Kaiser Seeking to Pay Bonuses to Nurses Who Help Cut Costs : Health care: The move is believed to be an industry first. Critics argue that such incentives create a conflict of interest.


In what is believed to be the first effort of its kind, the giant Kaiser Foundation Health Plan is seeking to pay bonuses to nurses who help move patients out of hospitals faster and cut other medical costs.

Critics of such incentives--widely offered to doctors--say they create a conflict of interest by encouraging medical providers to skimp on care so they can make more money. Because they are paid less than doctors, nurses may be particularly vulnerable to such conflicts, critics add.

But proponents say such incentives help control soaring medical costs and improve patient care by eliminating unnecessary, and potentially harmful, procedures. They add that nurses should be rewarded for efforts to lower medical costs.

The plan, which must be approved by the affected Kaiser nurses, follows a controversy that erupted this fall over Kaiser's payment of bonuses to its Southern California doctors for shortening hospital stays and prescribing less costly drugs. Earlier this month, directors of the Southern California Permanente Medical Group, which employs all 3,000 Kaiser doctors in the Southland, decided to eliminate those bonuses next year.

Kaiser, the nation's largest health maintenance organization, is under intense competitive pressure to reduce costs throughout its huge health network to fend off a host of aggressive managed-care rivals.

Kaiser's Southern California region, with 2.2 million members, plans to slash expenses by more than $800 million over five years, possibly by closing some hospitals.

The nurses' bonus plan is part of a tentative contract settlement reached last week between Kaiser management and the United Nurses Assns. of California, which represents about 4,900 Kaiser nurses, nurse practitioners and physician assistants in Southern California.

UNAC members have been working without a contract since earlier this year.

The plan proposes to pay bonuses to nurses who meet health plan targets for reducing costs and boosting membership. In some cases, Kaiser and the union's management have agreed that the bonuses, or "gain-sharing" program, be used to offset wage reductions for nurses. It could not be determined how large the bonus payments would be.

Details of the agreement are included in a Dec. 18 confidential memorandum prepared by UNAC President Kathy J. Sackman, a copy of which was obtained by The Times.

Sackman confirmed that she is the author of the memo but said it was not intended to be made public. She declined to discuss the settlement agreement until the union can present it to the nurses for a vote by mid-January. Approval is far from certain.

Kaiser executives declined comment on specific details of the UNAC agreement.

"We question the motivation of whoever is disseminating this confidential information, which has the potential to derail the ratification of this agreement," Kaiser Vice President Sally Newton said.

Margaret Peisert, health-care project director for the Service Employees International Union in Washington, said she was unaware of any other nurses' union contract that includes bonuses tied to corporate financial performance.

Peisert noted that profit or gain-sharing programs are common in union contracts in manufacturing industries, such as textile and apparel. "But in those industries," she said, "they know how to measure productivity and quality."

Despite increasing efforts to measure quality in health care, "the state of the art is not there yet," she added. "This is a life-and-death situation. We're not talking about a shoddy garment here."

Bonnie Bullough, a professor at USC's School of Nursing, called the nurses' bonus proposal "an interesting idea" that might work.

"It gives nurses a [financial] stake that they haven't had before, which is an important kind of recognition for them," Bullough said. However, while encouraging nurses to be more efficient can improve patient care, some nurses might "get carried away with it and provide less service," she said.

The California Nurses Assn., which represents Kaiser nurses in Northern California and has been an outspoken critic of HMO cost-reduction efforts, blasted the Kaiser-UNAC agreement. "We'd be stunned if the nurses accepted this," CNA Executive Vice President Rose Ann DeMoro said. The UNAC is not affiliated with the CNA.

"This marks a real turning point in history. . . . You're putting registered nurses in a situation to be complicit allies with Kaiser in their push to reduce services and care," DeMoro said.

Several critics said a particularly disturbing part of the UNAC proposal is that it would apparently use bonuses to offset wage reductions.

Jamie Court, director of Consumers for Quality Care, a Los Angeles consumer group and a frequent critic of HMO practices, said the bonus plan "puts front-line nurses in the position of making a choice between inoculating a child and having less money to pay their rent. It's much worse for nurses, whose salary is much less than a doctor, to have to worry about advocating for better patient care if it's going to affect their pocketbook."

Kaiser's Newton said the HMO's financial incentive programs for doctors and employees focus on "encouraging quality care, quality service, value to purchasers and membership growth."

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