Regional Oral History Office University of California The Bancroft Library Berkeley, California

Robert Erickson, J. D.

KAISER PERMANENTE MEDICAL CARE ORAL HISTORY PROJECT II

YEAR 2 THEME: KAISER PERMANENTE “CORE VALUES”

Interviews conducted by Martin Meeker

in 2007

Copyright © 2008 by The Regents of the University of California

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Since 1954 the Regional Oral History Office has been interviewing leading participants in or well-placed witnesses to major events in the development of Northern California, the West, and the nation. Oral History is a method of collecting historical information through tape-recorded interviews between a narrator with firsthand knowledge of historically significant events and a well-informed interviewer, with the goal of preserving substantive additions to the historical record. The tape recording is transcribed, lightly edited for continuity and clarity, and reviewed by the interviewee. The corrected manuscript is bound with photographs and illustrative materials and placed in The Bancroft Library at the University of California, Berkeley, and in other research collections for scholarly use. Because it is primary material, oral history is not intended to present the final, verified, or complete narrative of events. It is a spoken account, offered by the interviewee in response to questioning, and as such it is reflective, partisan, deeply involved, and irreplaceable.

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All uses of this manuscript are covered by a legal agreement between The Regents of the University of California and Robert Erickson, dated August 21, 2007 The manuscript is thereby made available for research purposes. All literary rights in the manuscript, including the right to publish, are reserved to The Bancroft Library of the University of California, Berkeley. No part of the manuscript may be quoted for publication without the written permission of the Director of The Bancroft Library of the University of California, Berkeley.

Requests for permission to quote for publication should be addressed to the Regional Oral History Office, The Bancroft Library, Mail Code 6000, University of California, Berkeley, 94720-6000, and should include identification of the specific passages to be quoted, anticipated use of the passages, and identification of the user.

It is recommended that this oral history be cited as follows:

“Robert Erickson, Kaiser Permanente Medical Care Oral History Project II Year 2 Theme: Kaiser Permanente ‘Core Values’”

conducted by Martin Meeker, 2007, Regional Oral History Office, The Bancroft Library, University of California, Berkeley, 2008.

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Discursive Table of Contents—Robert Erickson

Interview #1: August 21, 2007

[Audio File 1] 1

Family background in Oregon and Washington—Service in the Navy—Education at the University of Oregon and work in the Forest Service—Attending law school at both Hastings and Harvard—Clerking for Judge Healy and working on the Chessman case—Joining a law firm in San Francisco—Seeking legal practice with “sufficient social purpose”—Joining Kaiser Permanente in 1958—Involvement in the Associated Democrats/Tipplers—Rudy Nothenberg and Willie Brown

[Audio File 2] 23

Scott Fleming and the scope of work at KP—Learning about KP’s model of health care delivery—Government relations and lobbying—KP, California Medical Association, Assemblyman Byron Rumford, and pharmacy-related legislation—Work as staff attorney: board and contracts—Ernie Saward, KP’s “genetic code”, and the core function of the medical directors—Negotiating medical service agreements—Erickson as General Counsel—Negotiating plans with the Civil Service Commission—Community rating and efforts at health care reform—Role at board meetings as General Counsel

Interview #2: November 19, 2007

[Audio File 3] 47

James Vohs and the search for a new CEO—The unanimous selection of David Lawrence as CEO—Historical tensions between The Permanente Medical Group (Northern California) and the Kaiser Foundation Health Plan—Constituencies of the medical groups and the health plan—Thoughts about Jim Vohs, Bruce Sams, and David Lawrence, Eugene Trefethen—The McKinsey Report—Vohs opposition to Lawrence’s agenda—Vohs and Sams vs. Lawrence and Caulfied—Evolution of the Health Plan Board of Directors from the 60s through the 90s—Role of Kaiser family members on the board

[Audio File 4] 66

Board recruitment and development—Membership of board members in the health plan—Transformation of the board during Lawrence’s term as CEO—Kaiser Permanente Committee (KaiPerm Committee)—The development of the Permanente Federation from Erickson’s perspective—Selecting and dispensing with health plan managers—Role of the Health Plan Board in approval expansions and acquisitions—Health Plan national governance structure—Final thoughts

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Robert Erickson

Interview #1—August 21, 2007

[Begin Audio File 1 erickson_bob1_08-21-07.mp3]

01-00:00:00 Meeker: Today is the 21 of August, 2007. This is Martin Meeker, interviewing Robert

Erickson for the Kaiser Permanente Oral History Project, and like I said, what we like to start out with is just a sense about your own personal background, so you can just tell me when and where you were born, and maybe a little bit about your family circumstances that you were born into.

01-00:00:28 Erickson: Well, I’m Bob Erickson. I was born in Spokane, Washington. My dad worked

in some aspects of the timber industry most of his life, inspector for Western Electric Company, and then in plywood plants in Washington and Oregon, and eventually was a co-op owner of a plywood plant in Eureka, California. My mother was an operatic singer: sang on the radio in Tacoma and Portland, and at events, and so on.

01-00:01:08 Meeker: Where was she trained?

01-00:01:12 Erickson: Well, some in Fargo, ND, and some in Portland, Oregon.

01-00:01:16 Meeker: Okay.

01-00:01:18 Erickson: The Depression came along when I was about—I was born in 1926, so four or

five years. My dad lost his job six months before it would have become permanent, and it ended up he and I both went out to the farm, where my grandmother and step-grandfather had a farm, in Mount Vernon, Washington, in Skagit Valley, and I lived there for four years, a number of summers, and went to school the first four grades there. My dad was there for three years, and then they reopened a plywood plant in McCleary, Washington, and he got a job down there.

01-00:02:07 Meeker: What sort of crops were grown on that farm?

01-00:02:10 Erickson: Alfalfa, four acres, and nine cows, a nice orchard, about half an acre of garden

of every variety, and occasionally, oh, there might be peas, or barley, or oats on four or five acres. It was just a twenty-acre farm. It was very good, very rich land. And then my step-grandfather, who was the only grandfather I ever knew, was very close to, and spent a lot of time with. He was a powder

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monkey in the mines, where my real grandfather was killed in a mining explosion. He was a powder monkey, too. My grandmother, I guess as a condition of marriage, said he had to get out of the mines, which he did. He still was a powder expert on the surface, and blew the original Highway 99 from Mount Vernon to Sedro Wooley, about fifteen miles or so. Whenever they had blasting under their power lines, they would have him do it, because he could get rid of the rock or the stump, and not knock down the power line.

And he was also a well wisher. With a forked stick, he would find water, and very successfully. [laughter] His wells didn’t go dry. And that was interesting. He’d tell you about how deep it was within a couple of feet. And I helped him on that, in the summers when I was in the fifth to the eighth grade at McCleary. It got so he had a little trouble pulling the pipes twenty or thirty feet up and down, and I could do that.

01-00:04:04 Meeker: What was schooling like out there?

01-00:04:07 Erickson: Well, I thought it was very good. I thought it was a lot better, even, though it

was a rural school. It wasn’t California. But I’ve never been satisfied that California was that strong in primary schooling in general, even before the more recent disasters, but—

01-00:04:30 Meeker: The pre-Prop 13 world, huh?

01-00:04:31 Erickson: Yeah. Yeah. But it was pretty good, you know? I thought you learned a lot,

even though these were small schools. The first one was a two-teacher, two-room school, about sixty kids, and then in McCleary, we had five teachers and about 130 kids at that time. It was a town of 1,200. A one-man lumber town. Henry McCleary owned everything, practically.

01-00:05:04 Meeker: So, it was a company town? Did he own the housing you lived in and so

forth?

01-00:05:09 Erickson: No, there were a lot of company houses that he owned, but there were other

houses, too, and we lived in the other houses. There was a company store, but there were two non-company stores, where we traded.

01-00:05:23 Meeker: And I imagine any union activity was frowned upon there?

01-00:05:25 Erickson: There was heavy union activity while they were there, and my dad needed the

job, so he went through the picket lines. There were wars, and of course the

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highway patrol was there, on the side of Henry McCleary, and it was tough. People were shot. Not killed, but shot.

01-00:05:48 Meeker: So what years were you in this town?

01-00:05:51 Erickson: Fifth grade through the eighth grade. It was 1936 to 1940.

01-00:06:00 Meeker: Okay.

01-00:06:02 Erickson: Then my dad was going down to Oregon, to apply for a job at a new plywood,

Evans Products Company in Lebanon, Oregon, was building what was then to be the largest plywood plant in the US. So I started high school in Elma, Washington, and went down to Lebanon, and had a ruptured appendix in the middle of a three-day weekend. Ended up in the hospital, and in those days, a ruptured appendix was at least 50 percent, at least, fatal. It was about four weeks before I clearly was going to make it. So the finances being such as they were, my dad applied for a job building the plywood plant, and my mother moved us down there, and I started high school eventually. I think it was the first week of December. I did well enough, so I got full credit for the year, and went to high school there for four years. Played a little baseball: three year letterman in baseball. Did a lot of hunting and fishing.

01-00:07:20 Meeker: With the beginning of war in the end of 1941, 1942, did your father work in

any of the war industries, or did he stay at the plywood factory?

01-00:07:28 Erickson: He stayed at the plywood plant.

01-00:07:31 Meeker: And your mother? Did she look for a war job? Played for the Arsenal of

Democracy?

01-00:07:34 Erickson: No. No, she stayed there, and in the summers, she worked at—well, about half

the time she worked at a dress shop in Tacoma, and sang on the radio for that dress shop, and did some other stuff of that kind. And then she moved to a branch up in Olympia, and there she could even commute if she wanted to. It was only eighteen miles from McCleary. You know, the one day that I didn’t go hunting in 194— was it 1941? ’42? That’s when the war started? December 7.

01-00:08:23 Meeker: December of ’41. Sure.

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01-00:08:24 Erickson: ’41, yeah. That was the one day I didn’t go hunting. I'd stepped on a nail and

couldn’t walk very well, so I went to church with my mother. She always sang in the choirs, and so on at different churches. When we came out of the church, we went up to say hello to the friend that I worked for, saw me at a service station there. He came out to the car, and said, “The Japanese are bombing Pearl Harbor.” So.

01-00:08:55 Meeker: Was there a particular denomination that your family went to, as far as

church?

01-00:08:58 Erickson: My mother always was an Episcopalian, but we ended up in these towns that

didn’t have an Episcopalian church, so at the time of the day the war started, that time she was in the choir of the Presbyterian church in Lebanon. And my grandparents went to a Methodist church, which I went to for a year or so, and Sunday school, and so on.

01-00:09:24 Meeker: When you were in high school, was there an understanding that you would be

going off to college, or that you would be starting in a job like your father?

01-00:09:33 Erickson: No, all of us understood that I would go to college at the time I was five.

Never any question about that. My dad always regretted that he hadn’t gone to college, but, you know, in his day, he was lucky he got through high school. His two brothers didn’t finish high school. My mother went to college. Her father was a college professor in Fargo. I don’t know what the—South Dakota State or something? Or North Dakota University. I don’t know which one it is, but one of them is in Fargo, and he taught there. But he died long before she married my father. She and her mother had moved out to Portland, Oregon. Yeah. It was always understood I would go to college. In fact, my mother said I should go to Harvard Law School. I eventually did go one year there.

01-00:10:39 Meeker: So what year did you graduate high school?

01-00:10:42 Erickson: ’44.

01-00:10:44 Meeker: And you would have been, I assumed, old enough for the draft at that point in

time?

01-00:10:48 Erickson: Oh, right, but I had joined the Navy already.

01-00:10:51 Meeker: You joined the Navy already?

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01-00:10:51 Erickson: Yeah.

01-00:10:52 Meeker: Okay.

01-00:10:53 Erickson: A number of us joined the Navy, and what they called radio technicians

training. Later named more appropriately electronic technicians training, and I was called up originally in early June of ’44, but they cancelled me because I wouldn’t be eighteen until the end of September, and took the other four guys.

01-00:11:22 Meeker: So was this kind of like a Naval Reserve program that you joined?

01-00:11:26 Erickson: No, it was a special training for—with waivers for things like vision and so

on.

01-00:11:35 Meeker: Okay.

01-00:11:35 Erickson: See, I took tests for Air Force, and Naval Air Force, and other things. Passed

them all, but my vision eliminated me. I knew that. I just took them to practice taking tests. But this one was actually a tougher test, and a number of us did pass it. My best friend and I both passed it, and so on.

01-00:12:00 Meeker: For radio technician?

01-00:12:02 Erickson: Yeah.

01-00:12:03 Meeker: Okay. So, were you interested in the latest in technology as kind of one of the

things that —

01-00:12:08 Erickson: Oh, not at all.

01-00:12:09 Meeker: Okay.

01-00:12:10 Erickson: I was just interested in the Navy rather than the Army.

01-00:12:12 Meeker: Okay.

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01-00:12:13 Erickson: I did not—I preferred a ship to mud, and I knew the Navy had better food. I

found out they had infinitely better training than the Army, too. I mean, there’s no comparison in the electronic stuff between the Naval training and the Army training. Much better. So we went off. All of us went to Great Lakes for boot camp, you know, in a group that was all radio technicians, potentially. And then I went to Michigan City, Indiana, for six weeks of—I don’t know what they called it now, but anyhow, it was preliminary school.

01-00:12:53 Meeker: Is that right on the lake, there?

01-00:12:57 Erickson: You know, it’s between South Bend and Peoria.

01-00:13:01 Meeker: Okay.

01-00:13:03 Erickson: And, yeah, it’s right on the lake. You can see the ice pile forty feet high out

there on the south shore of Lake Michigan, and the wind always blows that way, and it just piles up. And I had my one weekend of SP duty there, too, which was sort of interesting. My best friend at the early stages of the Navy and I patrolled the streets of Michigan City, primarily Saturday night. Somebody dropped a bottle about three feet from us from the fifth story of a hotel. [laughter] And then they had a big fight between a fellow who had flunked out and was drunk and one of the petty officers. They had some conflict going on. We could control the guy with no trouble, but this petty officer kept grabbing the club and wanting to hit him over the head, and we kept saying, “Don’t hit him.” We eventually got him back to base in one piece.

01-00:14:11 Meeker: Did he end up in the brig?

01-00:14:12 Erickson: Oh, yeah. Well, what amounts to a brig in Michigan City Harbor. But it was

interesting. Then one day we had six inches of snow, and the guy took us out for our usual exercise, and I was running up and down about a 500-foot hill in that snow. It was great exercise. Yeah, that was my best memory of Michigan City.

01-00:14:47 Meeker: And so then did they send you out to the Pacific Theater?

01-00:14:51 Erickson: Oh, no. Then we went to primary training, and I managed to get Del Monte,

California. So we lived in the hotel at Del Monte. It’s still a naval school. It’s gone through various phases, and I think it may be a language school now.

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01-00:15:07 Meeker: Is that the one down in Monterey?

01-00:15:08 Erickson: Yeah. It used to be the Grand Del Monte Hotel with the polo field. The polo

field was our obstacle course, and they had three swimming pools in a series, and lakes, and flowers, and had a dining room with women waitresses, and all the milk you could drink. I mean, it wasn’t the Navy at all. And you could walk around the peninsula, or go over to what was then the one grand place down there, Pebble Beach. Had sort of free access to everything. Well, not monetarily free, but humanly free. So that was nice to do for three months. Then I moved to advanced school at Treasure Island. I was there for six and a half or seven months. Then went out to Hawaii, went to school again for three or four weeks, and then went to Japan, and arrived there promptly about—just about five months after the war ended. January 1 of ’46.

01-00:16:28 Meeker: And during this whole period of time, you were a radio technician?

01-00:16:31 Erickson: Sort of. What I did—well, I really did nothing until I got to a ship assignment

there. I just sat on the ship I went out there on. There were only about twenty passengers on the ship, and I think they were all radio technicians. And finally, they assigned a couple of us to the USS Panamint, which was the flagship of the Admiral in charge of sweeping the mines in the Sea of Japan.

After they finished sweeping the mines, we had a pleasure cruise, which I got on. Most of the people had been out there over eighteen months, nineteen months. So they got the pleasure cruise, and we got to go along, and we went to Kobe, and Yokasuka, and Tokyo. Had dinner in the Palm—what was it? The Imperial Hotel, which was McArthur’s headquarters. And went to Shanghai for a couple days.

And then we came back to San Francisco, and we got the ship ready for Bikini. Atomic tests at Bikini. Practically everybody got discharged, almost, within six weeks after we were back. We were anchored out at Angel Island during that period. Then the ship went up to Mare Island for a number of weeks, and I was one—there were a few of us that were still on, but very few. You know, everybody else had gone home. In the radio technician arena, there was one chief who had joined the ship, and me.

Our biggest task, we had to take down all these aerials. This thing was so top heavy, we thought it would roll over with aerials. They had to take them down, but we had to put them back up, and didn’t know how to tie a line that was sufficient to hold up those aerials, and neither did the deck hands, which surprised us. I thought they could do it for us, but they couldn’t do it, either. But we finally got some situations where we could pull it up, and anchor it, and then tie things, and got it going again. And then my discharge came up.

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They counted my time from the time I joined the Navy, so I got six months credit and got out two months early, which was fine.

01-00:19:06 Meeker: So that would have been when?

01-00:19:08 Erickson: I think it was the 10th of June, ’46. Yeah. Just in time so I could go down, and

enroll in the Forest Service, and worked for the Forest Service that summer. But first, I had a pre-enrollment at the University of Oregon, and then I went up to the Forest Service for the summer.

01-00:19:25 Meeker: So you enrolled in the University of Oregon, then had a few months to kill, so

you decided to spend it in the Forest Service?

01-00:19:30 Erickson: Yeah, I'd worked in the Forest Service between my junior and senior years in

high school. I really loved the mountains, and hiking, and chopping down trees.

01-00:19:41 Meeker: Yeah. So University of Oregon, that’s Corvallis, is it?

01-00:19:43 Erickson: No, that’s in Eugene.

01-00:19:45 Meeker: Eugene, okay. That’s right.

01-00:19:47 Erickson: That’s a liberal arts school. Corvallis is forestry and science. But now they’re

virtually interchangeable. They’ve permitted both of them to offer a full spread of courses.

01-00:20:02 Meeker: So, did you have a sense of what you wanted to study upon enrolling at the

University of Oregon?

01-00:20:06 Erickson: Yeah. I was very interested in history, and I was interested in pre-law, and I

originally enrolled in pre-law, because you only had to go two years, and then you’d go to law school. But I pulled that enrollment and majored in history. And then at the end of it, I had to make a decision: did I want to get a doctorate in history or go to law school? And I went up to Alaska to visit my mother. My parents had divorced shortly after I went in the Navy, and she was in Alaska with her second husband. I went up there, and was going to work, but there was a carpenters’ strike and the territory was closed down. It was a territory at the time, in 1950. So I had nothing to do, so I went down and sat in the courthouse. They had a very good judge there named Anthony J.

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Diamond, and I sat in there for probably like a total of four weeks, morning and afternoon, whenever they were in session.

01-00:21:20 Meeker: Just for your own entertainment?

01-00:21:21 Erickson: Yeah. And at the end of it, I said, “I’m going to law school,” so. Then I

worked up there at the construction at Elmendorf Air Force Base until December. Made good money for those days. They paid a lot in Alaska. My mother supported me as far as food and board, so I was saving money for school.

01-00:21:44 Meeker: This was immediately after graduating college, yes?

01-00:21:48 Erickson: Yeah. That summer.

01-00:21:51 Meeker: What sort of history were you interested in studying? Just curious.

01-00:21:53 Erickson: US and English history, but all kinds of history, you know? Any kind of

history was very—I found it fascinating. The first time I opened a history book was the last six weeks of the third grade. I had just really learned to read. My dad gave me two books for Christmas, read one to me, and told me I had to read the other. He read Pinocchio to me, and I had to read Tom Sawyer. And by the time I got through reading Tom Sawyer, I could read. And we had some of these history books. You know, the history of Magellan was about two paragraphs. I really loved that. And from then on, I learned anything about history.

