kaiser is still 75% a California care system, having to retreat from many states - New York, Texas, Missouri, etc. It seems 

that New York patients really wanted a choice of doctors. Dallas did not like finding 20 wrongful death cases filed soon after 

Kaiser arrived.  The Mid-Atlantic beltway operation of Kaiser was simply another health plan bought as it moved out. This Kaiser 

unit has been a steady income loss to Kaiser. But it is a chance to make Congress believe that Kaiser is really national.^{3 , 4}

    "Dad" Bechtal taught Henry Kaiser from the beginning that the only good business systems create a 50-50 division of profit. 

And so as it was as Henry Kaiser, Sr. and Sydney Garfield, MD, split profits, settled in Lafayette, California, living nearby one

another, and even marrying sisters.  And so it evolved some 60 years ago as the physician groups - having bought out 

Dr. Garfield - negotiated in a beach home owned by Henry Kaiser the internally key profit division of 50-50 between 

the Kaiser Hospitals and the for profit Permanente groups.

    This Tahoe Agreement, which may be read by your committee as needed (signature page enclosed as Attachment 

#3 with Sydney Garfield, MD, only willing to use his first name) set up the most lucrative physician reward system in 

the country - some 3,000 senior partners becoming rich taking care of those patients with few choices -

the elderly, those with moderate jobs, and the poor.

    On the enclosed Permanente Map (Attachment #4) - enhanced by me so as to readable by thoughtful people outside of Kaiser

- you can see that the little figure of Lake Tahoe is prominent in the history of Kaiser Permanente. That building on the beach is 

not about a Kaiser Clinic but rather the location of a fundamental kickback scheme. An update national agreement in 1997 

spelling out the same profit split and even more physician control - as evidenced by a photo op picture (Attachment #5) and 

article - has been referred to internally as Tahoe Two. It is all about renewing the kickback profit for doctors.

    As your Medicare investigators discovered in the mid 1980s but never emphasized to the people. Kaiser builds in 

its profit goals (3-5% of the budget - a budget now at about S22 billion a year) as the next year's business plan is 

created jointly by the physicians and management. Administration and the physician leaders share the same 16th floor of 

the same building. Once the appropriate fee per patient per month is decided by the highest executive committee - the National 

Partnership Committee now co-chaired by Dr. Francis J. Crosson [and Mr. Halverson] - there is a pretense of an "arms' length" 

contractual negotiation to solidify the amount.  The amount is about $70 per patient per month now.  This profit goal is reached by

giving patients about half of the services that are expected by national standards societies - the American Heart Association, etc.

One of the key elements is blocking patients from hospital beds and kicking those that get in out early - each physician having 

daily to justify each day in the hospital to a lay business type person with no license. One patient died as such a verbal

contest was occurring in the hospital hallway; the Kaiser physician - who was trying to do the right thing - decided to do no more 

hospital care thereafter.

    On the same Permanente Map please note that the physician patient relationship in the early part of the voyage to  

investment capitol is later replaced by the Permanente Patient Relationship on the captains' wheels. This allows the 

"wind" of the system to substitute the Group Ethic [read profit motive] for the Hippocratic Oath. In fact, the Kaiser 

physicians believe that all patients have some unwritten contracts with them - like spending less on the really sick 

patients so the premiums are kept down [or profits are kept up. They publish all this for internal motivation

- agreement on the "genetic code" of Permanente Medicine - but it can be put together when needed. The articles in 

the Permanente Journals which are not emphasized on the front cover should be a must read for anyone in Kaiser. 

And this map should be studied daily by your staff.

    The goal of the Permanente fleet of for profit units are to keep to the two goals on the right side of your copy of the 

map - A) a "sustainable future" meaning the huge retirement monies hidden non-profit under the Kaiser Plan by a 

special IRS deal, and B) investment capitol from Silicon Valley [and New York City in the way of bonds] to have

the leading Information Technology system possible.  They do not mention all the many for profit ventures 50-50 

between the Plan and the Physicians (the latter using the vehicle of the Permanente Federation and the Permanente 

Company or Permco) which allow Kaiser to often be on both sides of many business contracts.

