KAISER PERMANENTE: Hopes to be Back in Black This Year
Kaiser Permanente, with 8.6 million members (5.6 million in California alone) the nation's largest HMO, "expects to return to profitability this year" after two years of heavy losses. CEO David Lawrence said, "I'm cautiously optimistic about 1999." Lawrence anticipates that premium increases of 9.5% should offset cost increases of 5% to 6% this year, and expects profit margins of about 2% as cost cutting measures take hold. He said Kaiser hopes to drive profit margins up to about 4% in 2000, and to 5% to 6% in years following.
Bloomberg News/Hayward Daily Review reports that "Kaiser made more progress than expected in cost cutting last year, especially in hospitalization and referrals to outside hospitals, one of the main areas that caused losses to balloon in 1997." Inability to control costs was particularly pronounced in California, where enrollment far exceeded Kaiser's ability to treat its members. The company was forced to farm out many patients out to other facilities, "where it wasn't able to monitor costs as closely as in Kaiser facilities."
In 1998, Kaiser sold its unprofitable Texas health plan and plans to do the same with a money-losing plan in Charlotte, NC. The company, however, "reaped profits" from plans in Hawaii, Ohio, the mid-Atlantic states and Raleigh-Durham, NC. This year, Lawrence said, Kaiser expects to take losses in the Northeast, but hopes to cash in on its California and Kansas City plans (Finkle, 1/28). Click here for past coverage of Kaiser's financial woes.