01-00:22:44 Meeker: Did you do well as an undergraduate at the University of Oregon?

01-00:22:47 Erickson: Yeah. I did fine. I had a 3.7 grade average, I think, on a four point system.

01-00:22:59 Meeker: Were you on a GI Bill?

01-00:23:00 Erickson: Yeah. The GI Bill took me to the last three months, and then the Oregon Bill

took me those three months. But I lived in the vets’ dorm, and I was austere. I didn’t have a car or anything like that. I went to all the sports events, which were free, of course. We had a lot of cultural events. You know, Eugene, I mean it was a dream of a college city, and still is, and it was then. It was just total support between the school, and the city, and the students, and the police, and if you were doing something out of line, the police would take you out to

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the university and turn you over for whatever they thought was appropriate. Over in Corvallis twenty miles away, the police would throw you in jail. They hated each other, and they still do. And so they had these combined cultural events, sponsored by both the townspeople and the university, and it was very, very nice.

Then in the summers, I worked in the Forest Service. I spent a total of nine summers in the US Forest Service.

01-00:24:27 Meeker: How would you characterize your work with the Forest Service? What kind of

activities were you doing?

01-00:24:31 Erickson: It was a lot of hiking. In those days, you cleared trails. You didn’t have many

logging roads. In fact, the first logging road in the district I worked in occurred the day after Labor Day in 1946. So you did a lot of hiking. You had lookouts. We had ten lookouts in the district.

01-00:25:09 Meeker: Did you spend any time staying in those lookouts?

01-00:25:13 Erickson: Not very much. My wife and I spent a three-day Labor Day weekend with two

lookouts who were both students I knew at the university, one lookout and his wife. And that was fun. I stayed on a lookout once clearing trail for three days, and then I stayed with a lookout another time. I was working on spraying for spruce budworm then, and the plane had crashed, and I had been among the people that went in and fought the fire that resulted. They had a big search out for the pilot, but we found the pilot the next morning. He was dead within fifteen feet of the plane.

There were eight of us fighting the fire, and I said, “Let’s have breakfast,” when we got a line around it, and we completed falling the snags. One of the fellows was over in that corner, and came across, and he shouted to me, “I found the pilot.” I went other with him and I saw the pilot. The other six people didn’t know it was the pilot even when they saw him, he was so badly burned. They didn’t know at all. Yeah. Only the two of us could identify him.

01-00:26:41 Meeker: So when did you meet your wife?

01-00:26:43 Erickson: I met her when I was going to Hastings Law School in San Francisco. About

two years there, and I met her about the middle of the first year, and we got married—the third year, I transferred to Harvard, and graduated from Harvard, and we got married in Detroit, which was her home.

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01-00:27:07 Meeker: How does that happen? How do you enroll in Hastings for two years, and then

spend a third year at Harvard? It seems like an uncharacteristic —

01-00:27:14 Erickson: It happened because Harvard, at that time, accepted third year transfers. About

ten years later, they stopped doing that. They would only accept second year transfers. And most other schools had already done that. I had applied for the second year transfer. I had the papers all done, and I met my wife, or what proved to be my wife, and I decided I'd better stay around a while. So I didn’t send them in. The next year, we agreed that I would, and I was accepted.

01-00:27:46 Meeker: And this is because you wanted to practice law on the East Coast, or —

01-00:27:50 Erickson: No. Just because I'd always wanted to go to Harvard. I was in Alaska, and sort

of isolated, and I hadn’t realized that the ten leading law schools, including Stanford, and Cal, and Harvard, and Yale, and Cornell, and Michigan had said you had to take a test. So I got back too late to take the test, so I didn’t want to wait around a year, so I went to Hastings. I was accepted by Hastings and Oregon, and I went to Hastings because I thought a change of scenery would be preferable. Yeah.

01-00:28:33 Meeker: So tell me about your final year of law school at Harvard.

01-00:28:38 Erickson: Well, it was a very interesting year. Archibald Cox was one of my teachers.

And the dean of the Harvard Law School was another one. I really respected both of them.

01-00:28:52 Meeker: Was there a particular kind of law that you were interested in pursuing?

01-00:28:58 Erickson: I took all the basic courses. I didn’t take the choices very often. One choice

was labor law. I was interested in that, and that was Archibald Cox. But I took the basic courses: taxation, property, trusts. Had good professors. Some better than others. I had Capner—oh, no. What was it? Damn it. I mixed his name up with one of the Kaiser people. It’s close. Anyhow, whoever he was, he was—the big movie on Harvard Law School was based part on him; his name was Casner

01-00:29:42 Meeker: Oh, The Paper Chase?

01-00:29:43 Erickson: Paper Chase was based on. He was not as bad as the Paper Chase professor,

but—but he was a very good professor. I really enjoyed him.

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01-00:29:54 Meeker: And so upon graduation, did you immediately search for work with a big New

York law firm?

01-00:30:00 Erickson: No. I had no interest in doing that. I was definitely coming back to California.

I got married. My wife and I went into the Forest Service, spent the summer in the Forest Service. And then about the last week of August, I got a letter from Harvard saying that there was a judge in the Ninth Circuit Court of Appeals looking for a clerk, and if I was interested, I should apply. So I expressed my interest to Judge Healy by mail, and cut my Forest Service thing short by about a week. Well, not really, because I had to take the bar exam at the end of September. So I guess, actually, I didn’t cut it short. I considered cutting it shorter, but said that’ll be time enough.

So I went down and interviewed with him, and got the job, starting after I finished the bar exam. Of course, I didn’t take a review course, and that was a risk, but I figured if I worked hard, I might overcome that. I went over all of my notes on all the courses offered by the bar that I had taken while I was in the Forest Service, and then when I got down there, I studied hard for about ten days. And then I was fortunate enough to get a year, the only year, I think, it ever happened, when they had two days of the bar exam, on Thursday and Friday, and then a weekend off, and then the third day on Monday. So on the weekend off, I studied intensely. I picked the subject matter of nine of the ten questions I'd be asked. And I only had to answer eight of them. And I picked the exact question on three of them, so I did really well in that weekend, and I studied about five, six hours each day. And I did pass the bar.

01-00:32:16 Meeker: On the first time around?

01-00:32:17 Erickson: The first time around, yeah.

01-00:32:19 Meeker: So this clerkship with the judge, was this to be a one or a two-year position?

01-00:32:24 Erickson: Well, it’s a one-year position, and that’s what I stayed there. Almost exactly a

year.

01-00:32:29 Meeker: Okay. What kind of work did you do for him?

01-00:32:33 Erickson: Reviewed cases, and wrote my viewpoints, and discussed them with him. That

was basically all. He’d been far away the most active judge in the court until that year, and he was slowing down that year.

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01-00:32:49 Meeker: Active in the sense of the number of cases he would take?

01-00:32:51 Erickson: Of writing the most opinions, the number of cases, yeah. But I would sit in on

the oral arguments, and I would—when we were in Portland, where we spent a week, and Seattle, where we spent two weeks, well, I'd sit in on the judge’s conferences, too. That was really fun. We had very good relationships. The judges, you know, they would treat their clerks better than they would let their clerks treat them. You know, he was always helping me on with my jacket. Always brushing me off with helping him on with his.

01-00:33:34 Meeker: Were there any particularly interesting cases that you worked on with him?

01-00:33:38 Erickson: The Chessman case was the most interesting, nationally.

01-00:33:41 Meeker: Which was?

01-00:33:41 Erickson: One of the appeals. And it was an appeal in which the chief judge wrote a

totally erroneous opinion, which I told Judge Healey, “It’s totally erroneous, but it’s probably the result the Supreme Court would take, except it’s written erroneously.” And that’s what happened/

01-00:34:07 Meeker: What case was this again?

01-00:34:09 Erickson: Chessman.

01-00:34:09 Meeker: Chessman, which was?

01-00:34:10 Erickson: Are you familiar with Chessman?

01-00:34:12 Meeker: I’m not familiar with Chessman.

01-00:34:12 Erickson: It was a famous death case.

01-00:34:15 Meeker: Okay. Death penalty case?

01-00:34:16 Erickson: Death penalty case, and it was a case in which today, he wouldn’t be subject

to the death penalty, because there were no deaths involved on his side. He was a brilliant guy. He wrote books, and so on.

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01-00:34:34 Meeker: What was his crime?

01-00:34:36 Erickson: Robbing people, and then attacking several women in the process of robbing

them. He was the Red Light Bandit. He would come in with a red light, like he was a cop. Not a good guy, but very smart.

01-00:35:00 Meeker: How was the previous ruling erroneous, according to your reading?

01-00:35:05 Erickson: He said—Judge Denman was the Chief Judge of the Ninth Circuit then—said

the burden was on the plaintiff, and the burden is always on the government. It was clearly erroneous. So Judge Healey concurred in the result but dissented from the opinion, and the Supreme Court reversed it. Then it went up the other way, and the Supreme Court refused certiorari, and he was put to death.

01-00:35:43 Meeker: What were the ramifications of that decision?

01-00:35:46 Erickson: Well, it was just a controversial death penalty thing, and when Governor

Brown gave him a ninety-day extension, that was really the death knell of Brown’s governorship, really —

01-00:36:01 Meeker: Edmund Brown, yes.

01-00:36:01 Erickson: — in the state at that time.

01-00:36:05 Meeker: He gave him a ninety-day extension, a stay of execution?

01-00:36:08 Erickson: A ninety-day stay, and Brown immediately dropped behind, as far as winning

the election, and lost—well, as far as approval of governorship—and lost the election to Reagan.

01-00:36:28 Meeker: Interesting. I’ve always heard that election talked about in terms of the Watts

Riots, and the Housing Discrimination Act that was repealed by voters.

01-00:36:41 Erickson: The housing discrimination?

01-00:36:44 Meeker: I can’t remember the name of the proposition, but the California State

Assembly had voted to outlaw housing discrimination based on race, if I

15

remember correctly, and then voters came along and—Prop 14, perhaps?—overturned that ban on discrimination.

01-00:37:08 Erickson: No.

01-00:37:09 Meeker: No?

01-00:37:09 Erickson: Some confusion there. That ban has never been overturned, but it hadn’t been

enacted yet, either. It was enacted by the Democratic—well, I mean, it was enacted by the Democratic legislature when they came in ’58, and it did not—that did no damage to Brown, and he went on and defeated Nixon. It was supported by a majority of the state, and has been law since 1960.

01-00:37:33 Meeker: But then Prop 14, do you recall what that was about?

01-00:37:40 Erickson: When was Prop 14?

01-00:37:41 Meeker: That would have been ’64, I believe. I’ll look into that, because, I mean, this is

an interesting question around California politics, but I —

01-00:37:57 Erickson: Yeah. You still can’t discriminate in housing in California. And it’s never

been repealed.

01-00:38:03 Meeker: Well, from what I understand, there was a state proposition that challenged it,

or I don’t know what the deal was. I’ll have to look into, again, for the specifics on that.

01-00:38:12 Erickson: Well, there’s Proposition 13, of course, which destroyed the tax base for the

schools.

01-00:38:20 Meeker: Sure. Yeah. In the 1970s.

01-00:38:22 Erickson: Yeah. And there was a Proposition fairly recently that eliminated affirmative

action relating to discrimination in selecting university students.

01-00:38:52 Meeker: So, this work, I’m wondering if it sort of peaked your interest in criminal

cases, in the law, or —

16

01-00:38:59 Erickson: Oh, I was always interested in criminal cases. They were the most exciting in

the court up in Alaska, and so on, but I really had no interest in practicing criminal law.

01-00:39:10 Meeker: So, when your clerkship is done, what sort of work do you find?

01-00:39:14 Erickson: Clerkship was done. I applied—I went into the interview route—that is,

before it was done—and I got a job with a small law firm called Johnson and Johnson, who had six attorneys, and they hired two more. We both started the same day. And then we had eight attorneys.

01-00:39:35 Meeker: Was this in San Francisco?

01-00:39:36 Erickson: Yeah. They had split off from a big bond firm, and they represented, basically,

Safeway. They had some other clients, but Safeway was 80 percent of their business. On the Friday before I was to start, Safeway had a board meeting, removed their chairman, put in the guy who now heads up the San Francisco Giants, I believe, or his father. I don’t know which.

01-00:40:08 Meeker: Who was that?

01-00:40:13 Erickson: Magowan? Something like that. And then Safeway changed its policy. The

old chairman had litigated everything that came down the pike. Made no sense at all, and this firm did the litigation. So now, they got even a bigger percentage of Safeway’s business. However, what was really the big Safeway business was unnecessary litigation, and that was eliminated. Magowan. Yeah. I guess this probably was his father. He was connected with Safeway, too. So four of us—there had joined very recently: two the same day, and one had come there about a month before us. Plus one of the regulars had to leave, and in four months, we were all gone.

I ended up at Chickering and Gregory, which was not a very good firm for associates. In those days, people were there eleven, twelve, fourteen years to become partners, where at most of the firms, it was six to seven years. Now it’s back the other way again. But of course, I started there at $400 a month, and they had to raise the salaries of four of their associates that had been there three years or less to match that. Nowadays, you get—well, some people $160,000 as a starting attorney in a large San Francisco law firm, if you’ve had an A in law school.

01-00:42:23 Meeker: Sure. If you came from one of the top law schools, you can get those kind of

checks.

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01-00:42:29 Erickson: It’s amazing.

01-00:42:30 Meeker: What kind of cases were you worked on, works were you doing for the firm?

01-00:42:34 Erickson: There, I worked on claims cases. Like, I worked for Calaveras Cement

Company, and a lot of claims where people didn’t pay them, or bankruptcies that occurred. That was one type of thing. I wrote memos on anti-trust cases, and a couple of fraud cases for senior attorneys.

01-00:42:56 Meeker: So, sort of the gamut of corporate law, if you will?

01-00:42:59 Erickson: I handled a number of estates. I handled the estate of Arthur Brown, Jr., for

example, helping to write his will, and then when he died, helping or trying to help settle his estate, and other estates. So I would write some wills, and settle other estates. They had a great estate business there. Two areas of the law that are really good. One is securities business, where you get paid off the top. Another is estate business, big estates, where you get paid off the top. So you don’t have to worry about billing people, don’t have to worry about not getting paid. It’s just straight cash.

01-00:43:44 Meeker: What do you mean by getting paid off the top?

01-00:43:46 Erickson: You get paid before other people get the estate money, you know? The

distribution is there, but you have your money already. And on the securities, you get paid as part of the cost of issuing them. Don’t have to bill them, even.

01-00:44:07 Meeker: Okay. That’s a percentage sort of thing, then, sure. Okay.

01-00:44:12 Erickson: Yeah. It’s a great life. I was there three years. You know, it wasn’t a great life.

I didn’t want to stay there forever. That was for sure.

01-00:44:29 Meeker: A great life, meaning too long hours, or —

01-00:44:32 Erickson: Oh, yeah, but—it was okay, but it wasn’t stuff that was very exciting. Had a

good relationship with a number of the associates there, and I still see a couple of them. But it was a really conservative, old line firm.

01-00:44:59 Meeker: Okay. And you didn’t feel like you fit in, then?

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01-00:45:03 Erickson: Not particularly, no.

01-00:45:06 Meeker: You sort of saw yourself as kind of a northwesterner who liked to go out on

the trails in the summertime, and —

01-00:45:12 Erickson: Well, it was more that there wasn’t sufficient social purpose for me, really.

01-00:45:19 Meeker: Okay. What would that have looked like for you, sufficient social purpose?

01-00:45:26 Erickson: Kaiser Permanente was sufficient social purpose, as an example.

01-00:45:31 Meeker: Is that the next company that comes along that you work with?

01-00:45:34 Erickson: Well, so a couple of us that were good friends were looking. He’d come there

just a few months after I had, and I had known him before, when I was a law clerk, because the Yale group had invited me to join them in their luncheons which they had once a month, and he was a Yalie, and I was Harvard, so I —

01-00:45:59 Meeker: Who was this again?

01-00:46:00 Erickson: His name was Russ Mays. So we were both looking, and we were comparing

notes. One day he told me, “Well, I’ve heard about an opening in Kaiser Permanente.” And he said, “I’m going over to interview them.” And I said, “Well, if you decide you’re not interested, let me know, because I am definitely interested.”

01-00:46:30 Meeker: What year was this?

01-00:46:32 Erickson: This was ’58.

01-00:46:34 Meeker: Okay.

01-00:46:36 Erickson: Fall of ’58.

01-00:46:37 Meeker: What did you know of Kaiser Permanente at that point? It’s fairly early in

their life, right?

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01-00:46:42 Erickson: Yeah. Well, all I knew was that it was a creative health services plan that we

had tried to join, but it was closed in San Francisco. My wife and I had tried to join, and she was more aware of it than I was, really. I didn’t realize they even had an office in San Francisco. They had moved across the Bay. But they were full and we couldn’t join. But we were aware of—I read an article or two about it in some place, you know. Newspaper thing.

01-00:47:19 Meeker: And the attractive element was the way in which they…?

01-00:47:21 Erickson: The attractive element was it dealt with something besides serving people

with money. In other words, it was healthcare. And that was attractive to me. It was described as ahead of its time, and so on, so that was attractive to me. Beyond that, it was just that this might—this had some social purpose that was attractive to me.

01-00:47:52 Meeker: And the social purpose, then, would have been that it was a system designed

to deliver care to large numbers of working people, not just the rich?

01-00:47:59 Erickson: Right. Right. And I knew that laborers and labor groups were supportive of it,

and I was a substantial supporter of labor in those days, and so on.

01-00:48:11 Meeker: What do you mean by a substantial support of labor? In a political sense, or —

01-00:48:15 Erickson: Yeah. Political sense. I was very—in spite of the fact that my dad had crossed

the picket line in McCleary, when he got down to Lebanon, he was on the grievance committee, and in fact, he was at a statewide meeting at the AF of L-CIO the day Pearl Harbor happened. He was in Portland.

01-00:48:43 Meeker: So, did you ever desire to go into labor law, or to work for a union?

01-00:48:48 Erickson: I had an interest in labor law. That’s why I took labor law from Archibald

Cox. That was a possibility.

01-00:49:00 Meeker: At this point in time, when the possibility of work at Kaiser Permanente came

up, had you been considering doing labor law for a union, or anything along those lines?

01-00:49:08 Erickson: No. I hadn’t really looked at it, you know? I’ve interviewed several firms that

had openings, wasn’t greatly enthusiastic about them, because they were—there was one I found quite interesting, where the lead attorney became a

20

United States Court of Appeal judge, shortly therefore. And so they shut down the firm. But he was an interesting person. But I hadn’t found anything, really. There was on individual practioner that sort of was proposing to take me under his wing, and so on, but I was a little frightened by that. He was seventy-two or seventy-three, and I felt it might not last long enough for my wings to be big enough to fly. So I was looking.

He went over and interviewed, and came back, and said, “I decided I’m not interested in Kaiser. I’m really looking seriously at the Forest Service,” which would have been something I might have been interested in, too. But he ended up working for the Forest Service for thirty-five years, and I ended up working for Kaiser Permanente for thirty-six or so.

01-00:50:31 Meeker: So, you interviewed for that very same job?

01-00:50:34 Erickson: He gave me a number to call, and I called up Scott Fleming, who was the only

staff attorney. They had some professional liability attorneys, but no general attorney. He was the one attorney in the program.

01-00:50:50 Meeker: And this was a position as a staff attorney?

01-00:50:52 Erickson: This was a position as a staff attorney, helping him. He was also very

interested in government relations. Changes were happening, and Governor Brown had just been elected for the first time. The Democrats had control of the legislature for the first time in forty years, I think. They may have controlled it for a year or two under Olson, but, you know. And there was a quite a bit—they’d had a bill the year before the dental people had put in to knock out group practice in dental services, and of course, it covered us, too. So he and Gibson Kingren had gotten involved, and they felt there’d be more of that kind of legislation around now. So, it —

01-00:51:47 Meeker: Is that one of the reasons Fleming hired for a new position? In advance of

these potential legislative battles?