Note that CareTouch was a company developed free within Kaiser using its computer systems (a $14 million value of technology)

and then floated out as a private company with Dr. David McKinnon Lawrence still on board. I don't think even Congress could

ever map out Kaiser/Permanente full organizational chart (boards in charge), real operational organization (doctors in charge), 

profit investment systems, showing up on both sides of a contract (e.g. dialysis care), etc.

    Kaiser exists and flourishes because of media silence (ads on the radio and in newspapers), contributions to government, 

special treatment to government patients, toothless Department of Managed Health Care, sleeping regulators who like prime rib

while reading contrived notebooks, and the huge help of the federal government.  To the federal government's help there has 

been deferring Dr. Garfield from the draft in WWII so he could build his private, for profit clinics in free government buildings; then 

giving the same buildings to Henry Kaiser and Dr. Garfield almost free after the war; then giving huge grants to Kaiser for patient 

testing (1961); then allowing Kaiser to use high pricing on meds to get bloated Medicare financial credit; next letting Kaiser 

design the HMO Act of 1973 and the ERISA protection a year later; then further supplementing Kaiser as a federal HMO for more

startup funds; then the special IRS ruling party "X" and party "Y" that lets physicians amass delayed, tax free fortunes; then 

exemptions from Stark I and II conflict of interest rules; then heavy input into the Clinton plan for health; lack of scrutiny of ads for 

Senior Advantage in the Medicare Plus Choice office; disinterest as Kaiser pretends that it was aligned with CDC guidelines on 

anthrax ⁵  AHCPR Grant HSO 6680 to help Kaiser write a book on how the sickest of patients have to manage their own care⁶ 

and now the invitation by your committee to perhaps have Kaiser set the standards for medical information systems. This is a 

win-win-lose - Kaiser wins big profits, government has chance to secretly ration care without yet sharing any blame, and an 

patients are abused by this terrible system of non-care - a business plan masquerading as health care. Kaiser is the leading 

cause in this country of senior abuse.
 

Dr. Wiesenthal's Presentation to You - June 17,2004 (attached)

4. Only the Washington DC Kaiser unit (mid-Atlantic) tells the truth in its ads that only the Kaiser "Plan" is non profit, since 

then Permanente physicians are for profit; so Kaiser is careful where you can listen and watch but cavalier where you cannot

keep track of what they are saying to the nation.

6. Dr. Wiesenthal suggested that through the Public Health Grant of 1961 that Kaiser had "internists 

armed with computer print-outs of pertinent medical data"; I am quite sure that this was not true and the 

Cleveland Clinic and many others would dispute this; (I visited Kaiser in San Francisco in 1967 during a 

search for internship and saw the lab printout which was long but not unique¹².

7.  With the Public Health seed money for testing withdrawn long ago, Kaiser now does the least testing 

possible and even publishes articles to the same effect in the Permanente Journal; so the real goal is now 

reversed - full chemistry panels looking to uncover disease are rare - but the organization would still like 

the multiphasic testing mystique to be attached to the Permanente brand name.

8.  I review new Kaiser patient records about once a month with patients or surviving relatives permission; 

I have yet to see an easy to read, computer printout of information;

9.  While Kaiser Colorado is heralded in this report to your committee as wanting information to flow well, 

internally the physicians have been counseled one on one not to ask for the old chart of patients so 

often¹³.

