Kaiser Permanente Reports Increased Income

Oakland-based HMO Kaiser Permanente on Monday reported that net income for fiscal year 2004 had increased by 59% to $1.61 billion from FY 2003, the San Francisco Chronicle reports. Kaiser reported $1.47 billion in operating income on operating revenue of $28 billion.

For 2004, Kaiser reported a 5.3% operating margin, up from 4% in 2003. Membership increased by about 20,000 members to 8.23 million in 2004.

Kaiser officials said the gain in net income was boosted by rate increases, improved operating efficiencies and lower pharmaceutical costs. Unexpected adjustments to pension and post-retirement costs, workers' compensation and liability expenses also contributed to Kaiser's financial performance, company officials said.

Tom Meier, vice president and treasurer for Kaiser, said member rates increased by 10% to 11% in 2004, less than the 13% reported in recent years.

In addition, capital spending increased by 30% to about $2.2 billion in 2004, in part because of ongoing construction efforts and implementation of an electronic medical records system. Funding for programs for low-income and other underserved populations increased from $641 million in 2003 to $825 million in 2004 (Colliver, San Francisco Chronicle, 3/8).

For the fourth quarter of 2004, Kaiser reported net income of $313 million on operating revenue of $7.1 billion, compared with net income of $157 million on operating revenue of $6.4 billion in the fourth quarter of 2003 (Rapaport, Sacramento Bee, 3/8).

James Cortez, associate director of Standard & Poor's health care group, said Kaiser's financial results for 2004 are "definitely a positive." However, he added, "The question is: Will the rate increases continue, will there be more pushback from the employers who provide health care or the end consumer who has had to pay increases in copayments in the last couple of years?"

Kaiser also restated earnings for 2003, increasing its reported net earnings for the year by $14 million to $1.01 billion. The restated results also showed $1.02 billion in operating income on $25.3 billion in revenue.

Kaiser officials said the organization's new auditor, KPMG, found that Kaiser had spread out the financial impact of medical service contracts signed in 1998 over too many years, resulting in the restatement (San Francisco Chronicle, 3/8).