01-00:51:54 Erickson: Well, you know, it was already coming. This was when I first interviewed

him, I think. It was in November, maybe October. Yeah. I think the first interview was just after the election, actually. But he had interviewed Russ Mays before the election. And so I went over and talked to him, and he was talking about the legal stuff, and he was talking about government relations, and he was in command of both. That made him very attractive to me, because at that time, I knew every Democratic legislator, virtually, in the state, plus a lot of other people. I knew, you know, Pat Brown, and Stanley Mosk, and so on. Some of them better than others, but —

21

01-00:52:51 Meeker: How did you get to know them?

01-00:52:52 Erickson: Through politics. I was active in Democratic politics. I was very active in a

startup Democratic club in the city, which eventually became the largest Democratic club in the city, and —

01-00:53:06 Meeker: Which was?

01-00:53:07 Erickson: The Associated Democrats, better known as the Tipplers.

01-00:53:13 Meeker: So who were they associated with? Who were the —

01-00:53:15 Erickson: That was just a name. Associated Democrats, and Tipplers was how we raised

our money. We had a cocktail party every month, originally fifty cents, and then a dollar. In those days, we would have, you know, $2,500 to $4,000 when election came around, and that provided nice contributions in those days.

01-00:53:38 Meeker: Was there a particular saloon that you were associated with?

01-00:53:41 Erickson: Oh, no. We went to all of—every one in town. Good ones, you know, the

topless ones, later the—oh, what was it? With the bull fighters. Went to his quite often. I can’t think of his name now.

01-00:53:56 Meeker: Oh, it was Conrad something.

01-00:53:57 Erickson: Conrad. Barnaby Conrad.

01-00:53:59 Meeker: Yeah. Yeah.

01-00:54:00 Erickson: Yeah. We just selected a good one that was downtown, so people could come

from work on Friday, and come to the cocktail party once a month.

01-00:54:09 Meeker: But when I say associated, I mean what politicians received your

endorsements? Because I know that—from what I understand, during this period of time, there begins to be some—you know, as Democrats come into power in California, the Democratic party sort of splits.

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01-00:54:34 Erickson: Well, I was part of the California Democratic Council, the liberal wing, and

the wing that really got the party into control, and then faded away.

01-00:54:40 Meeker: The Burton wing. Yes.

01-00:54:42 Erickson: And Burton—I was part of the Burton wing, except I wasn’t, because I never,

you know, I did not vote for him every time, and if you didn’t vote for him every time, you weren’t part of it. But I supported him. I did a lot of work for him when he was elected the Assembly. I did a lot of work for him, even though we had long had a split by then, when he went to Congress, because I liked his ideas. The individual was really difficult.

01-00:55:14 Meeker: Well, he went through some problems during that period of time as well, so

I’m sure —

01-00:55:17 Erickson: Oh, he always had problems, but he was—basically, you either did what he

said, or get out. That was it. And his wife was the same way, except eventually, when he died, when she was in Congress, she was very receptive to anything I had to say, I think probably because the letter I wrote her memorializing his death. But anyhow, she—people said, “Well, things were going badly. Then when you got here, the whole world changed.”

01-00:55:51 Meeker: What kind of work did you do for them?

01-00:55:53 Erickson: For Kaiser?

01-00:55:55 Meeker: For, I guess —

01-00:55:55 Erickson: Oh! Oh, I worked precincts. I registered voters. I registered hundreds —

01-00:55:59 Meeker: So grunt work, really.

01-00:56:01 Erickson: I registered hundreds of voters. I did precincts. Then I worked for Frank Bran,

who lost for the Assembly twice. Then I worked for Willie Brown, and that one, Rudy Nothenberg really ran the campaign. My wife and I were his two and three. We ran the headquarters. If there was a mailing—that was before computers, really, in the campaign, so mailings—50,000 mailings to get out, you have fifty people working on them, you know, for two nights. We dispatched people and organized registration. We recruited people and organized getting the mailings out.

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01-00:56:46 Meeker: So which election—was ’64 the first time he won?

01-00:56:50 Erickson: Oh, let’s see. When did he win? Yeah, I guess it was ’64 that he won. He lost

in ’62. I'd done a little work for him, but he was—you know, it was totally disorganized in ’62. When I learned that Rudy was going to run it in ’64, I told him Betty and I would like to—this was my second wife, incidentally. Betty and I would like to work in the campaign, and knowing both of us, well, he gave us major roles. But he ran the campaign.

01-00:57:27 Meeker: Did you know him first as a lawyer?

01-00:57:30 Erickson: No. I knew him as in politics. He’d been in politics for years. The first Burton

campaign was when I met him. One that Burton won by 600 votes.

01-00:57:42 Meeker: And were you living in San Francisco at this time?

01-00:57:45 Erickson: Yeah. And in ’62, when Brown came up for reelection, you know, in ’58,

why, the whole city was supporting him. In ’62, actually, the clubs did all the work for him in the city, and then the Associated Democrats organized that, and we got out his mailings in the city.

01-00:58:14 Meeker: Well, I want to cover this a lot more, but maybe in subsequent interviews, and

we can spend some time talking about. I also have a personal research interest in Democratic and San Francisco politics in the sixties, and seventies, and eighties, so I’ll probably ask you questions along those lines. [laughter] I need to change the tape here, so.

[End Audio File 1 erickson_bob1_08_21_07.mp3]

[Begin Audio File 2 erickson_bob2_08-21-07]

02-00:00:14 Meeker: So, you applied for this job, and did you interview with Scott Fleming?

02-00:00:19 Erickson: Yeah. And I decided I was intensely interested in it, because it was this nice

combination of law, of medicine, and government relations, and I saw that as much more interesting than a pure legal situation.

02-00:00:41 Meeker: Did Fleming know that—did he know of you before, through your work in

politics? No?

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02-00:00:46 Erickson: Not at all. And I felt it was a particularly good fit for their organization,

because I clearly knew a lot more about the politics in California than anybody there, including Scott and Gibson Kingren, who were the two people working on it. Gibson later became our legislative representative in Sacramento, and then in Washington.

02-00:01:17 Meeker: Do you recall during this process what you learned about Kaiser Permanente,

particularly its model of delivery of care, and its peculiar arrangements?

02-00:01:27 Erickson: He gave me some stuff to read, which I began to learn something about that,

but what we talked about was what does the position—what are our problems, the idea that it was a combined legal and government relations type thing, and the fact that Kaiser had had a serious problem two years before and expected more, and that there would be some traveling to Sacramento, and so on. But we were—Kaiser is a little—is pretty complex to deal with in a two-hour interview, as to what the hell it is. [laughter]

02-00:02:16 Meeker: Why do you say that?

02-00:02:20 Erickson: You know, most people, you can talk to them for months, and they still don’t

know what it is. We had a great—that might be a misterm. We had a leading consulting firm here for five years, and they never did figure out what business we were in.

02-00:02:43 Meeker: I assume this is McKinsey —

02-00:02:43 Erickson: Yes.

02-00:02:44 Meeker: — that you were talking about. You know, I assume that might be somewhat

of an off the cuff remark, but you know, after their five years here, and this, of course, is moving forward a bit, but just to illustrate your point, what do you think that they thought your business was? I mean, what were their misconceptions centering on?

02-00:03:08 Erickson: They never could get away from the idea that they thought we were in the

insurance business. And we’re really in the business of organizing and providing health care services with an insurance piece, and they could never connect the two. They also could never understand why we didn’t tell the doctors what to do. Couldn’t conceive it! I mean, it was beyond their capacity, apparently.

25

02-00:03:38 Meeker: They thought the doctors should be treated —

02-00:03:40 Erickson: They were always telling David, “Tell them what to do!” And David would sit

around here telling them what to do in the safety of the board room, and then he’d go out and surrender everything they wanted to them one on one.

02-00:03:58 Meeker: So—yeah, I know. Two hours, you’re right. It’s not a lot to get a sense of

what was being done. Maybe we can do that by asking you to provide sort of an overview of not necessarily a year by year accounting, but an overview of some of the main projects that you’ve worked on you know, over this period of time in which you’ve served in the law and government relations department.

02-00:04:35 Erickson: Well, the first ten years I did a lot of general legal work: property purchases,

for example; contracts: building contracts, all kinds of contracts. I reviewed every piece of legislation introduced to the California legislature for those ten years or so, picked out those to watch, picked out those to be concerned about, and did some work on them as they developed. I would go to Sacramento as the technical person who knew what the bill said, and knew what we wanted it to say, if we had an amendment. I'd appear before committees on bills or on amendments. I would talk to legislators in their office, all with Gibson guiding me around which ones to talk to.

02-00:05:49 Meeker: Gibson?

02-00:05:51 Erickson: Kingren. He was the legislative rep. And he got to know the people very well.

02-00:06:01 Meeker: Who were some of the key legislators during that period of time?

02-00:06:04 Erickson: Well, Byron Rumford was the chair of the Health Committee in the Assembly.

He was key.

02-00:06:10 Meeker: And also local to here?

02-00:06:12 Erickson: And he was from Berkeley. And he had a practice of meeting at lunch on the

day the Health Committee met in the Assembly, would meet with certain people, basically, the California Medical Association representatives, and whoever they wanted to add to the party. Obviously, they never wanted to add us to the party. And then they’d go into the committee, and they would adopt what essentially the CMA’s agenda had been at lunch. They’d approve what

26

they wanted, and they’d disapprove what they didn’t want. Very interesting. But he had another feature, and that is he was a pharmacist. So he wanted to do anything to protect individual pharmacists against people like Kaiser, or people like the beginning of the chain drugstores, which were really just getting underway then.

02-00:07:17 Meeker: Walgreen’s and so forth.

02-00:07:18 Erickson: Yeah. And so there was a tendency for the Walgreen’s and Kaiser to often be

on the same side, although we didn’t talk much to each other. That’s naturally where it fell. So any type of mechanization in the industry, the private drugstores would oppose, the chains and Kaiser would support. One of the concepts that they really worked on during that period was that you couldn’t—what they really wanted to say, “No non-pharmacists could enter a pharmacy.” They even wanted only pharmacists to mop up the floor. You couldn’t have an aide. You couldn’t have somebody that delivered the drug, all labeled with a name and everything. And we were fighting that, and that sort of ended my career in Sacramento, in fact.

Byron had introduced this twenty-page bill that just practically eliminated any economic advantage that the chains had, and eliminated our ability to have any cost savings in our pharmacies, and we began working on amendments, and Gibson really got the votes, but at the final end, it ended up I was presenting the case. Basically, in Sacramento, if you don’t have the votes before the hearing begins, forget about it. So we did have the votes, but we had Byron on the other side, opposing me, and he was chair of the committee in the Assembly, and we got into, really, a head-on-head argument on a number of the issues in the bills, and it was a type of confrontation that should have been avoided, but he insisted on it, and I didn’t, you know, feel like retreating.

02-00:09:41 Meeker: What was the forum of this debate?

02-00:09:42 Erickson: This was the health—Assembly Heath Committee. He stepped down from the

chair to present the bill personally.

02-00:09:50 Meeker: Okay. So this was actually a real debate that happened with an audience?

02-00:09:57 Erickson: Yeah. It was an unusual type of debate, because it was really pretty nasty.

02-00:10:05 Meeker: Can you give me a little more insight into why it was nasty, and what was

talked about?

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02-00:10:07 Erickson: Well, there was a lot of—it was nasty, because he had a tremendous personal

investment in this bill.

02-00:10:18 Meeker: Did he still have his own —

02-00:10:19 Erickson: Oh, yes. He operated his pharmacy. And —

02-00:10:24 Meeker: And I assume he didn’t have any employees that would have been touching

the —

02-00:10:27 Erickson: Of course not. No. This would have been just fine for him. What they were

trying to do is beat back the opposition that the chains were presenting to them, and they were picking up Kaiser on the way. If the chains hadn’t been there, I don’t know what they would have done with Kaiser. They probably would have given us a group practice exemption, quite possibly. But they couldn’t do that and keep the chains in, and the chains didn’t—they’d hardly talked on the bill. We were the ones that did the talking. As I say, we hardly talked to them. I’m sure Gibson may have talked to their lobbyist a little bit. I never did. No one ever discussed substance with them.

02-00:11:22 Meeker: Well then what was the nasty element of this debate between you and

Rumford?

02-00:11:24 Erickson: Well, it was just that he was so personally involved, and so incensed that

someone could challenge his ability to control his committee, and I was determined that we were—our case was going to be presented. I wasn’t going to let him force me not to say anything, you know? If I had said nothing, it would have been peaceful, and we still would have won, so I probably should have said nothing. But it wasn’t, and we had a war. So then it had to go—our position prevailed in this committee.

02-00:12:04 Meeker: So correct me if I’m wrong, but if I read between the lines, perhaps one of the

things that was said was an accusation that he was protecting his own personal interest?

02-00:12:15 Erickson: Oh, no. I didn’t say anything that bad— not that bad.

02-00:12:20 Meeker: Okay. Then what was the nature of your comments?

02-00:12:21 Erickson: Most of it was there was an excessive amount of sarcasm involved.

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02-00:12:29 Meeker: Okay.

02-00:12:34 Erickson: Yeah. His staff person said it was the most challenging hearing he ever heard

while he was in Sacramento, and he was there about ten years.

02-00:12:47 Meeker: And so the result of this is that it meant that it was no longer possible for you

to work with Rumford?

02-00:12:54 Erickson: Well, yes. It was very hard, yeah. He was already mad at me, because I had

worked for Willie Brown, and he wanted Kaiser to give him a person to work with them. His position was Kaiser had given me to Willie Brown. Well, Kaiser had not one iota to do with what I did for Willie Brown. You know?

02-00:13:14 Meeker: Oh, I get it. Interesting.

02-00:13:18 Erickson: And so then this bill—now, what happened is there were a lot of provisions in

the bill that we had no problem with, so he still wanted his bill, you know? But on the amendments we wanted, we won every one, and that was about five or six of them. So then it goes to Ways and Means. Well, the Ways and Means hearing, I brought my daughter up to Sacramento. She was—I think she was seven or eight. How old was she, now? No, she was about—she was nine, I think. To see Sacramento. I took her into the Assembly chambers, and things like that, and I was not—well.

So he delayed the hearing. He saw my daughter was there. He delayed the hearing until 2:00 in the morning. He figured I'd have to leave. But I put her to bed in the car, and stayed. And then we got up the hearing, and he said that I had breached the rules of the Assembly by—as a lobbyist—by appearing in some area of the Assembly where lobbyists aren’t supposed to appear. I can't remember what they call it. So the argument went back and forth, and finally [Frank D.] Lanterman, who was one of the most conservative Republicans in the Assembly, said, “Your work here is incidental. Is that right, Mr. Erickson?” I said, “Yes, sir, it is incidental.” He said, “That answers it.”

02-00:15:02 Meeker: Incidental—what do you mean?

02-00:15:02 Erickson: Incidental, meaning I spent about 2 percent of my time in Sacramento. I was

not a lobbyist as then defined. Today, I would be, but then I came under the incidental category. So we had a battle, but we had the votes, so he lost there, too. And he certainly never forgave me. I don’t think he ever forgave Kaiser. And it was unfortunate, because it probably cost him being a Sate Senator. He

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lost that by 800 votes, and he would have had some support that might have been worth 400 votes.

02-00:15:44 Meeker: Who did he lose to, do you recall?

02-00:15:45 Erickson: To this Republican named Sherman, in Alameda County. It was because he

was black, purely and simply. The next year, —

02-00:15:55 Meeker: Because he had a wider range of constituents that he had to appeal do, being a

State Senator versus an Assemblyman?

02-00:16:00 Erickson: Yeah. The Assembly, the blacks were in the majority in his district. In the

State Senate, they were not. The fellow he had tried to succeed then, four years later, ran against Sherman and beat him handily, just to eliminate him. Yeah. That was unfortunate, and as I said, it would only have taken 400 votes to turn that around, and he might have gotten them.

02-00:16:39 Meeker: If he hadn’t created enemies amongst Kaiser Permanente?

02-00:16:44 Erickson: Right. There, and with me, specifically, because I knew a lot of voters in

Alameda County in those days, and I just—I didn’t campaign against him one iota, but I could have delivered quite a few votes, and I would have if, you know, different {inaudible}. But he probably would have lost anyhow, but it would have been even closer.

02-00:17:10 Meeker: Your title on staff at this point would have been staff attorney?

02-00:17:14 Erickson: Staff attorney, yeah. And, you know, I did some work on—I attended several

board meetings and took the minutes, Scott reviewing them, of course. I sat in on a lot of the discussions with the new explanation of the membership agreement that Scott was drafting. He’d done the contract—the basic contract—but he was drafting a larger compendium that was an explanation of the various provisions, and there would be twenty or thirty of us sitting around the table, physicians and others included, trying to define things. Big controversies over covering suicides. You shouldn’t cover suicides, because they’re optional. It was an exclusion in those days. Scott and I said we should cover them. Very controversial.

02-00:18:21 Meeker: What sort of coverage do you mean of suicides?

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02-00:18:24 Erickson: Health coverage. Then, if you tried to commit suicide, and incurred —

02-00:18:30 Meeker: Oh. An attempted suicide.

02-00:18:32 Erickson: Right. And collected $5,000 worth of bills, you had to pay them yourself, on

the principle that you voluntarily caused this.

02-00:18:46 Meeker: Which opens up a whole can of worms, about voluntary —

02-00:18:50 Erickson: Yeah. I think Scott and I felt that people that try to commit suicide are not

acting in that sense of voluntariness, you know? But there were many controversial things, and I sat in on all those discussions, and that’s where I really began to learn something about the program.

02-00:19:08 Meeker: Well, what were some of the big issues, then, that were being addressed on the

board that you would have been witness to?

02-00:19:21 Erickson: Well, not much, because I only attended a few board meetings. I’m trying to

think —

02-00:19:30 Meeker: Or perhaps issues that the board was addressing that then would have gone to

your office for review, such as this draft of the document that Fleming was working on.

02-00:19:42 Erickson: That wouldn’t go to the board for review.

02-00:19:47 Meeker: What was that document, then? Maybe we should —

02-00:19:50 Erickson: What did he call it? It was an explanation of the contract, or what do the

words really mean?

02-00:20:01 Meeker: And this contract —

02-00:20:01 Erickson: This was the membership contract.

02-00:20:03 Meeker: Okay. Oh, okay. All right.

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02-00:20:08 Erickson: And I also read the papers we had on the Tahoe Conference as a learning

process, and so on.

02-00:20:18 Meeker: What did that teach you?

02-00:20:24 Erickson: Well, it was very interesting, and the basic lesson was how deep the conflict

was with the physicians, particularly the Northern California physicians. It was nowhere near as bad with Oregon or Southern California, although—and Northern California, that continued for many years, really, while in Oregon, it disappeared completely, primarily because the medical director ran the whole show —

02-00:21:00 Meeker: Saward?

02-00:21:01 Erickson: Yeah. And Saward was very bright, and very capable, but his views

superseded the health plan. The main purpose—well, the main purpose. A significant purpose of the health plan was to represent the members, and the medical director’s clearer purpose was to represent the physicians, and number two, to have some members, but that was very secondary. With Saward, it was better balanced than the other regions, because actually, he was a marketer as well as a physician, and he actually controlled what the physicians could do, which didn’t happen in the other regions, and he actually did have some concept of meeting the needs of the members.

02-00:22:08 Meeker: You know, I wonder—this comment that the health plan was to represent the

members, the medical group was to represent the doctors. I suspect that members of the medical group might take issue with that?

02-00:22:19 Erickson: Oh, of course.

02-00:22:20 Meeker: What do you suppose they would say in response to that?