10. Next Dr. Wiesenthal quotes an anonymous Kaiser physician in an anonymous location (? real or not) 

being able to complete a consult on the same day; I would challenge Kaiser to come up with the author, (it 

sounds more like a chapter theme from Dr. Lawrence's book from CHAOS to CARE using fictional 

characters; the book was written after Helen Hunt commented in a movie about HMO failures and got 

audiences clapping around the nation in otherwise before and quiet theaters)¹⁴;

11. Contrast this to the reality of a Washington D.C. patient holding a job who came into Kaiser on 

January of one recent year saying he had Hepatitis C and needed a Gl visit only to have no Gl 

appointment at all with liver failure death coming 8 months later, speedy consults are not the 

internal reality of Kaiser computers or not;

12. An attached cartoon (Attachment #5) - a sample of Kaiser's twisted humor - shows the real attitude that

rapid care costs money - don't hire enough surgeons despite patient backups in surgery; in one location in

Northern California Kaiser was caught giving out bonuses to Call Center employees who could handle a 

patient problem on the phone without giving away a physician visit time;

13.  Then Dr. Wiesenthal promotes the idea of the computer as "on-line, real-time support information" for 

physicians; actually these are popups on the computer which the physician must follow or explain why not 

- an example of the illegal practice of medicine by a corporation like an unlicensed, for profit Permanente 

group;

14. The pop-ups are not state of the art suggestions but ratlier crude business suggestions like using 

medications from the 1970s and 1980s - Tolinase for diabetes, barbituates for depression, etc.; these type

of suggestions are also in pocket handouts given to all the physicians (surprise check any Kaiser white 

coat or nearest drawer);

15. As Kaiser is now trying to avoid putting diagnoses on patients so they cannot check them on the 

Internet, the "after-visit summary" will not be thorough to the care;

16. "Team care will be more patient centered" comes from the decision in 1997 within the Recovery Plan 

for 2001 to increase membership, retire physicians, and substitute nurses, pharmacists, dieticians, and 

others for MDs; physicians were to try to phone patients and have them write letters back¹⁵ to keep the 

clinics less crowded - all being separating the physician from being the personal friend they try to 

advertise on the radio.

17. So noting that visits to the MD go down is not about electronic care but a planned reduction 

in physician-patient time; this did result in getting profits back up - nearly one billion dollars last 

year (half to the physicians).

18. "Finally, clinical research to support evidence-based care will be greatly enhanced" is mentioned, but 

Kaiser is the HMO that most hides its supposed "evidence-based" material from the world; on the Internet 

it can only be found on the Kaiser Papers Website, one run by a Vickie Travis with our support of 

materials and totally unauthorized by Kaiser,

19. The Clinical Practice Guidelines pretend to be a reflection of national standards but are not; 

for example. Kaiser will not search its obese patients for diabetes despite the American 

Diabetes Association pointing out the obvious - that this is a good group to screen for 

diabetes16.

20. Dr. Garfield taught - opposite to all the Kaiser ads - that Kaiser dispenses wellness not sickness care; 

together with his "economy of shortages,"¹⁷ often no care occurs at all.

21. On page 4 of his report to your committee, Dr. Wiesenthal completely avoids the fact that Kaiser 

scraped its internal IT program in 2003 and went with an entirely new, outside brand from Wisconsin for 

which it had no training; ratlier he states "This explains why we have worked so hard to help the industry 

develop the tools that are the foundation of many systems now in use or development"

22. The goal of his presentation finally becomes clear -it is a request for more money from the federal 

government - the "provision of targeted financial support for public- private partnerships"; you might as 

well have McDonalds ask to be a central government partner in developing Big Mac standards to be used 

for all hamburgers.

23. No doubt Kaiser and the VA would like to get many dividends from their $2 billion each investment in 

IT - two organizations each of about the same size budget; private physicians would be left behind as well 

as other health plan competitors;

24. Your committee might do well to study the death of a Ven-Cor patient who was getting tired with and 

needed oxygen for the night for safety - and such was ordered - but with all the steps needed to execute

this order of simple care through the computer, the patient missed the treatment and died a suffocating 

death; computers have not replaced people particularly in systems where the money spent on IT is taken 

from other areas that require a lowering down the job training of the front line participant

25. Dr. Weisenthal continues: "We are convinced that widespread adoption of health care information 

technology like KP HealthConnect" [really licensed EPIC] "is essential for sustained quality improvement" 

is a statement that is entirely self serving and should not be accepted for one moment until the web of 

financial relationships and for profit ventures are made transparent for the first time in Kaiser's history; 

otherwise it is simply a welfare handout for the rich (check the million dollar retirement packages of the

senior partners).

