Kaiser Could Lose $7B if Expense Rate Rises
Kaiser Permanente could lose up to $7 billion over the next two years if its operating costs continue to rise at the current rate, according to an internal projection, the San Francisco Chronicle reports.
Kaiser CEO George Halvorson said that operating expenses are increasing by 10% each year while revenue from sources such as Medicare are decreasing. If the HMO can reduce health care cost increases to a 5% rate, he said Kaiser could turn an annual profit of about $2 billion.
Halvorson said that health insurers must learn how to reduce expenses rather than increase premiums for customers. Halvorson said that Kaiser already has taken steps to cut costs by implementing hiring freezes in some departments and evaluating staffing levels in other departments. Any cutbacks will not affect patient care, he said.
The estimated loss was made public on Friday to 180,000 Kaiser employees in an e-mail from Justen Deal, a project supervisor with Kaiser.
In the e-mail, Deal said that the HMO's electronic health record system is inefficient and unreliable. He also said that he brought his concerns to the board but that they were not addressed because of conflicts among executives.
Halvorson said the memo was "alarmist" and "inaccurate" and did not include data on how the company is managing its rising expenses. Recent reliability concerns with the EHR system were caused by power outages, not system malfunctions, according to Halvorson.
Deal on Monday was placed on administrative leave (Colliver, San Francisco Chronicle, 11/7).