02-00:22:23 Erickson: I guess for most of them, they would probably say it’s not true.

02-00:22:28 Meeker: What would they say is true, then?

02-00:22:31 Erickson: Then they’d get in real trouble.

02-00:22:34 Meeker: Okay.

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02-00:22:36 Erickson: But the fact is that the first function of medical director, who is an elected

person, is to meet the needs of his medical group. That’s just a fact, and no matter how much you try to go around it, it’s still a fact. Now, Saward said, “In order for us to survive, you’re going to have to do certain things,” and in his medical group, they had one physician for 1,500 members for years while he was there, and they provided better services than down here, where they had one for 1,000 or one for 1,100, and then toward the end of his reign, one for 800. But the thing that was driving Seward was survival. It was a very tough survival task there, and he managed to do it.

02-00:22:32 Meeker: So when the medical director is watching out for the physicians in his group,

it has to do with things like the ratio of members to doctors, income, —

02-00:23:44 Erickson: Doctors’ hours, income. The most significant things are benefits.

02-00:23:49 Meeker: Watching for layoffs, those sorts of things.

02-00:23:50 Erickson: Retirement, and, of course, what the medical director does want to do is he

wants a happy group, so they’ll reelect him, for one thing, like all politicians, and for another thing, it’s a lot easier to have a meeting where people aren’t attacking you every time you move, and very hard for a medical director to avoid that. In fact, if he laid down and played dead, he wouldn’t avoid it. You know, it’s tough. It’s a tough job.

The needed balance between what he has to do to get elected and maintain his position, which you have to recognize, and to recruit physicians, which you have to recognize, and countering that, the health plan people should—their primary function should be to serve the members and the market, but also don’t forget the needs, and recognize the needs, of the medical group and the medical director. But you need both coming in, not one of them dominating. In this system, usually the physicians have dominated, and it becomes very hard.

People are trained, many of them, hospital administrators in particular are trained if they don’t’ get along with the medical group, they’re dead. And very good hospital administrators have lost their jobs, not because they weren’t the best administrator in the region, but because they couldn’t get along with the medical director at the hospital.

02-00:25:41 Meeker: I’m wondering if you can maybe describe a few instances that you were

witness to that involved some negotiations between the health plan and the medical groups.

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02-00:25:56 Erickson: Normally, I wasn’t the witness to those. They were usually between the

medical director and the regional manager, and it was usually one on one. Some medical director would bring in a manager, like Goldsmith, I think his name was. Not the Gold that became the succeeding medical director to Murray, but he was the —

02-00:26:25 Meeker: Oh, Goldstein?

02-00:26:26 Erickson: Goldstein, I think. Irving Goldstein. He was the manager underneath both

Murray and —

02-00:26:35 Meeker: Goldsmith?

02-00:26:35 Erickson: Goldsmith, yeah. And Goldstein was a great guy, very bright guy. Very

capable. And one that, you know, he could see both sides of the issue, but still, his primary function was to make sure that he and the medical director survived, and you need to recognize that.

02-00:27:00 Meeker: So, then, what role did your department play in working with the medical

groups on these issues?

02-00:27:07 Erickson: We worked with them, and drafted medical service agreements, and

amendments to medical service agreements, which was a key document.

02-00:27:16 Meeker: So, can you describe this process?

02-00:27:19 Erickson: The last time we did it while I was here, it was basically Jerry Phelan, who

was my Associate General Counsel, and Irwin Goldstein in Southern California, for example. And they did a very good job, and they represented their respective interests the way I thought they should be represented.

02-00:27:46 Meeker: What goes into a medical service agreement?

02-00:27:50 Erickson: Well, it’s about forty pages long. It has the terms of employment. It has a

paragraph where you can drop in different ratios as time goes by. It has something to do with salaries. It’s usually just the member per member per month type of thing. It has those functions that the medical group does for the health plan. It has certain functions the health plan does for medical group. It has the retirement eligibility elements and so on. It’s a very complicated basic

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contractual document. And it tries to cover every question that will ever arise, which of course it never does.

02-00:29:10 Meeker: Sure. So the medical service agreements are different —

02-00:29:12 Erickson: It’s a growing document.

02-00:29:14 Meeker: They’re different than the annual memorandum of understanding that set the

rates for the year, correct?

02-00:29:19 Erickson: Oh, well, no. They provide for those, but those are just, like, say, we’ll agree

it’s going to be for $23 per member per month, or something. You know? The payment for medical group, whatever it is.

02-00:29:40 Meeker: So then, with each of the medical groups, how often —

02-00:29:43 Erickson: But that could be inserted in the contract. It’s probably just attached to some

amendment.

02-00:29:47 Meeker: Okay. Annually.

02-00:29:48 Erickson: Yeah.

02-00:29:49 Meeker: So then how often were these medical service agreements negotiated, or

renegotiated?

02-00:29:55 Erickson: Pretty long gaps, but again, it depended on the region. The regions that were

most continuously involved were Southern California and Northern California. While I was here, the fundamental agreement was done by Scott Fleming before I came, and it wasn’t fundamentally changed until the agreement that Jerry and Goldstein put together.

02-00:30:35 Meeker: Okay. When was that?

02-00:30:36 Erickson: But there were substantial amendments, periodically.

02-00:30:41 Meeker: So when was the Phelan-Goldstein agreement complete —

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02-00:30:43 Erickson: I think they put that to bed about, maybe, ’92. I think around there.

02-00:30:55 Meeker: And did this agreement become a model for—it was used in other regions?

02-00:30:59 Erickson: Yeah. But there are always modifications, too.

02-00:31:05 Meeker: Sure.

02-00:31:11 Erickson: But it was, basically, to be the model for the other regions, and I suspect that

Northern California might not have accepted that. I think everybody else would have accepted it as a model. Hopefully Northern did, too. I don’t know.

02-00:31:24 Meeker: Okay. But you weren’t involved in those particular negotiations. So what

you’re setting out here, then, is that the Tahoe Accords of, what, around 1954 kind of establishes the framework that then was tweaked over the next, roughly, forty years, until it was renegotiated, then, in ’92, and then adapted to specific medical groups?

02-00:31:51 Erickson: Yeah. But each region as they came on, of course, had a new agreement, so

there was a lot of—you know, a lot of work on medical service—I mean, on physician contracts.

02-00:32:04 Meeker: So, for example, the new Colorado region that came on during your period of

time here was different, because there was no hospital.

02-00:32:13 Erickson: There was no hospital, and the two people that were most involved in that

from the physicians’ side were Bill Reimers, who headed up the Colorado group, and Dr. Kay from Southern California. And Kay had some very peculiar things, some of which were not that significant except to him.

02-00:32:37 Meeker: Such as?

02-00:32:40 Erickson: Oh, I don’t remember specifics now, but I know nothing about Colorado,

actually. I did the basic legal work in Colorado, but then I was elsewhere when they were negotiating the service agreement. Colorado: Reimers, and then Boardman was the health plan person on that.

02-00:33:09 Meeker: So when you say the basic legal work, that maybe would have been

establishing a corporation —

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02-00:33:13 Erickson: How to go into business in Colorado.

02-00:33:17 Meeker: Okay.

02-00:33:19 Erickson: Yeah.

02-00:33:20 Meeker: So, I assume that you had a hand, then, in the various other expansion regions,

as well?

02-00:33:27 Erickson: It depended. I did virtually all the work in Colorado; I did virtually nothing in

Ohio. I did all the work in Georgetown, all the work with a person from my staff in Kansas City—

02-00:33:46 Meeker: Were you involved in the peculiar arrangement in Texas, with—what was

it?—Prudential? I can’t remember the name of the insurance firm.

02-00:33:54 Erickson: Prudential, yeah. Yeah, I was involved, but I can’t remember who did the

work on that. I think it might have been Jerry Phelan. With Jerry and these things, the rule was he had full responsibility except for what he thought I should review, and then in a document of that type, I would always review before it was final.

02-00:34:25 Meeker: Because he was working under you at that point?

02-00:34:27 Erickson: Yeah. He was working under me, but he was such a capable guy that it made

no sense for me to waste our mutual time supervising him. He was perfectly capable of determining when I should be involved when I wasn’t.

02-00:34:43 Meeker: Is he still here?

02-00:34:44 Erickson: No. He succeeded me as General Counsel, with some great effort on my part,

and he and David Lawrence didn’t get along, and he resigned—retired—with a nice closeout agreement after two years.

02-00:35:04 Meeker: Okay. You know, it might help to actually sort of stand back a little bit, and

kind of think about some of these larger issues, and I’m particularly interested in, again, this kind of notion that it was the job of the health plan to represent the members.

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02-00:35:18 Erickson: Yeah.

02-00:35:19 Meeker: Can you explain to me what that means?

02-00:35:22 Erickson: Well, it means that in an organization of this type, there needs to be somebody

that accepts the responsibility of representing—of finding the members’ interests, and representing them. It may be somebody who listens to the union, for example, in a particular group, or listens to the Civil Service Commission, when it was running the federal employees’ health benefits program, or listens to the state employees who run the state employees’ program. But somebody that responds to them not, “I don’t like that,” but says how this would work in our system, and why it should be acceptable to the medical directors.

02-00:36:10 Meeker: So, to what extent were you doing that kind of work?

02-00:36:13 Erickson: I did a lot of that kind of work, because I had the prime responsibility for the

federal employees’ health benefits contract, which went into effect—I believe it was July 1, 1961. I may be off on that date. And I had the primary responsibility of working out the arrangements. There was one item in which Scott assumed that responsibility, and that was the question of there was an interest in the Commission having one contract with Kaiser, and it was essential to us to have four contracts, one for each region. At the request of the manager in Oregon, he took over that one issue with the Commission. Other than that, I handled all the issues, and I handled the issue of community rating, which we prevailed on for fifteen years or so, which was very—that was even tougher than the other one, actually.

02-00:37:34 Meeker: Well, being an advocate for the members—

02-00:37:36 Erickson: And I reviewed the membership brochures—Gibson Kingren and I went over

one brochure after another for each of the regions, and talked to the regions, to the doctors, and so on what we thought they should accept, and why, and so on.

02-00:38:02 Meeker: So thinking about this context, particularly in 1961, but then, I imagine, as

these were renegotiated in the years since, what are some of the points that stand out to you that these member groups, like the federal employees groups, or—I don’t know if you’ve worked with the University of California or something like that.

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02-00:38:23 Erickson: I have, but they were really, after a brief period, they were merged with the

state employees for these purposes.

02-00:38:30 Meeker: Okay. All right. So the federal or state employees, thinking about these big

employee groups—

02-00:38:35 Erickson: I think they’ve separated again since I left.

02-00:38:37 Meeker: Okay. Now what were some of the main points they wanted brought up for

negotiation?

02-00:38:47 Erickson: Meaning the contracting party on the other side?

02-00:38:50 Meeker: Yeah.

02-00:38:51 Erickson: Yeah. Well, they were things like community rating—how will it be rated?

What should the brochure be? It shouldn’t be a sales pitch. It should just be facts. Not too good for marketing, but, you know. The question of one contract or four contracts was a significant one. A little later, they wanted a psychiatric benefit. Only one region had ever presented one. That was Southern California. On that one, I had the person in charge of group practice prepayment plans come out and talk to the medical directors. I accompanied her. And in each case—but I told the medical directors what I thought they should do, and—

02-00:39:51 Meeker: Which was?

02-00:39:51 Erickson: Which was they should provide a benefit. I didn’t tell them what it should be,

but I said, “I feel we have to provide a benefit,” and in each case, they did. Sometimes, it was a bunch of garbage, but at least it was a benefit. And Southern California provided a pretty decent benefit. They’d had a program with 60,000 retail clerks already. Northern California, it wasn’t much of a benefit, but they got a subsidy, which I told them they would get, undoubtedly. In fact, they got paid more for the benefit than it cost them for several years while they developed it better. And everybody did, although they had some fairly strong language in telling us “No, we can’t do it,” when Marie Henderson walked in the door, every one of them said, “We will do it.”

02-00:41:00 Meeker: Marie Henderson was?

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02-00:41:02 Erickson: She was the director of group practice prepayment plans for the Civil Service

Commission.

02-00:41:06 Meeker: Okay. Because that was a non-starter, I guess?

02-00:41:10 Erickson: The policy had been adopted by the Civil Service Commission that there had

to be a psychiatric benefit.

02-00:41:17 Meeker: Can you tell me more about the community rating question? Because I know

that this was something, concept, that was important, or it seemed important to the founders of Kaiser Permanente, and over the years, this is one of the things that, you know, maybe was a core value that has more or less disappeared.

02-00:41:41 Erickson: It’s really disappeared now. There’s some tiny vestiges of it left. It was a very

important value to me.

02-00:41:52 Meeker: Can you just describe what it was first?

02-00:41:53 Erickson: Well, it was basically that for the same benefits, you paid the same rate,

regardless of the risk of your group. That meant that individuals were community rated as a group, as well, as the ILW and the Teamsters. Obviously, you have some groups that are high risk, maybe because of what they do. You have other groups that are low risk, because they’re young, so you get real variation.

02-00:42:34 Meeker: So, in the spectrum, what’s an example of a group that was high risk, and

what’s an example of a group that was low?

02-00:42:42 Erickson: Let’s see. Well, the federal group at the start was reasonably low risk. The

state group was quite low risk. But when they covered retirees, they moved towards high risk. You know, twenty years later, they were getting up there; thirty years later, they were definitely high risk. So there’s a lot of factors that enter into it. Coal miners were high risk because of what they did. Fishermen—commercial fisherman—were high risk because of what they did.

02-00:43:33 Meeker: So the implication was that early on, each of these groups would basically get

the same rate —

02-00:43:41 Erickson: For the same benefits.

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02-00:43:42 Meeker: For the same benefits.

02-00:43:43 Erickson: They didn’t always get the same benefits.

02-00:43:45 Meeker: Okay. They didn’t always get the same benefits. But then there was pressure

to increase the rates for the higher risk people: the miners, the fishermen, the longshoremen, perhaps?

02-00:43:54 Erickson: Well, I don’t know whether the—the pressure was very interesting. Some of it

might have been that. I think it was far more frequent there was pressure to reduce the rates for the low risk. I think that’s where most of the pressure came from. And some of that was very ill founded, because a lot of employers were sure they were low risk when they were really high risk. So there was a group in the middle that often didn’t know which side they should be on, if they wanted to save costs.

02-00:44:24 Meeker: Now, the pressure came from the employee groups that were paying?

02-00:44:29 Erickson: The biggest pressure came from the employer groups at the outset, some of

them. Because some of them just wanted the principle, “We’ll pay for what we owe.” And the “owe” was, “We’ll pay for our people if they’re sick, and we won’t pay for them if they’re well,” and they all thought that they were well, and many of them were wrong. Then pressure came from other sources, and I guess the biggest pressure came from competing plans, who started age rating, and things of that kind.

02-00:45:24 Meeker: Other plans, for example?

02-00:45:29 Erickson: The competing health plans. Blue Cross, Blue Shield. Insurers always did

experience rate. Pretty soon most of the Blues did. And then the HMOs did. So pretty soon, you were so isolated you couldn’t maintain community rating, because you’d end up with no well people and all sick people. Very simple.

02-00:45:57 Meeker: Or no young people and all old people.

02-00:46:01 Erickson: No, you’d have no young people, —

02-00:46:02 Meeker: Well, yeah.

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02-00:46:03 Erickson: — because they’d be over there, where they only had to pay a dollar a month.

02-00:46:07 Meeker: Because they were not going to be using the system that much.

02-00:46:10 Erickson: Yeah.

02-00:46:11 Meeker: You said—I apologize, I interrupted you. Because you were about to say why

the community rating was an important value for you personally.

02-00:46:21 Erickson: Well, I felt that community rating—and I still do—that the only way you can

have health coverage of reasonably equally health coverage for the people in this country is to have a community rated system. It just isn’t possible to do it any other way. Of course, that has never been the viewpoint of Kaiser Permanente. That’s a personal viewpoint. It’s been the viewpoint of some people in Kaiser Permanente, but never an organizational viewpoint.

And I think it’s true today. I mean, we’ve got the alternatives out there right now, and one alternative—the one that’s getting most attention—will probably increase the administrative cost from, you know, from thirty cents of every dollar to fifty cents of every dollar.

02-00:47:17 Meeker: Which program is that? Is that the saving accounts?

02-00:47:18 Erickson: That’s—yeah. Well, that’s one, and the one the governor’s proposing, too.

Anyone that depends on multiple—I mean multiple—private carriers.

02-00:47:39 Meeker: As opposed to?

02-00:47:40 Erickson: Those proposals will all increase the administrative costs that are out there.

02-00:47:47 Meeker: And you’ll probably have new ones formed, simply to take advantage of the

new monies that exist.

02-00:47:53 Erickson: Oh, of course.

02-00:47:54 Meeker: So that will increase the —

02-00:47:56 Erickson: And so, you know, in my view, the only way you can ever get anything that

makes sense is to have universal coverage with community rating. That way,

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you can reduce the administrative cost substantially. I mean, that doesn’t mean that you won’t have tremendous pressure to increase the actual cost, still.

02-00:48:29 Meeker: Is there a place for Kaiser Permanente in a system like that?

02-00:48:33 Erickson: There could be a place for Kaiser Permanente in any system. One of my

functions from—the first day I worked here, Scott handed me a copy of the Forand Bill, which was the original Medicare bill. My function was to read it over and decided what amendments we needed to live with it. For the next six years, that was one of my major functions, and I was the major person responsible for Medicare for the first fifteen years of the program, fifteen or sixteen years, and played a major role in it after that, but not the total lead role.

And I looked at this bill, knowing very little about Kaiser, obviously, and so on, and I came up with, you know, four or five amendments that I thought we would need to live with it. Obviously, these were pretty amateurish efforts, but actually some of them were—they had the right point sometimes. You know? And we had to work a lot harder than that the next five years to end up with something we could live in in Medicare, and we only made it—well, we made community rating, incidentally, in the federal employees’ program, because Gibson Kingren, with my advice, got a comma put in by a very conservative Democrat from Tennessee that he developed a relationship with. And that comma was how we got community rating.

02-00:50:34 Meeker: How does one comma change policy?

02-00:50:36 Erickson: It changed the meaning of the sentence.

02-00:50:39 Meeker: Okay. So can you describe the fate of community rating? When it started to

fall apart, and some of the key decisions?

02-00:50:50 Erickson: Well, you know, I mean, in one sense, it probably started to fall apart the first

day an indemnity insurer entered the health field, because they dealt with it in an experience rating manner, and now it started. It became really significant when a lot of major employers wanted to be rated on the cost of their employees.

02-00:51:17 Meeker: When did that start happening in a major way, as far as you can recall?

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02-00:51:21 Erickson: I don’t really recall, but I suppose it was—I think it started happening in ’70

or so, and got really intense in ’80. That period. Just got more and more intense as it went on.

02-00:51:46 Meeker: What do you mean by “intense”?

02-00:51:48 Erickson: I mean it got to the point where you had to make concessions if you wanted to

keep major contracts.

02-00:51:55 Meeker: Okay. So we’ve got about five or six minutes left on this disc, and I’m

wondering if we can just spend a few minutes, and you can give me an overview of your work with the board of directors, so that in preparation for our next interview, I’ll be able to, perhaps, do some background interview, and to get a sense of what questions will be useful for me to ask you.

02-00:52:31 Erickson: Well, in the first five years, approximately—no, it’s probably—it’s probably,

say, the first ten years. Ten, twelve years. I attended the board meetings. I took minutes on a number of them. Scott reviewed the minutes, and we got the final minutes. Occasionally—when Scott was at Harvard, for example—no, it wasn’t—he wasn’t at Harvard then. Was he? No. He missed a meeting or two, and I would be the counsel at the meeting. That means I would present the agenda, or some parts of the agenda, and make sure everything was covered. But most of the time, I was a spectator, until he went to HEW, which was ’71.

