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The Desert Hospital That Changed an Industry
June | 2013


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Courageous Leadership

The Desert Hospital That Changed an Industry

Healthcare reform did not start in Washington, DC. It actually started in the Mojave Desert in 1933.

A young physician, Sidney Garfield, had just completed his medical residency at the University of Southern California Medical Center and was in search of a job. He heard about a position in the Desert to provide care to 5000 construction workers who were building the Colorado River Aqueduct that would provide water to the City of Los Angeles. A group of industrialists had formed an insurance consortium called Insurance Indemnity to provide worker's compensation services to employees. Garfield was able to secure a contract with the Consortium to provide health care and when he arrived in the community he saw an opportunity to provide comprehensive care to the men. He went and borrowed money to build a small 12-bed hospital. He soon found out that delivering the health care and getting paid for the health care were two different things, as Insurance Indemnity did not always pay their bills on time. Since Garfield refused to turn patients away, he was soon in financial hot water.

One of the executives of Insurance Indemnity, Harold Hatch, suggested to Dr. Garfield that he consider a proposal where the insurance firm would pay him $1.50 per employee/per month to cover any work-related injuries while the employees would pay him $1.50 per month for any non-work related medical problem. This idea of prepayment for health care was innovative to say the least, and it not only helped Dr. Garfield's financial problems but also provided him the opportunity to do something he truly believed in—to try to keep the employees healthy in the first place. The idea worked. By the end of the construction project, Garfield was serving more workers than ever, was employing ten physicians and had earned a healthy profit by forcing on preventative services.

In 1938, Garfield returned to Los Angeles intent in starting a solo private practice when he received a call from a representative of the Kaiser Company that was building the Grand Coulee Dam in Washington State. They wanted his help in setting up a medical system to treat their unionized workers and family members. Garfield's success in that endeavor extended his model to include family medicine.

As WW II began, The Kaiser Company, headquartered in Oakland California began to grow into one of the major shipbuilding companies. Sure enough, Henry Kaiser, the CEO of the firm, asked Sidney Garfield to provide care to their 20,000 employees. Garfield opened the first office of what today we know of as Kaiser Permanente Health Care System. Over the next 40 years, Sidney Garfield shaped what today is one of the largest and most innovative health care systems in the world.

Garfield said that his model represented the new economics of medicine in that its emphasis was on prevention before sickness. By prepaying the health system to manage all of the health of the individual and his or her family, the health care system could better manage the care of the patient and the patient would not have to fear seeking care due to what might become prohibitive costs.

Garfield was not without his critics. Concerned about losing money from fee-for-service medicine, the American Medical Association and other medical groups blocked his physicians from joining their associations, kept them out of local hospitals, called them "socialists" and "unethical" and even managed to have Garfield's license to practice medicine suspended.

Today, Kaiser Permanente has close to 10 million members across10 states and has revenues of over $50 billion. They've innovated in areas of hospital design, routine health screenings, computerized hospital records, and team based medical care where doctors, nurses, mental health professionals, nutritionists and other health care professionals work together.

Sidney Garfield was not the first physician to recognize that the payment system of health care had some basic flaws, nor was he the first to recognize that preventative health care was a better approach to medicine than was the focus on disease. Like so many of the leaders that we've read about in these columns, Garfield did not start out looking to change the world, but the world led him to a place where he had no choice but to change it. Our country is still not sure whether embracing a model of prevention and collaborative care will work but the tide of facts is definitely sweeping us in that direction. Like the picture above, it is better to thrive than just survive.

My thanks to Dan Martich for his suggestion about a story of a healthcare leader.

If you know of a leader you would like to see discussed in Courageous Leadership, drop me a line at [email protected]

 

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TED Talks

Brian Goldman is an emergency room physician who has an idea as radical as Sidney Garfield's. Doctors are human and they make mistakes. He proposes that health care providers recognize their own humanness, acknowledge and share their mistakes and learn from them. A good lesson for all of us. Watch his video here.

 

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