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Exerpt from the Oral History of Kaiser Permanente by Scott Fleming - 

Origin of the Term Health Maintenance Organization

Was what later became termed a health maintenance organization an
explicit component of this competing system that he envisioned?

Yes, but let me answer it this way. We developed the conceptual outline for what subsequently became the HMO Act. After we finished in mid-afternoon, we repaired to the Tia Maria, which was a Mexican restaurant then located on Grand Avenue not too far from the Kaiser Center, and got a pitcher of margaritas to relax with. Ellwood said, "Now that we've got this thing on paper, what do we call it?" We thought a little bit and said, "It's a prepaid group practice system, of course," and a few other things about competing alternatives. He said, "Aw, none of these are good terms. No sex appeal. Shopworn. We've got to have something better to call it." So we didn't solve the problem, but a few months later I found out that I'd been spending my entire career in a health maintenance organization--[laughter] and never knew it.

Was that Paul Ellwood's coinage?

It's widely attributed to Paul. However, I don't think so. I think the name came about this way. I think the conceptual
outline that we had started--no doubt modified by Paul after he got back to his own headquarters and talked to other people--was given to Undersecretary John Veneman and put into the bureaucratic system at HEW. It naturally would have gone to the Health Services and Mental Health Administration where Beverly Myers, who was subsequently the chief health officer of the state of California, was the Assistant Administrator for Planning and Evaluation--as the jargon goes. So she was naturally the one who would have received something like this.

A group of bureaucrats on the staff of the Health Services and Mental Health Administration then got together in a brainstorming session at the request of Beverly Myers. They probably came up with half a dozen names because they try always to present options. Then someone or other, probably Beverly, decided that

"Health Maintenance organizationv'- was the best choice. Although this is informed speculation, not history, the name originated in some such manner as this.

Hughes: Would you check with Dr. Ellwood?

Fleming: Yes, I will try. I think I've already asked him once, and I think that all he could tell me was that he didn't give it the
name and that it came out of HEW. I just embroidered on the scenario because I know how things work there.

Hughes: Sounds very plausible.

Fleming: At any rate, that's the essence of how the HMO Act originated. I've often said that it was all downhill from the first meeting we had at the Kaiser Center, because by the time our conceptual outline got into legislative language and got through the congressional committee process, it had become unwieldy and in many respects unworkable. The unworkabilities were finally resolved, in large measure through amendments. Originally enacted in '73 the HMO Act was amended in '76 and again in '78. After the '78 amendments it became reasonably workable. The Kaiser Permanente Program was the primary prototype for the HMO Act and the Exhibit A cited by advocates for HMOs during the
legislative process. It wasn't until the 1978 amendments that Kaiser Permanente felt the act was sufficiently workable for it
to become a federally qualified HMO. There were another round of HMO Act amendments in 1988 which again increased the flexibility of the act and made it more feasible for more organizations. Group Health Association of America History

Hughes: Do you care to comment on the GHAA's role in getting the HMO Act passed?

Fleming: Let me comment a little more broadly on GHAA. GHAA was the outgrowth of two predecessor organizations. One was the American Labor Health Association created by organized labor, which sponsored a number of diverse health care plans. The other was the Cooperative Health Federation of America sponsored by the consumer cooperatives. Many of the earlier prepaid group practice plans were consumer cooperatives--the Group Health Association of Washington, D.C., the Group Health Association of Puget Sound, the Group Health Association of St. Paul, and some other smaller ones. These two groups, both very affirmative toward prepaid group practice, merged, I think, in 1959--

Hughes: That's correct.

Fleming: --to establish the Group Health Association of America.

Hughes: Was it just chance that this was the year that the Federal Employees Health Benefits Act was passed?

Fleming: As far as I know, that was coincidental. The separate predecessor organizations were interested in a Federal Employees Health Benefits Program and perhaps part of their motivation was to try to become more effective politically by merging. However, GHAA was really not well established. It was established on paper but did not have much substance during the legislative work on the Federal Employees Health Benefits program. Again, I'll have to check with Gibson Kingren. I am sure they were an ally, but I don't think that they were a particularly significant 0ne.l

The Kaiser Permanente program as such was not a member of GHAA, but The Permanente Clinic, the medical group in the Northwest Region under leadership of Dr. Ernie Saward, was an institutional member. A number of us, including Art Weissman, Avram Yedidia, and myself were individual members. I don't remember specifically, but several persons in Kaiser Permanente were individual members. I was interested in GHAA partly because the nature of the legislative representation game in Washington gives a slightly preferred position to trade associations. Congressional committees generally prefer to hear from a single trade association than from a disparate bunch of witnesses from the same industry.

Also I recognized the value of allies and GHAA was a natural ally.

Hughes: Why didn't the other Kaiser groups join?

Fleming: Despite its being perceived as a somewhat radical organization in the health care field, much of the Kaiser Permanente leadership, particularly in the medical groups, is quite conservative politically and was then particularly anxious to maintain good relations with the American Medical Association. The American

'Gibson has since confirmed that they played, at most, a very minor role.

Labor Health Association was overtly anti-AMA and, to a considerable extent, the Cooperative Health Federation of America was also anti-AMA. As a matter of fact, some of their member plans had to engage in heavyweight litigation with the American Medical Association over restrictive practices. One major antitrust case involves the Group Health Association in Washington, D.C. versus the American Medical Association.

Thus one basic reason for not joining GHAA was that the leadership of the Permanente Medical Groups--with the exception of Ernie Saward who had a much more advanced sense of the socio-political world than the other Permanente Medical Group leaders-- was simply not comfortable with an organization that was pretty much on the liberal end of the political spectrum at that time and was also antagonistic toward the American Medical Association.

In addition, the GHAA bylaws contained a provision espousing consumer control of medical care. That's the anti-Christ from the viewpoint of many physicians who greatly prize professional autonomy and feel strongly that physicians should not be subject to any organized control from sources external to the medical profession. Hence the "consumer control" provision was unacceptable to key people in the leadership of the Permanente Medical Groups.

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