02-00:54:10 Meeker: What happened to your role then?

02-00:54:14 Erickson: I became the equivalent of the General Counsel, which he had been, but at

those times Thelen Marrin remained as General Counsel, although we really were performing the function from about 1961 on. So I, from then on—from ’71 on—I presented the agenda, until I left the General Counsel’s position in—I think it was—’73.

02-00:54:50 Meeker: ’83.

02-00:54:50 Erickson: I mean ’93.

02-00:54:51 Meeker: ’93.

02-00:54:52 Erickson: It was either ’93 or late ’92.

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02-00:54:58 Meeker: What does it mean to present the agenda?

02-00:55:01 Erickson: Well, it means to—there’s a —

02-00:55:06 Meeker: I mean, do you act as the m— is it basically acting as the moderator, leading

the meaning?

02-00:55:10 Erickson: No, the chairman is running the meeting.

02-00:55:12 Meeker: Okay. The chair is running the meeting.

02-00:55:14 Erickson: Who was always the CEO in those periods. I don’t know if they have a

separate chair now or not. Probably not, but I don’t know. So I would make sure that we followed the agenda and order, that we found the position in the agenda, and the various color-coded corporations, and that the necessary steps to be ta— action be taken.

02-00:55:46 Meeker: So following the particular rules of order?

02-00:55:49 Erickson: Yeah, well, you know, if we needed a resolution, I made sure the resolution

was moved and adopted, because sometimes that was missed otherwise. And I would answer any legal question that was raised at the meeting by anyone. For example, the first meeting that Justice Goldberg attended, he came with a whole set of questions for the General Counsel. I found out later he did this every place when he started on a new board. He did it with Kaiser Steel and so on, but these guys didn’t tell me that. So he had five questions that day, different times, and it was my function to answer them. Four of them were questions that had all been considered, and I essentially advised him on what the law was on them. For example, he seemed to think that a 501(c)(4) wasn’t tax exempt. I don’t know why.

02-00:57:09 Meeker: Well, 501(c)(3) would be the tax exempt.

02-00:57:11 Erickson: A 501(c)(3) means you can contribute and get—make donations to it, and the

donations are tax deductible by the contributor.

02-00:57:22 Meeker: Okay.

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02-00:57:23 Erickson: But a 501(c)(4) can be non-profit and tax exempt, too, and we were. And he

raised one question that we had never considered, and I said, “That’s a good question. We’ll look at it.” I didn’t think it was significant, but, you know, it didn’t prove to be.

02-00:57:42 Meeker: What was it, do you recall?

02-00:57:43 Erickson: I don’t remember what it was. It was not significant as it proved, when we

looked at it, but I wasn’t going to tell him that without having researched it, you know? So, and then, sometimes questions would come up, like somebody would say, “Is that an anti-trust question?” And my function would be to say, “It could be,” or to say, “No, I don’t believe so,” and to say why. There were always quite a few lawyers on the board, so it wasn’t, you know, you had to be pretty careful what you said, because they would pretty well know if it was wrong. [laughter] Somebody would out of the group. There were usually two to four lawyers on the board. In early years, the boards were very formal. They were employees of Kaiser companies, and Thelen Marrin had a couple of members, and there was nobody else. Then Dr. Keene started to move it towards non-interior directors, and when I left the board, there were—I think there were three—well, when I left the General Counsel’s position, I believe there were three employees on the board: the CEO, and two regional managers. And the rest were public members, and there had not been a Thelen Marrin lawyer for many years. One of their lawyers stayed on for a number of years, until he died. We had three directors who smoked, and they all said they were going to smoke forever, and within two years of when they said that at this—I was at the same table with them after the board meeting—two of them were dead. Both of lung cancer The third one had quit smoking.

02-01:00:01 Meeker: Were you ever a smoker?

02-01:00:12 Erickson: No. Never smoked. No. I decided when the kids went up to the railroad tracks

to smoke that smoking was not good for you. I was in the third grade.

02-01:00:26 Meeker: Well, I think that we should stop there, with the understanding that next time

we meet, we’re going to really focus on—it’s a huge amount of time—but the sort of roughly twenty-year period of time in which you served, basically, as General Counsel, in which you were in a position to observe what happened on a board. We’ll want to talk about the implications of the changes of the composition of the board for the kind of work that the board did and the power that it had vis-à-vis the decisions that were made in the organization about the changing chairman of the board, from Keene, yes?

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02-01:01:04 Erickson: Well, no, no. He was never chair of the board.

02-01:01:06 Meeker: Okay. I’m sorry, who preceded —

02-01:01:07 Erickson: Henry Kaiser was the chair of the board when I first came on. Edgar Kaiser

was later the chair. Eventually, after some significant problems, Jim Vohs became the CEO, and he became the chair of the board.

02-01:01:32 Meeker: Okay. And then Dave Lawrence.

02-01:01:35 Erickson: And then Dave Lawrence, and then George.

02-01:01:38 Meeker: So we’ll want to talk about the process of that, how these various individuals

achieved their positions —

02-01:01:44 Erickson: Incidentally, I was also on the board for three years after I left the General

Counsel’s position.

02-01:01:49 Meeker: Okay. So you served on the board, then, until ’96, about?

02-01:01:55 Erickson: I think ’94, ’95, and ’96, I think.

02-01:02:00 Meeker: Was it an ex officio, or was it a full board member?

02-01:02:02 Erickson: Oh, no, it was member of the board.

02-01:02:04 Meeker: Okay.

02-01:02:05 Erickson: Yeah. It is—well, in modern thought—it used to be the General Counsel was

always on the boards. In modern thought, General Counsel should not be on the board, because he’s the board’s attorney, and so I was never on the board while I was General Counsel.

[End of Audio File 2 erickson_bob2_08-21-07.mp3]

[End of Interview 1]

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Interview #2: November 19, 2007 [Begin Audio File Erickson_bob3_11-19-07.mp3]

03-00:00:00 Meeker: Today is the November 19, 2007. This is Martin Meeker interviewing Bob

Erickson for the Kaiser Permanente oral history project. And as I mentioned when we first sat down, we're going to probably skip over a vast part of your experience with Kaiser Permanente today with the notion that—and we'll come back to you and talk to you about really the work of the General Counsel and the government relations work, public policy work that was done in this office and that you have undoubtedly good insight into. We'll be focusing on that probably in about a year or so. So hopefully we can come back and spend some more time with you then. If you don't grow tired of us.

03-00:01:01 Erickson: I hope that will work.

03-00:01:05 Meeker: But really the focus of this year's interviews—the idea was really to look at

the concept of Kaiser Permanente core values. And the lens through which we're going to be doing that is really sort of focusing on the question of the challenges that were faced in the 1990s, both contextual challenges such as the growth of for-profit HMOs, you know, some of the economic challenges of the 1990s, threats around health reform and so forth, but also challenges that were more internal to the organization—so apparently increasing animosity or difficulty between the health plan and the medical groups, and then the ways in which the organization responded to some of these challenges. So the creation of the Permanente Federation, the Kaiser Permanente partnership group and so forth. And so I'd like to speak with you and just kind of—from your vantage point of someone who served on the board of directors and was in a good vantage point to view the way in which some of these issues were presented to and then addressed in the context of the board of directors over that period of time—so I'd like to start out today getting your perspective on what happened when James Vohs announced his retirement and there was a question of succession, who was going to be the next CEO of the health plan. I wonder how—what role the board of directors played in that and how—and how the board of directors approached that question?

03-00:02:49 Erickson: I guess the first important aspect of that was how Jim Vohs approached it.

03-00:02:56 Meeker: Okay.

03-00:02:58 Erickson: And his position was that he should not dictate the selection. So he presented

it to a board committee—three members of the board. And worked with them

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in developing a plan, and I was the other person that worked with them as the—sort of the neutral—it's hard to—the person that handled the paperwork and made recommendations on what—where they should go with the paperwork and so on and I sat in with them on everything but the interviews with the candidates. The—

03-00:04:00 Meeker: Who were the members of this, I guess, search committee?

03-00:04:06 Erickson: Having trouble remembering names.

03-00:04:08 Meeker: All right, that's fine.

03-00:04:09 Erickson: The lady from—that had headed the UCLA School of Nursing—

03-00:04:14 Meeker: Oh, Mary Reres

03-00:04:15 Erickson: —Mary Reres, Jack—[laughs] the member from Dallas. What the heck was

his last name? I knew all of these people well. The other was the attorney from Cleveland who had had a periodically crippling disease that—and he—the last episode of that was shortly after he served on this committee. Those were the three—Jim sat with them part of the time. They alone heard the presentations from the candidates. And it was fairly clear that the principal—there were two principal candidates. One was Wayne Moon, who was the regional manager in Northern California for a while—after serving Colorado as regional manager, then Northern California as regional manager. And then was the—don't remember what—you might say director of regional operations at what was then called Central Offices for a couple of years. And David Lawrence who had started out as an associate medical director in Oregon after serving as the Multnomah County health commissioner, then was the regional manager in Colorado and then succeeded Wayne Moon again as the regional manager in Northern California. And a number of other people appeared, too, talking on behalf of really those two candidates, one or the other. And that was the basic process. In the final analysis, the committee was unanimous for Dr. Lawrence. Jim Vohs was substantially distressed by this and did intervene a bit, but not enough to change their position.

03-00:06:57 Meeker: From your perspective, did you get an understanding of what the relative

merits or potential problems were with each of the candidates and then maybe why someone like Vohs was heavily weighted toward Moon as opposed to Lawrence?

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03-00:07:20 Erickson: Moon had a long history in the program and did know the program really

well. In Northern California—he had been sent there to put some limitations on Bruce Sams, the medical director who had had rather a free hand. And he did that, and in doing that he produced great enmity with Bruce Sams. So Bruce was a major supporter of anybody but Moon, and that made him a major supporter of Lawrence. And he talked most of the medical groups into supporting Lawrence. Murray, the Southern California medical director was definitely neutral. He did not support Lawrence like the other directors did. And Bill Dung, the medical director in Hawaii, was very moderate in his support. The rest were gung-ho. This was the man who could run the company. Bruce's motivation was that he—that this was the man that he could run, he thought. Because he's had great success in Northern California reversing the hard line position that Moon took, largely at the direction of Vohs.

03-00:08:57 Meeker: Can you give me a sense of what the substance of the difficulty between

Moon and Sams was? Were there particular issues—

03-00:09:08 Erickson: The substance was that Moon had a program and Bruce had a program—

03-00:09:13 Meeker: Sure.

03-00:09:14 Erickson: —and Moon didn't accept Bruce's program and Lawrence did accept Bruce's

program.

03-00:09:19 Meeker: When you define the program, you mean?

03-00:09:24 Erickson: The things—I can only do it—I was not privy to their discussions. I can only

do—by saying what usually was the problem. The payments to the doctors, the number of doctors—so you change the ratio and—of—questions of who had the authority at medical centers

03-00:09:53 Meeker: Okay. So these are perpetual issues—

03-00:09:56 Erickson: These were consistent issues and in Northern California—it was the last

region to more or less accept the Tahoe solution. They held fast for a long time. It was helpful to me that I came along after that, so that people like Dr. Cutting were—at least Dr. Cutting was fairly receptive to my positions on various things, where he wasn't as receptive to the positions of people that had been at Tahoe. Dr. Collen was a little stronger resistant. He was really the number two person, but he was—we had a pretty good rapport because I like

50

smart people and he sort of likes smart people too, I think. So we—it wasn't as good as Cutting's as far as getting to something, but it was good and we had good exchanges. But Collen was pretty hard-nosed. Baretell was even worse, but fortunately he left the plan, there wasn't—it was so much worse he didn't want to be around anymore. And those were the three powers, and Baretell and Collen were blood enemies and that's why Cutting as the in-between was elected medical director, and served as director for many years.

03-00:11:44 Meeker: It seems interesting to me that these issues are the same issues that come up,

you know, year after year—

03-00:11:51 Erickson: Oh, yes, yeah.

03-00:11:52 Meeker: —decade after decade, and so then the question of why they flare up at certain

times or another makes me think of things like, well, personality conflicts.

03-00:12:07 Erickson: Yeah.

03-00:12:08 Meeker: To what extent do we attribute it to that or to what extent do we attribute it to,

like, larger contextual things like periods of economic challenge that then sort of precipitate these personality conflicts?

03-00:12:24 Erickson: I would say if there was a real economic challenge that tended to bring the

parties together in Kaiser Permanente. It might take a little longer for the medical group to recognize the challenge, but they would eventually. If there wasn't any particular challenge, things were pretty prosperous, then they tended to move apart. And the health plan and hospitals were always pushing to get a better result both from a viewpoint of service to members and economically and it was very hard to do if there was total prosperity. And then you had some medical directors who were really strong in their views. So Murray was very rational in his views. And Goldberg in Oregon who had come from Southern California and San Diego. Basically Bruce was a very hard-nosed guy. And at the Kaiser Permanente Committee meetings, many of the meetings, the most substantive stuff was where Bruce was on one side and Jim Vohs was on the other and would get pretty hard. And I, on occasion, used to intervene, get in before Jim to oppose Bruce's position just to balance things out a little. And Bruce and I had head-ons, although we were—it wasn't the same as with Vohs. We were—could always talk to each other after a meeting and—on another subject—quite well.

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03-00:14:45 Meeker: But just this question of historical interpretation, it seems to me what you're

saying is that the two parties were further apart and harder to bring together during periods of—

03-00:14:56 Erickson: Prosperity.

03-00:14:57 Meeker: —prosperity.

03-00:14:58 Erickson: Because the health plan—Vohs, Fleming, Weissman, Yedidia, Erickson, who

really—in those days, most of those days, represented health plan policy more than the regional managers—were always saying we can do better. We can provide better service to the members. We've got to reduce the complaints. We've got to watch the rates. We've got to cut costs appropriately and so on. And the medical groups were basically, as was their appropriate function, the medical directors were elected people, by the physicians, and their chief interest was easing the load on the physicians, which sometimes meant less service to the members, and increasing the income of the physicians, which meant higher rates and so on. And also, having the physicians control the hospitals. I was heavily involved from the beginning in hospital issues, staff issues, and the Joint Commission on Hospitals was coming into greater prominence and I was highly interested in meeting their standards. And so was Jim Vohs. And then that produced some conflicts, too. So it was this—the power of the physicians at the serving locations, the income of the physicians, and part of that was the number of physicians per thousand members, because that reduced the load.

03-00:17:00 Meeker: Well, just to play devil's advocate here for a second, you know, because I—

you know, it's one of these things, like, actually interviewing physicians and then interviewing health plan members, I feel like all I'm doing is asking for a replication of these age-long debates, or age-long perspectives, and I guess I'm trying to kind of get beyond that a little bit. So it makes me think, when I hear the health plan perspective on what the physicians wanted, I can imagine the physicians as they respond in the interviews I do with them—well, they say things like, well, we provide better quality when we see fewer patients—

03-00:17:45 Erickson: Right, right.

03-00:17:46 Meeker: —or we have better physicians when we can afford to pay them more. And,

well, and they claim beyond that that they're primary interest, too, is quality care for the patients.

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03-00:17:59 Erickson: Oh sure, sure. But the interests did diverge a bit because their first interest was

having good relationships with their physicians so they could be reelected—and having their physicians get enough income so they could recruit more physicians. And it wasn't that we were disinterested in that, but they were more intensely interested in it and so on.

03-00:18:29 Meeker: You know one of the things that I'm hearing is also that—I mean, not to put

this too—in too extreme terms, but one of the problems, if you will, of the structure of the physician medical groups is that it's democratic, therefore it's corruptible. I mean, not that they're corruptible, but if you look at the way in which politics exists today, there's—what's the word I'm looking for? You know, patronage—

03-00:19:12 Erickson: Right.

03-00:19:13 Meeker: —involved when someone is elected. But in a situation like the health plan,

there's a more corporate model—which might be immune from those questions of patronage in election?

03-00:19:26 Erickson: Well they are, somewhat. They have other problems, of course, like the

medical group had problems if a hospital administrator was too dominant. And one of the best hospital administrators we ever had, the only one that for many years ever got 100 percent on a Joint Commission review was essentially discharged because the medical director insisted on it and the health plan regional manager didn't stand up on it.

03-00:20:03 Meeker: Do you know any of the peculiarities or particularities of that case?

03-00:20:08 Erickson: Just what I've said, basically. This guy was quite probably the best

administrator in the business, but he told some doctors to do some things that they didn't want to do and they complained so much the medical director that he insisted on his dismissal and the health plan manager thought it was easier to have him dismissed than not—or the regional manager.

03-00:20:32 Meeker: All right.

03-00:20:33 Erickson: Not the health plan manager, yeah.

03-00:20:34 Meeker: So now back on track to this question of the selection of Lawrence over

Moon—

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03-00:20:42 Erickson: Yeah.

03-00:20:45 Meeker: From the way that you describe it, it has primarily to do with the influence of

the medical group leadership.

03-00:20:53 Erickson: Well, that was one aspect. Here you had one candidate which all but two

members of the medical group vehemently opposed and—two medical directors—of the medical directors, and the others endorsed in swimming terms of how this way we could have cooperation forever and it'll be wonderful. And that was appealing to the directors. But I think the key thing was the presentation, the ability to present of the two candidates. Because at least one of the directors was totally for Moon before the presentations and switched. And I'm not sure where the other two were before the presentations. Moon is not a particularly great presenter. And his theme that he presented on was to be the best place for people to work, which was not a particularly dramatic theme on looking at the future, particularly in a period when the word on employee relations—business schools was—you know, you change employees every five years, etc.

03-00:22:28 Meeker: Yeah.

03-00:22:31 Erickson: Which, of course, was something that made no sense at all as applied to a

medical care program, but that was the word out there.

03-00:22:39 Meeker: This presentation that you're describing is a—

03-00:22:41 Erickson: This is to the committee. Each—

03-00:22:42 Meeker: It's just to the committee—

03-00:22:43 Erickson: Yeah, a three-member committee. And David Lawrence is a great presenter.

And he presented themes of flight, of looking at the future and how we can do better and expand and work with the medical groups and etc., etc. And I think that was the deciding factor. As far as experience, you know, Moon had more, but David had—appeared on the surface to have certainly adequate experience with the Colorado position and the Northern California position. And no outside candidate was seriously considered.

03-00:23:36 Meeker: Okay. Why is that?

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03-00:23:38 Erickson: I don't know. That was a committee decision.

03-00:23:44 Meeker: Do you think that—I mean, just candidly, do you think that the search

committee performed their due diligence in this function or were they overly influenced by personality?

03-00:23:56 Erickson: I think that they were overly influenced by personality, which most people

were with David.

03-00:24:02 Meeker: Sure.

03-00:24:03 Erickson: He had a very attractive personality to most people. And he spoke well and he

was broadening the outlook and, you know—

03-00:24:17 Meeker: Well, I guess in—maybe in their—in thinking about the search committee, I

mean, that could be that that's what they thought the organization needed at that point.

03-00:24:25 Erickson: Yeah, oh yeah. Yeah. No, I think they thought he was much more promising

because he had a broader outlook, sure.

03-00:24:34 Meeker: Now I understand operationally there was a period of transition between Vohs

and Lawrence's terms?

03-00:24:42 Erickson: Yeah, ostensibly there was and there—but it was very modest, because—

03-00:24:46 Meeker: Okay, but Moon stayed involved in the organization?

03-00:24:51 Erickson: Yes.

03-00:24:52 Meeker: Yeah.

03-00:24:53 Erickson: For a while, until he got the job heading up Blue Shield. But there was no real

rapport between him and David. There was a transition period, but I think Vohs wanted to cut it as short as possible, and it was really pretty short. It was supposed to be for a year I think and I don't think it lasted six months.

55

03-00:25:25 Meeker: Other than the rocky relationship between Vohs and Sams, how was Vohs

from your vantage point viewed by the medical groups throughout the system upon his retirement?