26. "The Leapfrog Group has been a leader in the introduction of payment-quality standards, especially 

for hospitals" obscures the fact that Kaiser has also developed self serving "quality" standards; these 

efforts hide the fact tliat Kaiser's real focus is to kick patients out of hospitals before they are well or even 

worse commit them to rogue hospice units with too much uncharted morphine in caregiver pockets.

27. "Ultimately, for payment incentives to have real influence on quality, they should be directly tied to the 

care delivered during a specific time period," and Kaiser with its benchmarking tracking of physicians will 

be the only one ready to supply the demonstration projects; the government will forget in the process that 

the Kaiser physicians already have dazzling incentives to withhold care.

28. Kaiser's good score on a California survey of heart attack ontcomes, as an example, came 

from convincing 25% of the patients at the door that they would not like to have any care at all 

making them DNRs - within the survey the equivalent of dead at the scene; so Kaiser statistics 

are as bad as Mark Twain predicted of all statistics.

29. Kaiser's view of itself- expressed to you as supposedly an organization sharing good ideas - should be

asked by you to publish all of their Clinical Practice Guidelines for physicians (outpatient) and the parallel 

Pathways for physicians (inpatient) each for the first time; instead, they guard these items and the huge 

profit systems as if it was gold buried in Fort Knox not even the AMA getting to peek at them;

30. Medicare and Medicaid made Ross Perot a very rich man by subcontracting data techniques which 

could then be used privately by the same contractor. Kaiser would not mind duplicating that path with its 

IT.¹⁸

^{31. Both the VA19 and Kaiser make their patients split medications into pieces of uneven fragments just} 

^{to save money even though the patient ends up with a 40% swing in dose (see Timmis v. Kaiser20 case} 

^{now in appeals court); many Kaiser patients start with big pieces and work their way down to dust - does this} 

^{sound like a quality outfit to you?}

^{32. Rather than following Dr. Wiesenthal's congratulating the committee on this "timely and important hearing,"} 

^{I would rather remind the committee that if greed were to be removed from health care that there would be} 

^{enough money to provide the right treatments no exception for organizational size; first make greed} 

^{transparent, then hold hearings on IT standards.}

^Conclusion

^{Dr. David McKinnon Lawrence - former Kaiser CEO who now exports Kaiser ideas (of empty hospitals) to England - and I were} 

^{both premeds on the Amherst College campus just one year apart. But we have taken different paths and have an entirely} 

^{different vision of medicine and the covenant of good care.}

^{Dr. Lawrence believes that the Marcus Welby, MD, TV show was not helpful to patients and only described the "lone eagle"} 

^{practitioner who has become extinct in this new era of medical economics. As a small town physician with a sound education,} 

^{board certification, and 35 years of real medical practice, I would encourage you to let both eagles with patient compassion and} 

^{accountants still wearing MD white coats compete so patient advocacy will not be banished from this planet}
 

^{In the final analysis you need to understand the Group Ethic versus the Hippocratic Ethic and know which one you are really} 

^{funding. Your own personal health depends upon it as well as the health of all whom you represent.}

^Sincerely,

^{'  I am a near constant participant in the Dialogue chat group of the Health Administration Responsibility Projectrun by Harvey Frey, MD, PhD, and JD.   (HARP.org)
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^{3 One published, internal strategy of Kaiser is to leave a copy of a Permanente Journal lying around your Congressional office to give the illusion that is a nationally accepted journal of medicine and research which it isn't; physicians realize it is more of an internal communication device.
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^{4 Kaiser headquarters in Oakland taxed its Missouri Permanente physician group $3,000,000 a year to artificially support the mid-Atlantic unit. When the Missouri operation closed as a failure, the physicians suing Kaiser brought that up. Another issue was loss of profit equity.
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