KAISER PERMANENTE: Posts 3Q Losses Of $111 Million
Kaiser Permanente Group reported Friday that its third-quarter losses from operations totaled $111 million, bringing year-to-date operational losses to $240 million. The nation's largest HMO said its net loss this quarter was $102 million on revenues of $3.9 billion. "The costs we're experiencing at Kaiser Permanente are reflective of what's happening to health care providers across the country," said CFO Dale Crandall. "Like many other health care organizations, we're grappling with the pressures of rising medical costs, including pharmacy and medical technology, and increased demand for services." Kaiser said it expects full-year losses comparable to last year's, which were nearly $270 million. The HMO explained that because winter is usually the sickest time of the year, costs are higher in the last two quarters of the year (Kaiser release, 10/30).
The Wall Street Journal reports that Kaiser had "been warning for some time that it expected substantial 1998 losses." The HMO, however, did say that "it has taken significant steps to improve its performance by increasing capacity, raising prices and reducing costs" (Rundle, 11/2). The Los Angeles Times reports that "[g]iven the size of Kaiser's loss from operations," it "may need to raise premiums more than expected in 1999 and 2000, giving competitors such as WellPoint Health Networks Inc., Foundation Health Systems Inc. and PacifiCare Health Systems Inc. room to raise rates" (10/31). New Century Health Care Institute analyst Wanda Jones said, "Rates will have to go up. In real dollars, Kaiser and the other HMOs have seen as much as 25% reduction in real premium since the early '90s." The San Francisco Chronicle reports that as Kaiser's membership rolls have swelled in the past few years, "large corporate insurance buyers were forcing all HMOs to hold their rates flat, and that particularly affected Kaiser, which was 10% lower to begin with." In addition, Kaiser "has been unable to treat all its new members" in high-growth areas "in its own facilities," which has forced it to "pay higher costs by farming the excess out to other hospitals," according to Jones. (Abate, 10/31). In its release, Kaiser noted that it has just opened two new hospitals in California to provide additional inpatient capacity (release, 10/31).
Kaiser "said it expects to conclude a strategic review of its operations within the next month that could result in the sale of unprofitable businesses outside of California and cost-reduction measures such as job cuts" (Los Angeles Times, 10/31). In California, where 5.6 million of Kaiser's 8.5 members reside, the HMO's 3Q losses were $55 million, bringing losses to $190 million for the year (Chronicle, 10/31).
Lone Star Bye Bye
Kaiser is pulling out of Northern Texas, the Dallas Morning News reports, "leaving behind a legacy of investigations and lawsuits." For $129 million, Las Vegas-based Sierra Health Services will take over Kaiser's 120,000-member HMO in the area. The Morning News reports that Kaiser has already faced dozens of expensive liability lawsuits and still faces a dozen more from patients in Texas, as well as "scrutiny from state regulators" over reimbursement of emergency care (Ornstein, 10/31). Click Kaiser Permanente for previous coverage of the nation's largest HMO.