03-00:25:39 Erickson: I think it's hard to say overall. Certainly several of them agreed with Bruce.

Certainly Murray was quite affirmative towards Vohs. Dung was quite affirmative. Packer was very much with Northern California on everything. Others were not particularly influential because of the size and so on. I think that there—overall, they thought Vohs was a competent guy that—they disagreed with him on certain things as they always would, and so—as David—the day after he had been selected came into my office and he sort of made the rounds and he said, well, the thing I like about this the most is that now we have a chance to really work between the health plan hospitals and medical groups and really work together. And I—my comment to David was, well, David, I'm sorry to have to say this but your closest relationship to the medical groups was yesterday afternoon. It's less close today and it will be less close tomorrow and within two years or so, David—in fact, within—at the time I was on the board, David said to the whole board—Bob Erickson told me that and he was right. But it—I think basically most of them respected Vohs. Sams did not like Vohs. I don't think any—and probably Packer did not like Vohs. The rest of them were, you know, they were willing to go the way that other people went. And occasionally they went with Murray. But Murray was not as consistent as Bruce. Bruce would get a position and then he would push it and push it and push it. Murray would push it a ways and then usually back off if it was, you know, not getting anywhere.

03-00:28:29 Meeker: Well, you know, it sounds like at this point in time, of the transition—and

we're looking at, what, '92? '93? Is that right?

03-00:28:35 Erickson: Yeah.

03-00:28:38 Meeker: It appears to be a rather, you know, positive beginning sign you know, and it

sounds like Lawrence was optimistic about the relationship.

03-00:28:50 Erickson: Yep.

03-00:28:52 Meeker: What was his agenda? I mean, from your perspective, what was he going to do

to, in fact, build upon the apparent goodwill between the medical groups and the health plan?

03-00:29:09 Erickson: It's a little hard to say. Certainly his approach in Northern California had been

to give Bruce what he wanted. Now why that was his approach, I wasn't sure

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at the time. Because I thought that maybe it was the politics of it, that he would give Bruce what he wanted and Bruce would support him to be this—the CEO. I later felt it was—I think that was a piece of it, but I think it was a deeper piece, and that was that basically he couldn't resist strong presentations of an opposite point of view.

03-00:29:58 Meeker: What do you mean?

03-00:30:00 Erickson: If somebody really pushed hard, he would retreat. And I think that was the

fundamental thing. And more problematic than the other—I mean, you can't—I guess it's certainly legitimate in the battles for CEO positions to try and line up your support, but I think in fact it was—probably the deeper problem was he—if you presented a strong case and stuck with it, he would fold.

03-00:30:33 Meeker: So maybe it was Sams's sensing his weakness or—

03-00:30:39 Erickson: Yeah, I think in part. But Sams's interest was in winning his points. And he

won them all. I mean, it was amazing.

03-00:30:50 Meeker: But I can't imagine that Lawrence—that this would be part of Lawrence's

agenda, that he would think going into the role of CEO that the way that he's going to maintain good relations is by basically just giving up the farm.

03-00:31:06 Erickson: No, I don't think so. I don't know that he ever recognized his weakness in this

area. But it became self-evident during his term too. He would come out to the board and present the case to the medical group—in fact, that was what led to Vohs' resignation from the board: Vohs voted against his proposal, as did Trefethen. They couldn't eliminate Trefethen and—but a board member told Vohs that he really should resign and Vohs did.

03-00:31:48 Meeker: Well, can you give me a little background on that particular exchange?

03-00:31:52 Erickson: Well, what happened was—I don't know exactly, maybe the third year of

Lawrence's filling the position of CEO, and he made a—

03-00:32:08 Meeker: So we're thinking about 1995 or thereabouts?

03-00:32:09 Erickson: Yeah, I think so. And it could have been '94. I think it was '95. He—Lawrence

had one of the senior partners of McKinsey come in and make a presentation, which David thought was brilliant and I thought was immaterial. I mean, from

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my point of view how any—why anybody would pay any attention to it other than sit there while he made it, I don't know. I mean, it had no relevance to Kaiser Permanente.

03-00:32:48 Meeker: Do you recall the substance of it?

03-00:32:50 Erickson: No, I don't, because it had no substance, in my opinion. [laughs] But it was

this great presentation. I defy anybody there to know what the hell the guy said.

03-00:33:01 Meeker: Okay, so was—it's not as if he had a—or the presenter, he or she, had an

identifiable agenda.

03-00:33:13 Erickson: He had an agenda, but from his speech and his couple of graphs I couldn't find

it. And I don't think anybody on the board could, although some of them being more familiar with that type of presentation might have. And David—

03-00:33:33 Meeker: So was it kind of what we might describe today as very wonkish, very sort of

expertise, policy-oriented or, you know—

03-00:33:41 Erickson: It had some—you know, it had some lessons, but I couldn't find how they

applied to Kaiser Permanente.

03-00:33:49 Meeker: Okay, all right.

03-00:33:52 Erickson: And then David gave a speech and he was going to tell the medical groups

this and it was final and he wasn't going to—they weren't going to squirm out from under him. And then he wanted an approval of this policy.

03-00:34:09 Meeker: Do you recall what the policy was?

03-00:34:10 Erickson: I don't know. I could never figure it out.

03-00:34:13 Meeker: Right.

03-00:34:14 Erickson: Except it sounded like I'm going to tell the medical groups what to do no

matter what. And I think that was all Vohs got out of it. And—

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03-00:34:25 Meeker: Just from what I've heard at interviews—I know one of the things that

McKinsey—initial McKinsey study came back with was that Kaiser Permanente needed to increase market share because—competition.

03-00:34:40 Erickson: Yeah.

03-00:34:41 Meeker: Was that something about—

03-00:34:42 Erickson: No, that was not a part of this.

03-00:34:43 Meeker: Okay, okay, all right.

03-00:34:44 Erickson: No. Much of the board never did understand the relationship between the

medical groups and the health plan. And certainly McKinsey never did. And that, of course, is crucial to understanding the damn plan. I think there were a few people on the board that understood that, but there were more of them that didn't. And so basically Lawrence was saying I'm going to tell the medical group what to do. That was his speech. The senior partner's speech—I don't know what the hell it was and I never did. So Vohs and Trefethen voted no because of this concept that he was going to direct the medical groups what to do, which they knew wouldn't work. I abstained, just to try and have—keep having some voice with Lawrence.

03-00:35:45 Meeker: Yeah.

03-00:35:47 Erickson: And everybody else voted aye.

03-00:35:50 Meeker: Now can you describe that, because from what I understand, there is a history

of consensus voting or unanimous voting on the board?

03-00:36:00 Erickson: Yeah, pretty much.

03-00:36:01 Meeker: Was this a rare occurrence?

03-00:36:03 Erickson: This was extremely rare. Extremely rare.

03-00:36:04 Meeker: Okay, so not completely unheard of but extremely rare.

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03-00:36:10 Erickson: Damn near unheard of. [laughter] I can't remember—I really can't remember

another case. There might have been one sometime, but—

03-00:36:23 Meeker: Okay. So for the former CEO to vote no on something like this—

03-00:36:30 Erickson: To this fundamental policy position, yeah, and one of the former CEOs on the

board came around the Vohs and asked him for his resignation and he resigned. And they—Trefethen was an honorary member anyhow, so they couldn't ask him to resign and no one dared do anything else. But he always voted.

03-00:37:03 Meeker: Was Dan Wagster on the board at this point?

03-00:37:07 Erickson: Yes.

03-00:37:08 Meeker: Did he vote?

03-00:37:09 Erickson: He voted aye.

03-00:37:10 Meeker: He voted yes?

03-00:37:11 Erickson: Mm-hmm.

03-00:37:13 Meeker: Because when I spoke with him he kind of expressed also his disappointment

in the way in which it was going.

03-00:37:21 Erickson: What?

03-00:37:22 Meeker: I don't know that he said that he voted no on it, but that was sort of the

impression I got.

03-00:37:28 Erickson: Oh. Well if he voted no, it was not known. It might have been that he didn't

vote. I said abstain. Vohs and Trefethen said no. And nobody else said no.

03-00:37:44 Meeker: I think that what happened was that he also resigned from the board.

03-00:37:46 Erickson: Oh no.

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03-00:37:47 Meeker: No, not—

03-00:37:48 Erickson: No, Wagster stayed on 'til his term ended.

03-00:37:49 Meeker: He stayed on. Okay. All right. So it's a different experience then.

03-00:37:52 Erickson: Yeah, yeah.

03-00:37:53 Meeker: I guess I just kind of want to get a sense of what this says about the board of

directors of the health plan.

03-00:38:05 Erickson: Well, I think what it says is that normally—certainly my philosophy of the

board was, in general, to—that you would support the CEO unless you made a decision to replace him. And I think that's what it said more than anything else. But I also think some of the board members were attracted by the idea of David saying I'm going to tell the medical group what to do, and I'm going to stick with that. Of course, within three months he'd surrendered on every issue to the medical group, which was his typical mode of operation. Every issue he had raised, he accepted the medical group position. And that was probably because Bruce sat down with him.

03-00:39:02 Meeker: When did Caulfield become the medical director?

03-00:39:07 Erickson: Caulfield—well, let's see now. I don't know.

03-00:39:15 Meeker: I think if we're looking at '94—

03-00:39:16 Erickson: Caulfield had a whole term in there, so Bruce was gone, yeah. Yeah. Some

medical director sat down with him or maybe all of them. There was a change. The sitting down and now there was no longer a battle with the medical group.

03-00:39:42 Meeker: Well, you said within three months, Lawrence surrendered. Can you recall any

of the particular issues?

03-00:39:51 Erickson: I don't think I can. I don't recall the specific issues, no. He had mentioned

three or four things, one sentence each, and I don't remember what they were. All of them ended up with the medical group prevailing. But that was, again, pretty typical. He would take a strong position when the medical group wasn't there and usually it was a weaker position—in fact, always it was a weaker

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position—this was the most compelling, though, because it had—you know, it was the factor that led to Vohs's resignation, and was a policy adopted by the other members of the board, and yet within about three months, it was all out the window. Never heard of it again.

03-00:40:57 Meeker: From what I understand of board operations—

03-00:41:03 Erickson: Before the next board meeting.

03-00:41:04 Meeker: Yeah. Well, I guess I'm thinking about, you know—so if a CEO brings

something to a board of directors, particularly something that is new or forceful or controversial perhaps, that person will, you know, basically check with the board members in advance, because you don't want to go into a boardroom and have this sort of potential revolt.

03-00:41:31 Erickson: Yeah. I don't—and I don't know, he might have checked with some—he

wouldn't have checked with me, but he might have checked with some of the board members. On the other hand, I don't know that he expected any resistance. And the resistance was, you know—certainly was not in my comprehension that there was—if he had just not said anything, I think people would have just said, okay, it's nothing. Okay.

03-00:42:04 Meeker: Yeah.

03-00:42:05 Erickson: But then he gave his little speech and that was what Vohs was objecting to

and Trefethen. And I objected to it, too, but I just chose to abstain instead of vote no, in part because I'd—I thought that was a side light really to—but I think a lot of the board didn't recognize it as a side light.

03-00:42:32 Meeker: A side light.

03-00:42:33 Erickson: A side light to this wonderful policy that McKinsey was recommending,

which as I said was incomprehensible to me. I don't think it even applied to the organization we were representing.

03-00:42:48 Meeker: And so, your recollection basically says that Vohs decided to break with this

long tradition of unanimity?

03-00:42:59 Erickson: Right.

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03-00:43:00 Meeker: Largely because?

03-00:43:02 Erickson: I think largely because of the statements about relationships with the medical

groups, which was not the McKinsey presentation.

03-00:43:10 Meeker: But then how was—

03-00:43:12 Erickson: That is, it doesn't mean it wasn't consistent with what McKinsey had been

saying to Lawrence, but it was not represented in the policy presented by the McKinsey senior partner.

03-00:43:25 Meeker: Okay. So a thing that I'm somewhat confused about is the way that you talked

about Vohs was that he also took a very—sort of serious stance when it came to dealing with the medical groups, particularly with Sams. How would then—

03-00:43:47 Erickson: But that—with the—Sams, it was mostly discussion. I mean at the KaiPerm

Committee we had freedom of discussion, and—but the difference was that Vohs and Trefethen recognized that the medical groups had to be—the goal—their goal was that the medical groups be equal partners with the health plan and hospital. They had a problem when the medical groups encroached this way and they didn't want the health plan to encroach that way. And that was essentially my position, too, in that battleground. You know, a lot of the arguments—there were arguments about policy positions on federal legislation, for example. They didn't go to the guts of the medical group hospital relationship like Lawrence's speech that day did. And obviously people could have different positions. If they didn't agree with me they were wrong, of course (facetiously).

03-00:45:06 Meeker: So I guess what I'm hearing is the differences between Vohs and Sams, for

instance, were largely questions of policy, but the difference between Lawrence and then Caulfield or Sams if he was still there would have been—or wouldn't even—I guess the medical group wouldn't even have been brought in on the differences, it was it was more a difference of organizational relationship.

03-00:45:37 Erickson: Yeah, the—or the dictation—in that speech that day, David was saying I'm

going to tell them what to do on fundamental relationship issues. That's all. The—and it was, you know—and I think that's what the board voted for more than this amorphous policy that this senior McKinsey officer presented.

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03-00:46:14 Meeker: So how did the board, from your vantage point, evolve, say, from the mid- or

late 1980s into the period of time in which you left the board in '96?

03-00:46:27 Erickson: Well, I followed its involvement from the time I came on board when I

attended virtually every board meeting that was held after I arrived on February 1st, 1959. Sometime—well, frequently my only function was to write the—draft the minutes and then slowly I began to do other things and then of course after Scott left then I was the chief staff representative to the board in all the board meetings except one when I was at Harvard and Jerry Phelan did that, and then after he succeeded me he did that. And the—when I first attended board meetings, there were nothing but Kaiser employees on the board. Edgar Kaiser, Henry Kaiser, the general counsel for the Kaiser industries, Bill Marksma—Ordway, Henry's first employee, and several other officers and then at some point Dr. Keene and Dr. Garfield came on the board. I'm not quite sure—they—I don't think they were on it when I first came, but at some point they came on. And then Dr. Keene appointed an outside director. The first one was the dean of the Stanford Medical School who later headed up the Kaiser Family Foundation in that Palo Alto area. And then slowly more people came on. Polly Bunting who was the—who passed—I guess when she first came on, she was the head of—the women's adjunct at Harvard-Radcliffe. And then—so soon there were three and then others came on.

03-00:48:55 Meeker: How did the—

03-00:48:56 Erickson: And eventually, of course, there was a solid majority and only maybe three or

four program directors.

03-00:49:08 Meeker: Okay. So we look at this first major transition from, say, the 1950s into the

late 1970s. By that time it was majority non-employees?

03-00:49:19 Erickson: I'm not quite sure when it was. It was sometime in the late—in the seventies, I

think it was, yeah.

03-00:49:24 Meeker: Okay. But let's say by the late 1970s it was majority external board members.

How did that impact the governance?

03-00:49:32 Erickson: Oh, Trefethen was always on it too, of course.

03-00:49:34 Meeker: Okay. How did that impact the governance of the organization?

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03-00:49:39 Erickson: Well, it impacted it materially. Obviously the Kaiser industry members, their

prime function was the success of the industrial companies. And this was a secondary function, one that some of them paid little attention to. Ordway had—his—really his only interest was that a certain physician that had crossed him once in the—what the hell is that town where the steel plant was?

03-00:50:17 Meeker: Fontana?

03-00:50:18 Erickson: Fontana. In the Fontana area. Not a Permanente physician—might apply to be

on the staff of the Fontana hospital, and he was going to blackball him if he was. He would always ask me is that guy on the list of new people to approve for staff privileges? And that was about it. Bill Marksma had definite interest in all the legal aspects and was a very bright guy in that area. Eventually we had the head of the World Bank, who was an idiot. That'd be—I think that's a safe description. The fellow that has the reputation until the recent one of being the worst director of the World Bank in history. And the general essence was that, for example—one example, the Ordway building was sitting over about one third empty, and it was a drain on the industries who had financed it. Aluminum, steel and—who was the other one?

03-00:51:51 Meeker: Mining, maybe?

03-00:51:52 Erickson: I don't remember. There was aluminum, steel—I guess the general—Henry J.

Kaiser, Inc. that covered so many companies. And it was a drain on them, so the interest of these directors was to fill it up. And the proposal was move Northern California over to the Ordway building (which they had purchased)—their regional offices, which were then in the old Kaiser building, move them over here and that would fill up four or five floors. And the—there was some resistance to that. The northern region and the medical group were absolutely opposed to it. Jim Vohs and I were opposed to it. The—it ended up that we had created a conflicts of interest committee about a year before. It had never met up to that time. And they kept pushing moving into the Ordway building, Trefethen pushing it perhaps the most of anybody, and I said, well, fine, we'll send it to the conflicts of interest committee. It is a conflict of interest, we'll send it to the conflicts of interest committee for review. And that was the end of it. It never went to the committee. They dropped it. That I think is an example of what could happen when—before you had independent members. The conflicts of interest committee were three non-Kaiser members. And there was pressure on contracts to put in provisions that could only be fulfilled by Kaiser Steel or Kaiser Aluminum. And I was consistent with—and Scott Fleming were consistently opposing that. I had a little more room to oppose it than Scott, because he had come out of industries and eventually we prevailed. And the reason we didn't prevail earlier—that

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nobody was raising the issue, probably. But there were little things like that, which didn't impact on—well, impacted minimally on Kaiser Foundation Health Plan and Hospitals, but could have impacted on their tax-exempt status. And that's what we were representing. And eventually we prevailed.

03-00:54:41 Meeker: So the idea is then that by opening the board of directors to more external

members it would decrease the influence of the Kaiser Industries?

03-00:54:51 Erickson: Right, yeah.

03-00:54:52 Meeker: —and then also make the health plan less susceptible to questions about its

non-profit status?

03-00:55:06 Erickson: Well, avoid the IRS raising issues about its non-profit status. They eventually

raised some issues anyhow, but we did prevail and in part it probably helped that we didn't have these types of things that they could shoot at. And it—you know, I'm sure that—you go around to these companies that have foundations, they were doing the same thing and maybe are still doing it. But our function was to protect the—particularly the tax status of these two organizations—and by having someone there representing that and having neutral directors coming on board, why, it changed it.

03-00:55:57 Meeker: When you say two organizations, you mean health plan and then hospitals?

03-00:56:01 Erickson: And hospitals, yeah.

03-00:56:02 Meeker: Okay.

03-00:56:03 Erickson: One is a 501(c)4, health plan, and hospitals is a 501(c)3. The standards are

tougher for the 501(c)3. But the rules are very clear. You're not supposed to use their non-profit—these non-profits to benefit a profit-making company. And as I say, they're—I'm sure there are foundations all over this country where they still do what Kaiser Industries did at one time on bidding, you know, what's in the contract and so on in bids, but we thought it was essential to eliminate that type of thing and over time we did.

03-00:56:47 Meeker: I can imagine that also opening the organization or the board to external

members, in addition to resolving certain problems, might also create certain problems.

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03-00:57:00 Erickson: Well, it's—you certainly have a risk of it, that some of the members, these

new members without an identification with this might have some serious questions. And there was another major battle here involving Jim Vohs, where Edgar Kaiser wanted his eldest son, Edgar Junior, to be a member of the board, and Edgar Junior is—had had a couple of problems—international type problems with Canadian operations that raised some question about how he conducted things. And Jim felt he shouldn't come on the board and he said he opposed it. And Edgar was very unhappy. This went on for about two years and finally Edgar says I want him on the board. And then Jim says I'll submit it to the board selection committee, of which Polly Bunting was the chair at that time, and the other two members were non-Kaiser members, and we met and went over the history and the newspaper stories and so on and Polly Bunting said he shouldn't be on the board. And the other two members agreed with her. And he never came on the board. Now unfortunately, the son that did come on the board got into some criminal difficulties, too, and went to jail and resigned. That was using somebody else's money to finance his international investment operation, but—and now the third member's on the board. Neutral observers always said was the nicest son he's the one that didn't come into the Kaiser companies. He’s chief pilot for Alaskan Airlines, and although I've never met him, everyone says he's just a great board member and a wonderful guy. And that—

03-00:59:30 Meeker: So there's another Kaiser on the board?

