Kaiser Permanente Posts $525 Million Loss
Kaiser Foundation Health Plan, operator of Kaiser Permanente, the nation's largest not-for-profit HMO, Friday announced a fourth-quarter loss of $525 million on $5.8 billion in revenue, the Los Angeles Times reports (Gellene, Los Angeles Times, 3/1). The insurer attributed the loss to higher operating costs, investment losses due to poor stock market performance and computer development charges, which alone accounted for a $442 million write-off of computer systems development assets, according to the Wall Street Journal. The write-off was triggered by the HMO's decision to abandon decade-long plans to develop its own automated medical records system and to purchase and adapt a similar product made by Wisconsin-based Epic Systems (Wall Street Journal, 3/3). The new system will make the medical records of its 8.4 million members -- including 6.3 million California members -- available to 12,000 providers (California Healthline, 2/5). It is expected to take three years to implement and will cost Kaiser Permanente $1.8 billion, about $1 billion less than estimated costs for developing the system internally (California Healthline, 2/4). The insurer's net income fell 90% to $70 million in fiscal year 2002 from $681 million in FY 2001; revenue rose 14% to $22.5 billion in FY 2002 from $19.7 billion in FY 2001 (Wall Street Journal, 3/3). Kaiser representatives said the HMO's net worth declined by about $470 million in 2002 because of a noncash adjustment to pension liability funding (Los Angeles Times, 3/1).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.