03-00:59:31 Erickson: Yeah. This is the third son, the youngest son. Jim tried to put him on the

board, but Edgar wouldn't have it.

03-00:59:45 Meeker: Tried to put the third son—

03-00:59:46 Erickson: The third son on, yeah.

03-00:59:47 Meeker: Who is now there?

03-00:59:48 Erickson: Right.

[End Audio File Erickson_bob3_11-19-07.mp3]

[Begin Audio File Erickson_bob4_11-19-07.mp3]

[First two minutes are irrelevant conversation]

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04-00:02:29 Meeker: Let's see, where were we? So this is helpful about getting a sense of the

transition of the board—

04-00:02:34 Erickson: Yeah.

04-00:02:35 Meeker: —when external members started coming in. What were—

04-00:02:39 Erickson: And this again was something that the—we as lawyers supported throughout

and so, you know, encouraged, because we felt this again was helpful on the tax situation.

04-00:02:58 Meeker: What were the qualifications or the desirable characteristics of someone who

would be invited to join the board? I guess I ask because I think about most non-profits having worked on a few small ones myself, you know, there's—the board gets together and they think about a variety of different qualifications. I mean, one is that if it's a working board, they want people who have certain, you know, experience. Experience in marketing, experience in accounting. If it's a board that is primarily about development, they want people who have funds themselves or have access to people with funds who can help support the organization. There's also, you know, thinking about representation and diversity, so getting members of labor or ethnic minorities onto the board.

04-00:03:50 Erickson: I think in the early stages it was medical background, then it moved into an

executive background. Then it moved into women and minorities. African-Americans and Hispanics, you know, and then Asians. Yeah.

04-00:04:14 Meeker: So it cycled through all of these?

04-00:04:15 Erickson: Yeah, yeah. And again, the—I think the first thing that most people thought

about was medical background. The second thing was executive experience. And it was from the lawyers that came the main push for diversity.

04-00:04:34 Meeker: Can you just—so did you play a role in that? Bringing diversify to the board?

04-00:04:36 Erickson: Oh sure. Sure. Basically just suggesting that we need some minorities on this

board. When we were going to select a Hawaii person for the first time, I suggested it be an Asian. We did find an Asian, although then subsequently they didn't have an Asian from Hawaii, which made very little sense since it's a totally Asian state, but anyhow. And blacks and Hispanics, here again, a

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suggestion, look for qualified blacks and Hispanics. We did—once did look for a labor person and Dr. Keene was on board with that. The only mistake was Edgar Kaiser said he should call up Justice Goldberg who was then—had of course been the U.N. rep—a practicing attorney again and ask him. Well, on that—anyone that knows—Justice Goldberg wouldn't do that, but—

04-00:05:45 Meeker: Why's that?

04-00:05:46 Erickson: Well, Dr. Keene called him up and he said I wanted a labor representative on

the board of course, his quick answer was to nominate himself. And so he came on as allegedly a labor representative because some of his clients were labor unions, but he obviously was not a labor representative. But he was an interesting guy to have on the board and certainly qualified to be a board member. He was a good friend of Edgar's and—

04-00:06:17 Meeker: Did the board use a search committee to identify and locate these individuals?

04-00:06:21 Erickson: Usually they—usually the CEO just identified somebody. They—for a long

time—I think in recent times—I'm not sure. I think—well, I think George has identified most of them. I think the committee has identified some of them, and the committee did identify a few also.

04-00:06:46 Meeker: There's also another tendency of boards and I—you know, I'm going to give a

couple extremes and they can certainly fall between them. But there are boards that seem—or organizations that seem to have very strong CEOs that then basically to a certain extent—although in essence they're employees of the board, they really run and manage the board and to that extent are selecting who will be on the board.

04-00:07:14 Erickson: Yeah.

04-00:07:16 Meeker: And then there's organizations that are more board directed that really look at

and treat the executive director or the president/CEO as an employee and really kind of direct and dictate policy to them and they're the ones who seek the new board members as opposed to the CEO. Where does Kaiser Health Plan fit within that?

04-00:07:41 Erickson: Well, obviously at the start, it had to come from the CEO or the equivalent.

Dr. Keene was the equivalent of that. And to some extent from—well, Edgar Kaiser was always a source of board members. He brought—what—[Art] Linkletter on, for example, when they were co-chairs of a bond drive in California to increase the capacity of training of physicians in the state. And

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he was bounced when we woke up one Sunday morning and found his—along with the Chronicle his big ad for a major medical plan, and some of us thought that was a conflict of interest. And we prevailed. But—and then he—of course, he indirectly brought Goldberg on by suggesting the phone call. And he brought on the head of the World Bank. Which one was his name? [George Woods]

04-00:08:55 Meeker: Was he the owner—president, or—

04-00:05:58 Erickson: President of the World Bank. He came out of the Boston financial

organization First Boston and was a good friend of Edgar's and then worked on the project to recover from the automobile fiasco with Edgar and Trefethen. But as I said, he was—he never knew what he was talking about and I guess he wasn't much better in the World Bank from what the critics have said.

04-00:09:27 Meeker: What period of time this is, do you recall?

04-00:09:29 Erickson: Oh, he came on when he went on the World Bank so he could retain some

insurance—life insurance—and again, that was a—technically a misuse of a non-profit and we were not enthusiastic about it, but we had no choice. That was—Edgar decided that's what would happen.

04-00:09:53 Meeker: When external members or non-Kaiser Industries or Kaiser Health Plan board

members came on board, was there an expectation that they would be members of the health plan?

04-00:10:07 Erickson: No.

04-00:10:08 Meeker: No.

04-00:10:09 Erickson: No, no.

04-00:10:10 Meeker: So that was never an expectation or?

04-00:10:11 Erickson: Never.

04-00:10:12 Meeker: Was there ever a debate about that?

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04-00:10:14 Erickson: Never. No. No, it made no sense. Many of them came from places where the

health plan didn't exist. And, you know, but some—you know, there were some, I think, that were members. But most of them—well, you know. I think most of them were not, but there—I think there were a few that were.

04-00:10:40 Meeker: So this description of the foundation—or the health plan board—

04-00:10:46 Erickson: But we always had some members on the board, of course. Jim Vohs was a

member. That may have been the extent of it sometimes.

04-00:10:55 Meeker: Were you a member?

04-00:10:57 Erickson: I was a member, of course, but I was only on the latter days.

04-00:11:00 Meeker: Yeah. Well, so then when Vohs retires—

04-00:11:07 Erickson: Wagster was a member.

04-00:11:08 Meeker: So then when Vohs retires, does the board change much under Lawrence or

not?

04-00:11:17 Erickson: There's some change. The only members he eliminated were Vohs, indirectly,

and Maynard, Nancy Maynard, out of the Tribune, wife of the publisher of the Tribune.

04-00:11:36 Meeker: Why was she eliminated?

04-00:11:38 Erickson: He felt she had a bad attitude towards physicians. She was one of my favorite

members of the board at that time. I didn't warn her sufficiently, I guess.

04-00:11:52 Meeker: What was the substance of her attitude, do you recall?

04-00:11:57 Erickson: Well, in her meeting with him, apparently, she said, you know—she basically

presented a consumer's interest. And she apparently said he should do this and this with the medical groups and Lawrence felt she showed disrespect for the physicians and asked her to resign.

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04-00:12:22 Meeker: Is that, from his perspective of protecting the organization or because he was a

physician?

04-00:12:29 Erickson: It was because he was a physician, yeah. I mean, and I—you know, I—first

place, I never denigrated physicians. I might denigrate an individual physician on occasion. But I never denigrated physicians or medical groups. And I really had a lot of respect for physicians, including the Permanente managing physicians. You know, I had a good deal of respect for Bruce Sams although he and I disagreed on a number of things—as I said, we did disagree on things and we would—might have a strong face to face expression of those disagreements, but we always talked to each other afterward and the next time we saw each other—and occasionally called up each other to discuss an issue and so on. And I still—you know, I send him a Christmas card and he sends me a Christmas card. And he also told me in one of his Christmas cards he made a real mistake on Dave Lawrence.

04-00:13:41 Meeker: Oh really?

04-00:12:43 Erickson: Yeah.

04-00:12:44 Meeker: Interesting.

04-00:12:45 Erickson: Interesting.

04-00:13:51 Meeker: I wonder, how was it that you made a mistake?

04-00:13:55 Erickson: I didn’t say I made a mistake. He said he made a mistake.

04-00:13:58 Meeker: Oh, he said he made a mistake.

04-00:14:00 Erickson: Yes.

04-00:14:00 Meeker: Oh, okay. All right. A mea culpa. [laughs]

04-00:14:05 Erickson: After Lawrence came, he had a lot more—Bruce had a lot more respect for

Jim Vohs, actually, and did say it was the worst—he said to me, "It was the worst mistake I ever made."

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04-00:14:21 Meeker: So, did the operation of the board of directors change at all under Lawrence?

04-00:14:27 Erickson: Not appreciably except it was different while Jim was there somewhat, and—

but, no it stayed pretty much the same. And he—the other members he had no problem with and he did nominate new members and he did recognize diversity and—

04-00:14:55 Meeker: Well, I've heard some people on the medical group side describe a

transformation on the board of directors that I'm not hearing you describe.

04-00:15:04 Erickson: Oh really?

04-00:15:05 Meeker: It seems to me that on a board of directors that is really directed, if you will,

by the CEO that these changes would happen with any new CEO—but that the new people that came on were—they owed their position to Lawrence, and so therefore they would be much more in his camp when certain decisions came down.

04-00:15:46 Erickson: I was only there for a relatively short time, and while I was there the majority,

the strong majority, were carryovers. I'm trying to think, I—I think they were almost totally carryovers, but there were—there must have been one or two new ones. But they were mostly carryovers, some from Keene and Reres and most of them from Vohs, and—

04-00:16:24 Meeker: So you wouldn't describe it as sort of a real Lawrence board?

04-00:16:26 Erickson: During the time I was there, no.

04-00:16:30 Meeker: Okay.

04-00:16:31 Erickson: But as I say, he in essence eliminated Vohs and Maynard and Trefethen died.

That certainly—there was a different—you know, a difference there in that Vohs and Trefethen were the people that understood most that it was a two-way street and that the medical groups were independent and that we had to recognize that. But basically, you know, the board never—well, the board never significantly disagreed with Vohs except on the selection of his successor. And I don't think the board significantly disagreed with Lawrence except that he had two no votes on that one issue, which from my point of view, I think it was related to his hard—the idea that he would take a hard

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position with the medical groups rather than with the undecipherable mess that the senior partner of McKinsey presented.

04-00:18:02 Meeker: So the board terms were three years, is that correct?

04-00:18:06 Erickson: I believe that's right, but then you're free for reelection as long as you're

mutually agreed to. That was something that came along later, too, that they were—when I first came on, they were as long as you were in favor with Edgar Kaiser, basically. If you were an Industry guy who was on the board and you didn't do what he thought you should do over in Industries, you'd go off all the boards.

04-00:18:40 Meeker: So could you have gone for another term?

04-00:18:43 Erickson: No.

04-00:18:44 Meeker: No.

04-00:18:45 Erickson: The mandatory retirement is at the end of the year in which you attained

seventy. And that still prevails. Except Trefethen got a one-year extension because Edgar was ill and I suggested this, that he could sort of keep Edgar informed and so on. And then Edgar died during that year and Trefethen was made—what did I call it before?

04-00:19:21 Meeker: Member for life or something?

04-00:19:22 Erickson: He—sort of, yeah.

04-00:19:23 Meeker: Yeah. Oh, you said like emeritus or something.

04-00:19:25 Erickson: Emeritus director.

04-00:19:27 Meeker: Yeah.

04-00:19:28 Erickson: And he attended virtually all of the board meetings there for years as emeritus

director, and he voted. [laughs] The—and then he died, not—just shortly after Vohs went off the board, I believe. It might have been a year, but it wasn't long.

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04-00:19:52 Meeker: So, I wonder about this abstention vote that you made—

04-00:19:56 Erickson: Yeah.

04-00:19:57 Meeker: I'm surprised that didn't make your position untenable on the board.

04-00:20:02 Erickson: Well, I didn't think it would and it didn't. It made—I don't know, it made—I

don't know how Lawrence reacted to—but to the rest of the board members, that was an acceptable position, clearly, and I had a very good relationship with all of them.

04-00:20:24 Meeker: You know, sometimes an abstention can be just as resounding as a no.

04-00:20:28 Erickson: Oh yes, it can be.

04-00:20:29 Meeker: And I wonder why it was that Vohs was asked to leave and you were not?

04-00:20:35 Erickson: Because he voted no and he was the prior executive. I was not that significant

in the picture.

04-00:20:46 Meeker: Okay. So, I'm wondering in the time that we have left, if we can go through a

few things and, you know, to the best of your recollection whether or not they were presented to the board and how the board responded to these ideas. And the first one is the fact that—and, assuming these happened prior to your departure or retirement from the board—and one is the ending of the Kaiser Permanente committee.

04-00:21:21 Erickson: That happened before I was on the board even.

04-00:21:24 Meeker: Before you were on the board?

04-00:21:25 Erickson: Yeah.

04-00:21:27 Meeker: Well, can you describe what—

04-00:21:29 Erickson: Well, it—well, I—you know, just when did it die?

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04-00:21:33 Meeker: Yeah.

04-00:21:33 Erickson: I considered—it died when they had a meeting and Lawrence didn't come.

04-00:21:39 Meeker: Okay.

04-00:21:40 Erickson: And there may have been one meeting after that, and the medical directors felt

highly insulted by that and I thought appropriately so.

04-00:21:49 Meeker: Okay. Yeah, this—

04-00:21:51 Erickson: And that was the only means of interchange and they certainly didn't think it

was appropriate that he didn't even come.

04-00:22:03 Meeker: Well, how did the board respond to that? I mean, it seems to me, just

hypothetically, the board would want to have—

04-00:22:10 Erickson: The board—

04-00:22:11 Meeker: —good relations and to keep the—one channel of communication open

between the medical groups and the health plan.

04-00:22:16 Erickson: —didn’t respond to anything relating to the Kaiser Permanente committee, per

se.

04-00:22:22 Meeker: They didn't then see it as in the best interest of the CEO to maintain open

communication with the health plan—or the medical groups?

04-00:22:33 Erickson: They didn't really know how the Kaiser Permanente committee operated, and

if the CEO said it's a waste of time—which he did—why, that was sufficient.

04-00:22:45 Meeker: Okay. So this wasn't something that was—a decision that was even—well,

what?

04-00:22:53 Erickson: Never even considered by the board other—they were just told.

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04-00:22:58 Meeker: Okay. What kind of—did—I guess, you know, that just brings up the basic

question of what sort of authority did the board have vis-à-vis the CEO?

04-00:23:09 Erickson: They had the authority to replace him, to nominate him—to select him and

replace him, and they exercised that authority after I was off the board by bringing in a manager to run the company for the last four years of his term. And that manager had the authority to make the decisions for the company. And the CEO had the authority to make presentations to the public on behalf of the company.

04-00:23:44 Meeker: Okay. So in essence, they replaced Lawrence in the late—well, '98 or '99 or

something like that?

04-00:23:50 Erickson: Something like that, yeah.

04-00:23:52 Meeker: And you weren't involved in that then, were you?

04-00:21:29 Erickson: I was gone. I was fully retired.

04-00:23:57 Meeker: Were there any of the board members you had worked with part of that

decision making process?

04-00:24:03 Erickson: Oh sure. Well, two—the two key ones were the director from Portland who

had been on the board for a long time while I was—before I was on it and while—all the time I was on it.

04-00:24:18 Meeker: Oh, I'm trying—do you remember his name?

04-00:24:19 Erickson: And—it's—I should. I knew him even before he came on the board because

he was with our law firm up there. Rockwell. [Ridgley]

04-00:24:30 Meeker: What?

04-00:24:31 Erickson: Rockwell? Not right?

04-00:24:33 Meeker: No, I don't think so.

04-00:24:34 Erickson: Not Rockwell?

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04-00:24:35 Meeker: No, I don't—

04-00:24:36 Erickson: Okay.

04-00:24:37 Meeker: I actually just had another meeting with Al Weiland and he mentioned this

guy to me, too, so I—

04-00:24:42 Erickson: Oh, yeah. Yeah.

04-00:24:43 Meeker: Rockwell doesn't sound right, but—

04-00:24:44 Erickson: It doesn't sound right, okay.

04-00:24:46 Meeker: I could not be remembering it accurately, you know, so—

04-00:24:49 Erickson: He was the CEO of one of the electrical companies in Portland.

04-00:24:52 Meeker: Yeah, yeah.

04-00:24:54 Erickson: And he was one person and the other was the director that had been CEO of

Hewlett-Packard. Henley maybe? Is that right? Think it was Henley.

04-00:25:09 Meeker: I don't know. Former CEO of HP?

04-00:25:16 Erickson: Yeah.

04-00:25:17 Meeker: Okay.

04-00:25:19 Erickson: Henley—I don't know. Those two knew this fellow who's a trouble-shooter on

companies in difficulty. And they talked him—he'd retired—they talked him into coming back and being the decision-maker for Kaiser Permanente. And they presented him to the board and the board selected him to do that job and the—to David, they gave him a four-year contract and he was in essence the public face and that was about it.

04-00:26:14 Meeker: Okay. So I guess from the way that you're describing the power of the

board—well then, you know, in between these periods of time in which a new

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CEO's being selected and there's a determination that a CEO should retire or be removed, what does the board do? What is the function of the board?

04-00:26:37 Erickson: Well, they meet—I don't know, what—how many times a year now? Four

times a year? And they have an agenda. They discuss the issues on the agenda. They have the right to raise issues that aren't on the agenda, which they exercised in this change of—effective change of real management, which at—for a time I didn't realize they'd exercised it and I was rather unhappy, but they did. And they have—you know, they accept donations, they approve changes in the retirement plan. You know, they do all the things that boards do,

04-00:27:31 Meeker: But sometimes boards have different functions and I'm just trying to get a

sense of what, you know, what power they had and how they exercised it.

04-00:27:38 Erickson: Their primary—the, you know, the primary function of a board is to select the

CEO and replace him if he needs replacing. And they did carry out those responsibilities. And other things. There are policy issues, like he presented this alleged policy issue to them, which they approved, and I can't believe—I have to think most of them approved his supplemental statement on the—being tough with the medical group rather than the policy position, because, you know, I don't see how they could have approved that, because there was nothing to approve in my opinion, but anyhow.

04-00:28:28 Meeker: So when I speak with people in the medical groups rather—and they talk

about some of the—some of what they viewed as the difficulties in the 1990s that inspired them to create the Federation which was historically without precedent in medical groups—

04-00:28:51 Erickson: Yeah, it was without precedent but it wasn't without encouragement that they

ought to have a stronger organization of medical groups. And, you know, the health plan had supported their having a—what do they—a medical liaison here, although the only one that really performed the function was Lairson and supported their strength—I mean, that function, which the Federation did, and they had an excellent representative there the last ten years—

04-00:29:37 Meeker: Crosson.

04-00:29:37 Erickson: —yeah, really capable guy. And I think he's been a very constructive feature

for the program. And I hope the new person will—Colorado's always had a very good medical group, so I hope—is it White, I think his name is. I hope that he will represent the quality of Colorado medical group—and do an equally good job.

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04-00:30:03 Meeker: So I guess what I want to ask is that when I speak with the people in the

medical groups and they talk about some of the issues in the—during the Lawrence tenure that they found to be particularly challenging, I’m guessing that these things, these issues never really came to the board?

04-00:30:22 Erickson: Well, some of them did, and one of them was that vote which expressed the

idea the board be tough with the medical group. But, you know—but then, as I said, before the next meeting, Dave had caved on all the issues he mentioned there.

04-00:30:38 Meeker: Well, then, what about the issue of—

04-00:30:40 Erickson: I don't—yeah—and he didn't—

04-00:30:41 Meeker: —focusing on increasing market share, for instance?

04-00:30:46 Erickson: Oh, yeah, well, now we have McKinsey, that's a different world. McKinsey

came in basically because David had no confidence in anybody that was here and, two, because he had no confidence in himself. And McKinsey was a great answer, so he hired a consulting firm to run the company. And for five years, they basically ran the company. He adopted, as far as I know, every recommendation but one that they ever made.

04-00:31:28 Meeker: What was the one they didn't?

04-00:31:29 Erickson: That one was Hawaii. First he created an atmosphere that induced a successful

regional manager in Hawaii to resign, primarily I guess because she was a friend of Vohs. I don't know any other reason. And—but succeeding her was her deputy who was also a qualified person and a—qualified as a native Hawaiian. The person she replaced was the first Asian to have a high position in Hawaii, which is something that I'd been talking about for a long time after I found out, after spending a little time over there, that Hawaii was the definition of an Asian state. I mean, 90 percent of the school kids were Asian and 80 percent of the population is Asian. And we sit there, unexposed, you know—we had the—we once had a Japanese controller there. That was the nearest we came to ever having anybody in the hierarchy who was Asian. And HMSA was sitting there with, you know, 78—75 percent of the population and identified as a great Asian entity. Well, that was very simple. Either their chairman or their deputy chairman and their health plan manager and their legislative representative, which—90 percent of the legislature was Asian—those—so the health plan manager and the legislative representative were always Asian and one of the top two people, either president or the—whatever

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the next title was was always Asian. And they're identified as an Asian company. Eventually we got down underneath that and found out that when you got under the executive level, we had more Asian—many more Asians than they did. We eventually won an award for having all these Asians. I knew we had lots of Asians in the medical staff, but I wasn't really aware how many we had at the non-medical staff level. And we won a national award eventually for the integration of employees in Hawaii. And so she came in as a Filipino and she brought in, out of HMSA, their deputy health plan manager as health plan manager, and their legislative representative and director of communications to the—that position. And—so for the first time, we had visible Asians there, too.

04-00:34:47 Meeker: So the selection of a health plan manager for the various regions, that is—that

was—

04-00:34:52 Erickson: The regional manager.

04-00:34:52 Meeker: —subject to the approval of the board of directors?

04-00:34:55 Erickson: Subject to the approval of the CEO. Health plan managers were appointed by

the regional manager with the consent of the CEO. The board would then approve their appointment as officers of the health plan

04-00:34:56 Meeker: No.

04-00:34:56 Erickson: Regional manager with the approval of the CEO and the board..

04-00:34:57 Meeker: Oh, the regional manager. So what about the selection of the—

04-00:34:58 Erickson: They might send it by the CEO, although most of them didn't, I believe, but

some of them did.

04-00:35:05 Meeker: Okay. Well, then, the selection of the regional manager, that was—

04-00:35:08 Erickson: That's the function of the CEO.

04-00:35:11 Meeker: The CEO. And the CEO didn't take those—

04-00:35:13 Erickson: There's no participation except for approval by the board.

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04-00:35:18 Meeker: Okay.

04-00:35:19 Erickson: If the board had some reason to disapprove, they certainly could do so. It

never happened in my experience. Certain officers had to be approved by the board, but they were always selected by the CEO. And what happened there with McKinsey was that McKinsey—well, and Lawrence wanted them to study Hawaii as well as they'd studied the other regions—and they'd studied Southern California, for example, and never mentioned blacks or Hispanics. And I told David, you know, if you don't have your share of the Hispanic membership and you're below your share in Southern California right now, you're not going to maintain your membership in the state. What did they say about that? They said absolutely nothing. When he went—when he said he was going to have them study Hawaii, I said, well, remember, Hawaii's an Asian state and let's see what they have to say, they—I mean, there ought to be something—well, the extent of that in Hawaii was that the head of the study was half-Chinese, but it didn't mean he knew anything beyond that about Asians. They did the study and David gave me a summary to read, which I read. And I said if you adopt this recommendation on Hawaii, you won't have a program there in three to five years. It was just absolutely contradicting the Asian philosophy. It said have a battle for market share in Hawaii. You've got to get up to 50 percent rather than 22 percent. And you can't survive otherwise and have a head-on battle—recommended some of the tactics. Just totally unacceptable to Asians, and—

04-00:37:29 Meeker: How would that be—

04-00:37:31 Erickson: Well, they're—they don't believe in confrontation and battles of that kind, and

they don't respond to them. McKinsey doesn't know anything about that. So he—I talked to him three times and it was, you know, a rejection three times. He called over the Hawaiian regional manager and the Hawaiian medical director—for a two-day session—the purpose of which was that they were going to adopt the McKinsey plan. They—I don't know what they did, but they did something because at—the meeting went for three days, and at the end of three days, Hawaii was relieved of complying with McKinsey. So I'm sure among other things they both said they would resign, but I'm sure they also presented a much stronger case than mine on what it would mean to try and do that. And they did prevail. Now that's unusual. They were the only region that wasn't—then wasn't hamstrung by McKinsey.

04-00:38:51 Meeker: I wonder operationally how—

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04-00:38:52 Erickson: Except—well, Northern California wasn't because they used a different

consulting firm, which was equally as bad and got the same results as if McKinsey had been there, I would say, but—

04-00:39:11 Meeker: I wonder operationally how these McKinsey recommended changes would

have been implemented? Would actual employees—McKinsey have taken or—taken residence in—

04-00:39:26 Erickson: Normally they didn't do that and I don't think they would have done that

unless they had offered somebody for Lawrence to hire to do it. They wouldn't have done it as McKinsey.

04-00:39:38 Meeker: So would have basically been writing up of recommendations?

04-00:39:42 Erickson: That's what they had done and you would work from that with your people.

But they did on occasion provide somebody that you—if you wanted to hire to implement. I don't know that it ever happened in Kaiser, but I know it's happened in other firms.

04-00:39:59 Meeker: So when you think about a couple other things that happened during this

period of time—one was the reorganization of care in North Carolina—do you recall that coming to—

04-00:40:09 Erickson: That was after me.

04-00:40:11 Meeker: That was after you.

04-00:40:12 Erickson: I'm sure—yeah.

04-00:40:13 Meeker: Okay. Because what happened there was that they started contracting with a

medical network—

04-00:40:21 Erickson: Yes.

04-00:40:21 Meeker: A physician network.

04-00:40:22 Erickson: Yeah.

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04-00:40:22 Meeker: And that wasn't anything that ever came to the board when you were there?

04-00:40:26 Erickson: That presumably wouldn't have come to the board, but—other than

reporting—

04-00:40:34 Meeker: Okay. So not—just not as a—not as a voting thing—

04-00:40:37 Erickson: That's operation—that's, no, that's operation.

04-00:40:39 Meeker: Yeah. Because that's—

04-00:40:41 Erickson: And of course they acquired the company out of Albany, New York, which

was in that business. And then they put that—you know, they hired that company's managers and released or transferred their own managers.

04-00:41:05 Meeker: Did that come before the board?

04-00:41:06 Erickson: But not in the sense—what?

04-00:41:07 Meeker: Did that come before the board for a vote?

04-00:41:08 Erickson: No. Not that I know of.

04-00:41:12 Meeker: Okay.

04-00:41:13 Erickson: They might have had a vote on the acquisition, I'm not—yeah, they might

have had a vote on the acquisition.

04-00:41:19 Meeker: Were you there at that point in time?

04-00:41:20 Erickson: No.

04-00:41:21 Meeker: Okay.

04-00:41:21 Erickson: I was retired.

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04-00:41:24 Meeker: But in both—

04-00:41:25 Erickson: They did this in the face of the fact that it was a failed management and a

failed plan that had lost 80 million dollar—50 million dollars the year before and was in mid-term of losing 80 million the year they required it. And what had happened is the plan, which had advertised itself as being able to handle all these medical groups and control costs had failed. And they acquired it with the management, which made no sense in the world. I think the acquisition with Kaiser management could have conceivably succeeded. And of course it failed, along with the three Kaiser organizations that had—that were—had made a profit most of the time we had them and had certainly a possibility of succeeding under some pretty good management that was removed.

04-00:42:24 Meeker: And then, also, there's a similar story with the acquisition of Humana in D.C.,

an economically troubled health plan—

04-00:42:32 Erickson: Now, Humana, you mean Group Health Association—

04-00:42:35 Meeker: Oh, I guess so, yeah.

04-00:42:36 Erickson: Yes.

04-00:42:36 Meeker: Yeah, Humana was earlier, right?

04-00:42:38 Erickson: Well, yeah. Well, our first acquisition in D.C. was the Georgetown plan. And

that went very well. Then they had a manager there who was doing fine, and he fired him. And they—he had considered acquiring Group Health Association, and he'd done a good study on it and it came out that he'd have to re—increase his rates by about four dollars and eighty cents a month to acquire it, and that would make him—really impair his competitive position with the other plans. So he'd said no. Then they had a change in management and so on, and the acquisition—which I assume that McKinsey recommended, because they always recommended acquisitions whether they made sense or not. And they acquired it—by that time, the situation would have been probably seven or eight dollars, because the population had aged, thirty thousand of the younger population had left and it was really a charitable—only a charitable organization, but lots of money would have acquired it. And of course they had great difficulty in the whole region—it's been endangered since, although they—I think there's reason to think they can pull it through, but it's really tough. They didn't even look at that other study because, you know, just stupidity. If they'd done the same study then, as I said, they would

85

have been up at seven or eight dollars and maybe even more, because if you pull thirty thousand of the relatively well people out and leave the shell that was there, why, it's a real problem.

04-00:45:02 Meeker: So, I guess one of the things I'm getting at here is that—with these different—

with these acquisitions and these different models of care and delivery happening in North Carolina and Albany in New York—

04-00:45:19 Erickson: Definitely the models of care delivery never came before the board—these

plans had their own boards.

04-00:45:23 Meeker: Yeah.

04-00:45:24 Erickson: —except for reporting.

04-00:45:25 Meeker: Okay.

04-00:45:26 Erickson: On acquisitions, yeah, they did come before the board at the point of

acquisition and the board, as far as I know, always accepted the recommendation of the CEO.

04-00:45:42 Meeker: Okay. So there was—I guess the board never had to confront this question of

we're going to—by doing this, we're going to end the exclusive relationship between the health plan and the medical groups.

04-00:46:01 Erickson: No. And in North Carolina and Washington, D.C., of course, there was a

separate corporation, too.

04-00:46:11 Meeker: Meaning?

04-00:46:13 Erickson: Meaning that the separate corporation had some consideration of the medical

group stuff but this corporation would not have been—

04-00:46:24 Meeker: What separate corporation?

04-00:46:25 Erickson: There was a separate health plan corporation in all these outlying regions

except Oregon and Hawaii and Southern and Northern California.

04-00:46:36 Meeker: I guess I don't understand.

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04-00:46:37 Erickson: There is a separate corporation in Colorado, a separate corporation in—there

was a separate corporation in Texas, separate corporation in Georgia, still. There was a separate corporation in North Carolina—

04-00:46:54 Meeker: You mean a separate medical group or—

04-00:46:55 Erickson: No, a separate health plan corporation.

04-00:46:57 Meeker: Okay—that's not related to—

04-00:47:00 Erickson: That is a wholly owned subsidiary—the equivalent of a wholly owned

subsidiary, but it is a separate corporation.

04-00:47:07 Meeker: So they were going to have their own board of directors?

04-00:47:10 Erickson: They have their own board of directors, and that board of directors would

have considered the changes in the medical group, because the consumers on that board were very interested in the delivery of services.

04-00:47:24 Meeker: Well, this is interesting because the way in which medical group people

generally talk about it is—the Kaiser Foundation health plan as basically a single entity that—

04-00:47:36 Erickson: Well, in Cleveland and in Colorado, there are separate boards, but the same

composition. And the—

04-00:47:46 Meeker: The same composition as the—

04-00:47:47 Erickson: —same composition as the main board here.

04-00:47:50 Meeker: All right.

04-00:47:51 Erickson: But in the others, separate composition. But this board can elect directors and

remove them. So they can change policy if it's brought to their attention.

04-00:48:04 Meeker: So is that what allowed, for instance, the outside network physicians' contract

to enter into North Carolina?

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04-00:48:11 Erickson: Yeah.

04-00:48:14 Meeker: So are you saying then that Lawrence as CEO of the organization didn't really

have anything to do with that or—

04-00:48:22 Erickson: Oh no. Lawrence is the CEO of those boards, too.

04-00:48:25 Meeker: Okay.

04-00:48:26 Erickson: He had something to do with it, but they didn't—they would never—as far as

how the medical groups were organized would never come before this board.

04-00:48:36 Meeker: Interesting. Was there ever concern about that?

04-00:48:40 Erickson: No.

04-00:48:41 Meeker: Was there ever a move to try to integrate the boards?

04-00:48:44 Erickson: Well, we integrated them as much as we could by having the boards in

Colorado—and Ohio was the same board. But in these other states, you had statutes that require consumer representation and so on, and we couldn't bring those boards in, but we could provide that those boards control the election of directors and certain other things, too—limited things—so that they weren't out there out of control—

04-00:49:22 Meeker: Sure.

04-00:49:23 Erickson: —but they'd—you do have a different circumstance on certain of the things

that went on there. And some of them were discussed at the—at those boards with their consumers and so on and never discussed, maybe reported on, probably not in most cases, but in some cases to this board.

04-00:49:46 Meeker: So are you saying that independence of those organizations played a role in

the non-traditional models of delivery that were being developed?

04-00:50:00 Erickson: I would think they probably did, but I wasn't there.

04-00:50:04 Meeker: Okay.

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04-00:50:05 Erickson: I was on those boards for a number of years, too, but Lawrence removed me

from them finally about two years before I went off the big board, but—

04-00:50:19 Meeker: Why were you removed from those boards?

04-00:50:21 Erickson: I would say that the most likely reason was that he wanted to do some things

there that he thought I might object to.

04-00:50:32 Meeker: For example?

04-00:50:33 Erickson: Like how they contracted and so on, but I don't know.

04-00:50:39 Meeker: Okay.

04-00:50:40 Erickson: I think I was off both boards before they did that, so I don't think it would

have made a bit of difference. Probably removed me because, again, there were certain things he would rather I didn't know, probably, about them. [laughs] And maybe he wanted to economize on airfare, I don't know. [laughter] Yeah.

04-00:51:02 Meeker: So, were you on the board when the first words about the Permanente

Federation started to reach the health plan?

04-00:51:11 Erickson: Well, it—the—there's been a good deal of discussion of a stronger posture by

the medical group. And I mean they had almost no posture while Ian was there because in part they selected him because of that and because nobody of greater strength wanted the job—a combination of those two things. He—you know, I always liked Ian [Leverton] and I knew he was in an impossible position for his personality and so on and always—we were always very friendly and I always discussed things with him and so on that I didn't have to. So they needed somebody that was stronger and Jay [Crosson] was the person who was available. But he wasn't available unless he had something to do. And so that's when the discussion really took place, I think. But there'd been discussion several—you know, at least for several years about they should strengthen their position here. And as far as I know, that certainly wasn't disagreed with by the legal department and government relations department. If there was disagreement, I was not privy to it.

04-00:53:01 Meeker: Okay. Well, I think that most of the Federation work and then the partnership

group happens after you retire from the board.

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04-00:53:13 Erickson: Yeah, I think so.

04-00:53:13 Meeker: So I'm not going to spend any time asking you about that. But we just have

really a couple minutes left—

04-00:53:22 Erickson: But there was a strong feeling by at least some on the health plan hospital side

that the medical group should have a stronger posture here to—at program offices.

04-00:53:38 Meeker: Is that something that—

04-00:53:39 Erickson: And I think there was general support for the idea that a strong guy was going

to fill the position. And a smart guy. [laughter]

04-00:53:49 Meeker: Do you think that Lawrence advocated that as well?

04-00:53:54 Erickson: I don't know.

04-00:53:54 Meeker: Yeah.

04-00:53:55 Erickson: I don't—you know, he never opposed it in my presence.

04-00:54:00 Meeker: You know, it's interesting. I mean, I think about the—what the health plan—

how the health plan may think about, you know, a stronger medical group presence—you know, there's pluses and minuses to that. There's positive—

04-00:54:16 Erickson: Well, yeah, but I certainly—personally, I always thought good representation

of the medical group would be beneficial to the program.

04-00:54:28 Meeker: Okay.

04-00:54:29 Erickson: And particularly smart representation. And, you know, from my position, we

would get program enhancements through a mixture of that rather than having the medical group just oppose something for the hell of it because it came from here and things of that type.

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04-00:54:55 Meeker: So I guess what I want to ask you now is do you have any sort of final

thoughts about the work of the board of directors as we've focused on it today?

04-00:55:10 Erickson: Well, I think generally speaking the—over time, as the board became more

mixed and then—overwhelming majority of it being outside directors, that it was—that was beneficial to the organization. And the board more effectively kept health plan and hospitals as a—as organizations which met the rather technical requirements of the various statutes relating to non-profit organizations and that that was beneficial—that the board reflected more interest in a minority membership and minority interest was beneficial.

04-00:56:32 Meeker: All right.

04-00:56:37 Erickson: And I must say that the board in its—in the greatest crisis I saw it faced—did

come up with an answer that was very helpful to the continued success of the organization and—in bringing a manager in who could make decisions, which was the critical thing.

04-00:57:01 Meeker: Okay. If you have anything else—I think we're just about done with the tape

here, so go ahead.

04-00:57:12 Erickson: Physician income, physician hours, numbers of physicians who—the number

of members, control of the facilities and—many of these—some of these are traditional doctor positions, most of them are. And the health plan, you know, certainly is exemplified by Fleming and myself and Phelan and Zatkin, and our primary interest had been comply with the law, meet the requirements for maintaining the tax exemptions. Have a balanced position between medical group and health plan everywhere—we don't like to see a hospital or the chief physician control everything any more than we would like to see that with the region as a whole. And meet the needs of the members, meet the service needs. Provide quality care and don't say it's only a medical group responsibility, because the health plan has to share that responsibility. And I would say David did a good job in that area.

04-00:58:54 Meeker: Meaning?

04-00:58:55 Erickson: On having the board have a real function on quality, yeah.

04-00:59:01 Meeker: Okay.

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04-00:59:05 Erickson: And—but we were never looking for unitary control, which some of the

physicians were.

04-00:59:20 Meeker: What do you mean by unitary control?

04-00:59:21 Erickson: Meaning I tell you what goes on at the San Francisco hospital and nobody else

is involved, which was really basically Morrie Collen's position, and—but, you know, he accepted some modifications of that when an intelligent argument was presented.

04-00:59:49 Meeker: Not easy to?

04-00:59:50 Erickson: No. And, you know, the tendency is that hospital administrators are not—

don't run the show anyplace, so it's very hard to find an administrator where you can get the balance, because they're always subject—if they're not subject to the Permanente Medical Group, they're subject to a hospital staff, which is sometimes even worse. [laughter] And—but I think some of us, Jim Vohs included, would see the ideal situation is to have equal strength on each side of each region, of the program as a whole and of each facility.

04-01:00:40 Meeker: Do you feel like that equilibrium is closer now than it was, say, in 1990?

04-01:00:48 Erickson: I hope it's a little closer, but I wouldn't—you know, I know of hospitals where

it's not a bit closer. [laughs] And usually the dominant figure is a physician. But it's really tough.

[End of Interview]